[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


                                                                      


   FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR 2009

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS
                             SECOND SESSION

                                ________

       SUBCOMMITTEE ON FINANCIAL SERVICES AND GENERAL GOVERNMENT 
                             APPROPRIATIONS
                  JOSE'1 E. SERRANO, New York, Chairman
 CAROLYN C. KILPATRICK, Michigan         RALPH REGULA, Ohio
 C.A. ``DUTCH'' RUPPERSBERGER, Maryland  MARK STEVEN KIRK, Illinois
 DEBBIE WASSERMAN SCHULTZ, Florida       RODNEY ALEXANDER, Louisiana
 PETER J. VISCLOSKY, Indiana             VIRGIL H. GOODE, Jr., Virginia
 ROBERT E. ``BUD'' CRAMER, Jr., Alabama  JO BONNER, Alabama
 MAURICE D. HINCHEY, New York
 ADAM SCHIFF, California            
                                  

 NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full 
Committee, and Mr. Lewis, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
      Dale Oak, Bob Bonner, Karyn Kendall, and Francisco Carrillo,
                           Subcommittee Staff

                                ________

                                 PART 8
                                                                   Page
 Consumer Product Safety Commission...............................    1
 National Archives and Records Administration.....................  107
 Office of Personnel Management...................................  151
 General Services Administration..................................  255
 Federal Communications Commission................................  333
 Small Business Administration....................................  429

                    

                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
 42-551                     WASHINGTON : 2008





















                                  COMMITTEE ON APPROPRIATIONS

                   DAVID R. OBEY, Wisconsin, Chairman

 JOHN P. MURTHA, Pennsylvania                JERRY LEWIS, California
 NORMAN D. DICKS, Washington                 C. W. BILL YOUNG, Florida
 ALAN B. MOLLOHAN, West Virginia             RALPH REGULA, Ohio
 MARCY KAPTUR, Ohio                          HAROLD ROGERS, Kentucky
 PETER J. VISCLOSKY, Indiana                 FRANK R. WOLF, Virginia
 NITA M. LOWEY, New York                     JAMES T. WALSH, New York
 JOSE'1 E. SERRANO, New York                 DAVID L. HOBSON, Ohio
 ROSA L. DeLAURO, Connecticut                JOE KNOLLENBERG, Michigan
 JAMES P. MORAN, Virginia                    JACK KINGSTON, Georgia
 JOHN W. OLVER, Massachusetts                RODNEY P. FRELINGHUYSEN, New Jersey
 ED PASTOR, Arizona                          TODD TIAHRT, Kansas 
 DAVID E. PRICE, North Carolina              ZACH WAMP, Tennessee
 CHET EDWARDS, Texas                         TOM LATHAM, Iowa
 ROBERT E. ``BUD'' CRAMER, Jr., Alabama      ROBERT B. ADERHOLT, Alabama 
 PATRICK J. KENNEDY, Rhode Island            JO ANN EMERSON, Missouri   
 MAURICE D. HINCHEY, New York                KAY GRANGER, Texas
 LUCILLE ROYBAL-ALLARD, California           JOHN E. PETERSON, Pennsylvania
 SAM FARR, California                        VIRGIL H. GOODE, Jr., Virginia     
 JESSE L. JACKSON, Jr., Illinois             RAY LaHOOD, Illinois      
 CAROLYN C. KILPATRICK, Michigan             DAVE WELDON, Florida    
 ALLEN BOYD, Florida                         MICHAEL K. SIMPSON, Idaho 
 CHAKA FATTAH, Pennsylvania                  JOHN ABNEY CULBERSON, Texas     
 STEVEN R. ROTHMAN, New Jersey               MARK STEVEN KIRK, Illinois 
 SANFORD D. BISHOP, Jr., Georgia             ANDER CRENSHAW, Florida    
 MARION BERRY, Arkansas                      DENNIS R. REHBERG, Montana   
 BARBARA LEE, California                     JOHN R. CARTER, Texas
 TOM UDALL, New Mexico                       RODNEY ALEXANDER, Louisiana
 ADAM SCHIFF, California                     KEN CALVERT, California
 MICHAEL HONDA, California                   JO BONNER, Alabama
 BETTY McCOLLUM, Minnesota
 STEVE ISRAEL, New York
 TIM RYAN, Ohio
 C.A. ``DUTCH'' RUPPERSBERGER, Maryland
 BEN CHANDLER, Kentucky
 DEBBIE WASSERMAN SCHULTZ, Florida
 CIRO RODRIGUEZ, Texas              
                                    
                        Rob Nabors, Clerk and Staff Director

                                  (ii)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  

 
   FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR 2009

                              ----------                              

                                           Tuesday, March 11, 2008.

                   CONSUMER PRODUCT SAFETY COMMISSION

                               WITNESSES

HON. NANCY A. NORD, ACTING CHAIRMAN, CONSUMER PRODUCT SAFETY COMMISSION
HON. THOMAS HILL MOORE, COMMISSIONER, CONSUMER PRODUCT SAFETY 
    COMMISSION

                  Chairman Serrano's Opening Statement

    Mr. Serrano. The subcommittee will come to order. Mr. 
Regula, our ranking member, will be joining us in a few 
minutes, but he has asked us to go ahead and begin.
    I welcome you to this hearing of the Financial Services and 
General Government Subcommittee. Today's hearing is on the 
fiscal year 2009 budget request of the Consumer Product Safety 
Commission. The CPSC's emphasis is on protecting consumers from 
an unreasonable risk of injury and death that could result from 
faulty and defective products.
    The agency watches over 15,000 different types of consumer 
products. The actions of the CPSC have contributed to 
substantial reductions in consumer product-related deaths from 
fire, electrocution, carbon monoxide, poisoning and accidents 
relating to baby products such as walkers and cribs. However, 
as we have seen from the increase in recalls during the past 
several months, there is much more to be done.
    Until this year, the CPSC was an agency that was slowly 
bleeding to death from budget cuts and staff reductions, the 
Commission had 978 employees in 1980; at the beginning of this 
year, they had fewer than 400. At the same time, the number of 
imported consumer products has been increasing substantially. 
Over 85 percent of all recalled products are imports and over 
85 percent of all toys sold in the United States are made 
overseas. Recalls of unsafe toys and other children's products 
are making headlines, the CPSC clearly did not have enough 
resources, nor was it as aggressive as it should have been to 
keep up with the increases in imports and to effectively 
perform its mission.
    This subcommittee responded by providing the Commission 
with an $80 million appropriation in fiscal year 2008, which 
was an increase of $17 million, or 27.5 percent over the year 
before. This money is well spent. The Commission has started to 
replenish its staff and will be up to 444 full time equivalent 
staff by the end of the fiscal year. Many of these additional 
staff will help begin an import safety initiative. This 
improvement of staff resources is just a start as the 
Commission is still well below historical levels of staffing. 
We need to continue to make sure the Commission is well 
equipped to do its job.
    The additional funds we provided will also modernize CPSC's 
testing laboratory, which is antiquated and in dire need of 
upgrade. Information technology will also be improved so that 
the Commission will have the tools and databases to identify, 
track and take action to remove dangerous products from the 
marketplace and our homes.
    We need to build on the progress we are making toward 
restoring the strength of the agency. Fiscal year 2009 budget 
request for the Commission is the same as appropriated for this 
year, 80 million, but it does include some programmatic 
increases because of several one-time expenses occurring in 
fiscal year 2008. These increases include the funding of 24 
staff for the import safety initiative and I commend the 
Commission for continuing this effort.
    I believe that there is much more to be done, and this 
subcommittee will work hard to ensure that the CPSC has the 
resources to meet the responsibilities. While the budget for 
this Commission is relatively small, the Commission's mission 
is essential.
    I am pleased to welcome Nancy Nord, the acting Chair of the 
CPSC, and Thomas Moore, a member of the Commission. We have a 
lot to cover today in this hearing, so I ask that each witness 
observe a 5-minute maximum for their opening statements. Your 
complete written statements will be submitted for the record. 
We will follow your statements with a round of questions from 
members and the members, once Mr. Regula is through with his 
questions, will be reminded carefully and courageously by the 
gavel when your 5 minutes are up.
    Now it is my honor and pleasure to recognize my friend and 
colleague, Mr. Regula.

                     Mr. Regula's Opening Statement

    Mr. Regula. Thank you, Mr. Chairman. I think you covered it 
well and certainly protecting consumers should be the top 
concern. I often think we buy products, we use products and we 
always assume that somebody, somebody being government, is 
ensuring our food is safe, that our products are safe. We take 
a lot for granted in this country in the assumption that 
everything is being watched and supervised by somebody. So the 
somebody is each of you in the case of consumer products. We 
welcome you here this morning and look forward to your 
testimony.
    Mr. Serrano. Thank you, Mr. Regula. We will hear first from 
Chairman Nord and then from Commissioner Moore, we welcome you 
again. Thank you.

                       Chairman Nord's Testimony

    Ms. Nord. Thank you so much, Mr. Chairman. I appreciate the 
opportunity to present the appropriation request for the U.S. 
Consumer Product Safety Commission for fiscal year 2009. As you 
know, we are a small independent bipartisan regulatory agency 
created by Congress to protect the public from unreasonable 
risks of injury associated with consumer products. As the 
Committee also well knows, our agency has been in the spotlight 
over the last year. Frankly, I am pleased with the national 
attention that we have gotten since this has greatly raised 
public awareness of our agency and our mission.
    In testimony before Congress last year, I said that if you 
give me more resources, I will put them to good use. Last 
December, the Appropriation Committees did precisely that, and 
significantly increased the CPSC budget for fiscal year 2008. I 
am proud to report to this committee that we are putting these 
funds to good use.
    For fiscal year 2009, we are requesting $80 million to 
carry out our safety mission for American families. This is an 
almost $17 million increase over our requested funding level 
for fiscal year 2008 and matches the Committee's final 
appropriation for the current fiscal year.
    With these 2008 and 2009 funds, CPSC will be able to 
complete the modernization of our testing laboratory, overhaul 
our information technology infrastructure, fund our import 
safety initiative, expand our new early warning system and hire 
more technical and support staff.
    While the American home environment has never been safer, 
the American marketplace is dynamic and there is always more 
work to be done and new challenges to be met, the greatest 
challenge now being that of import safety, especially of 
imports from China. The Commission has taken aggressive steps 
to meet this challenge with strong enforcement of our laws, 
enhanced communications with the Chinese Government and 
industry, and proactive training and education on site in 
China.
    The CPSC is spending our 2008 funding on increased staff, 
work space and information technology resources. The CPSC's 
number of actual FTEs at the start of 2008 was under 400. Our 
aggressive goal is to increase that number to 444 by October 
1st, an increase of over 50 employees. Some of these employees 
will be working for the first time at the Nation's largest 
ports of entry. Our new import surveillance division is 
designed to be the front line of defense, working to prevent 
dangerous products from entering the country.
    As you know, and your committee's staff has witnessed 
firsthand, CPSC's testing laboratory needs to be modernized to 
better support our product safety work, including the new work 
generated by our import safety initiative. I am pleased to 
report the Commission is now moving forward with the site 
selection process for a new laboratory, and we hope to move 
into a new facility in 2009.
    The agency is also spending new funding on important 
improvements to our information technology infrastructure. 
Achieving the agency mission is dependent on our IT systems and 
an increased emphasis on import safety demands greater reliance 
than ever before on integrating CPSC databases and accessing 
other agencies' databases in a seamless fashion.
    As you can see, the expenditures for laboratory facilities 
and IT infrastructure are critical capital investments that 
must be made to accommodate current and expected future growth 
of the agency.
    An important part of our mission is educating the public 
about safety issues. This committee, and in particular, 
Representative Wasserman Schultz has had a special interest in 
water safety. Building on past activities we have underway a 
focused effort to educate the public on the dangers of drowning 
as directed by the recently passed Virginia Graeme Baker Pool 
and Spa Safety Act.
    Before concluding my testimony, I should note that the 
House and the Senate have passed different versions of 
reauthorization legislation for the CPSC. The CPSC's fiscal 
year 2009 budget does not include funding increases in the 
event that Congress finalizes its legislation and the President 
signs it. Since it is clear that the final legislation will 
impose new regulatory, enforcement and other mandates on the 
CPSC, we will, of course, be in further contact with you and 
your staff in that regard at the appropriate time.
    In conclusion, the CPSC is an agency that is undergoing 
change like no other agency in the government. As we make the 
transitions that will accompany this change, I look forward to 
continuing to work closely with the committee and welcome the 
opportunity to answer your questions about our budget. Thank 
you.
    Mr. Serrano. Thank you.
    [The information follows:]


    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                     Commissioner Moore's Testimony

    Mr. Moore. Thank you. Mr. Chairman, Ranking Member and 
members of the subcommittee. Thank you for providing me this 
opportunity to present testimony before you today on the U.S. 
Consumer Product Safety Commission's fiscal year 2009 
appropriations request. For our current fiscal year, 2008, 
Congress, lead by this subcommittee, took up the cause of the 
American consumer by focusing on, and addressing, the serious 
deficiencies at the Commission resulting from our most recent 
years of shrinking resources. Our agency was appropriated $80 
million, a $16.75 million increase over the administration's 
request. For fiscal year 2009, the President's funding request 
for the agency is $80 million, which is equal to the level of 
funding provided by Congress for fiscal year 2008. With this 
amount of funding, we propose to hire up to a level of 444 
full-time employees.
    Additionally, we propose to continue our efforts to acquire 
a modern state-of-the-art laboratory facility and to acquire 
additional office space which we will need to accommodate some 
of our new hires.
    The fiscal year 2009 request, on its face, is a request 
from level funding from 2008. Level funding, because of 
recurring annual increases for staff salaries and rent, is 
ordinarily a cut for us, and I would not be before you in 
support of a de facto cut in agency funding at this crucial 
time. However, there are a number of one-time expenses 
occurring in 2008 that are not anticipated in 2009. Not having 
those expenses in 2009 allows the Commission to direct 2009 
resources towards activities which would give indications of 
growth as opposed to stagnation or movement in a negative 
direction.
    Given the timing of our appropriations for 2008 and our 
concentration on hiring qualified people to fill our crucial 
vacancies, our fiscal year 2009 budget request approach makes 
sense to me at this moment. Most important to me is our now 
present ability to rebuild our staff. CPSC is a staff-intensive 
organization, at the heart of CPSC's organization is its staff, 
without question, our greatest and most important asset. Over 
time, we hope to be able to hire and train capable 
replacements, but the level of experience in crucial areas 
where we lost personnel will take years to recover.
    However, I am very optimistic and pleased that we can now 
move in a positive direction with respect to our staffing 
issues and therefore on product safety. In addition to 
Congress' focus on Commission appropriations issues, both 
Chambers, the House and the Senate, have passed reauthorization 
legislation. Both bills provide significant increases in our 
authorization levels for future years at the Commission. The 
authorization levels reflect my own views on how growth should 
be contemplated for the Commission. And I am hoping that future 
appropriations will be in line with the Senate and House final 
agreed-upon authorization levels.
    The bills would also require the Commission to undertake a 
number of activities that I am not taking into consideration as 
I present this statement. I cannot say at this time what 
resources we would need to fully implement any new 
requirements. When a final package is agreed upon and signed 
into law, we certainly intend to communicate with this 
subcommittee with respect to any future requirements and their 
effect on Commission resources.
    Mr. Chairman, I want to thank this subcommittee for your 
recognition of the importance of our agency with respect to 
product safety for American consumers, the sale of unsafe 
consumer products remains a major national problem. Because of 
your attention and assistance, we are now on the way back to 
firm footing in preventing unsafe, potentially harmful, 
consumer products from causing deaths and injuries to American 
consumers. The continuous support of this subcommittee is 
essential to a successful fulfillment of our mission. I thank 
you again and I am now available to respond to questions you 
may have. Thank you.
    Mr. Serrano. Thank you.
    [The information follows:]

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                          REAUTHORIZATION BILL

    Mr. Serrano. Both of you have commented on the fact that it 
will be difficult at this point to begin to speculate on how 
much funding you will need, based on the fact we have not seen 
the final reauthorization bill signed into law. Notwithstanding 
that point, what are your views on the House and Senate 
versions of the reauthorization bill and what are the different 
elements of the House and Senate bills that will better enable 
the Commission to safeguard consumers?
    Ms. Nord. I think that reauthorization of the Consumer 
Product Safety Commission is long overdue. Congress had not 
taken a thorough look at our agency and our statutes for 18 
years, and they clearly need to be modernized. Back in July of 
last year, I sent up to the Congress a proposal that made 41 
specific recommendations for changes in our statutes, and I am 
pleased that both bills include many of the things that I had 
asked for. I think cutting through to perhaps the most 
important thing that the Congress can do is give us 
certification authority across all our statutes.
    If you have manufacturers certify that they are in 
compliance with applicable safety standards, that forces an 
examination of those standards, it forces an examination of 
manufacturing processes. I think that that, in and of itself, 
goes a long way towards dealing with the issue of unsafe 
imports. There are a number of other very, very helpful 
provisions in both pieces of legislation, for example, making 
it illegal to sell recalled products. Most people think that 
that is already the state of the law, but it isn't. And so that 
is a very helpful example of something in the legislation as 
well.
    Mr. Serrano. Commissioner Moore? On the same question, you 
spoke about the inability to decide at this point how much 
money you would need to implement the provisions of the bill, 
but are there any thoughts you have on the bills as any stand 
now in the Senate and the House?
    Mr. Moore. I would have to review it in that light, but 
right now the reauthorization process has been very successful 
as far as I am concerned and the amount of funding is going to 
be beneficial and help us to move forward. And I think that is 
what we are looking forward to.

                       SALE OF RECALLED PRODUCTS

    Mr. Serrano. Let me ask you something, you just mentioned 
that there are recall items that are resold or that are sold.
    Ms. Nord. Yes.
    Mr. Serrano. Who sells them?
    Mr. Moore. That is a good one.
    Ms. Nord. Many people. The----
    Mr. Serrano. Not the person that originally sold it, right?
    Ms. Nord. No.
    Mr. Serrano. Or was scheduled to sell it?
    Ms. Nord. No, what happens is when something is recalled, 
the retailers stop sale and they remove it from store shelves, 
but the challenge we have is to make sure one, that consumers 
become aware of the recall and what they should do about it; 
and two, that other products sellers, the Internet sales, the 
smaller stores, the dollar stores, secondhand stores also are 
aware of the recalls.
    That is one of the reasons that we put in place a program 
that we are calling Drive to One Million which allows people to 
sign up to get recall notices sent directly to their E-mail in-
boxes.
    Mr. Serrano. I signed up yesterday.
    Ms. Nord. I appreciate that. I encourage all members of the 
subcommittee to sign up and inform their constituents about 
this as well. That is an example of one way to talk to 
consumers directly about this issue.
    Mr. Serrano. Incidentally, one of the things I would say at 
the end of the day, but I will say it now because I did sign up 
for this yesterday in English and Spanish, is that your agency, 
for I think some good reasons, and perhaps some that are still 
to be reviewed, has taken some heavy hits over the last few 
months, if not the last year. And we are all going to work hard 
to make sure that you do the job you are supposed to do, and I 
know that from some of the things you are talking about, the 
Commission wants to do the job that it is supposed to do.
    One of the things you could do is use us as allies in this 
fight. The more information you give us, the more information 
we can share with our constituents. There should be links of 
all kinds on our Web sites to allow us to put forth this 
information. On that particular one, I commend you on the fact 
that the information will be coming in Spanish and in English--
I am sorry, in English and in Spanish, I don't want any trouble 
to my left, not to my political left, of course, but to my 
left, and that is a good thing.

                       PUBLIC COMPLAINT DATABASE

    One of the more controversial issues in the reauthorization 
is a proposal to establish a public complaint database that 
would better enable consumers, government agencies, health care 
workers and others to report on unsafe products. This seems to 
me to be a good idea to give the public an opportunity to learn 
about potentially awful products sooner than that we do now. 
This increases information and transparency, and I believe that 
is beneficial. My understanding is that the Bush administration 
opposes establishing this database.
    Ms. Nord, you have been quoted as saying the database would 
be of questionable, if not detrimental, impact on consumers. 
What are your concerns about creating this database, and what 
is the fear that we have? Is it that folks will be able to 
share information ahead of the officials, if you will, finding 
out that something is wrong with a product?
    Ms. Nord. Well, I am certainly all for making sure that 
consumers have information they need to make good choices. And 
in that regard, sir, the CPSC is one of the most transparent 
agencies in the Federal Government. If you would go to our Web 
site, you would be amazed by the amount of information you can 
find there about product safety issues.
    My concern about the database is multifaceted. The agency 
gets into it a tremendous amount of information, probably half 
a million different pieces of information, that would be 
categorized as complaints or other kinds of information that 
would be qualified to go up on this database as it is described 
in the Senate bill. Much of that information is inaccurate, 
much of it is wrong. You end up with wrong model numbers, you 
end up with wrong manufacturers. So we do have a concern about 
putting that kind of information up on a database which may 
mislead consumers.
    The cure, of course, is to vet the information and have the 
CPSC staff go through and make sure it is accurate. That is not 
required or requested in the Senate bill, but it seems to me it 
is almost a public obligation that we would have to do that to 
make sure that consumers aren't misled, and that would be a 
tremendous drain on our resources.
    My other concern about it is that this is going to be a 
very, very expensive undertaking for our agency; again, based 
on how information comes into the agency and what we would have 
to do with that information to get it up on line and searchable 
as described in the Senate bill.
    Our budget people have told me that we are looking at 
upwards of $20 million to set up the database. They are looking 
at a $3- to $4 million a year maintenance obligation.
    Mr. Serrano. How much?
    Ms. Nord. $3 to 4 million. And for an agency with an $80 
million budget, that is a tremendous amount of resources. So if 
you are going to take a large part of our budget and send it to 
maintaining this database, I would really, really ask you to be 
very sure that it is going to be a value to consumers in the 
way that it is contemplated, and I have some grave doubts.
    Mr. Serrano. I understand. I just want to remind you though 
that the authorization speaks about the possibility of a $100 
million allocation. Of course we would have to come up with 
that.

           U.S. TERRITORIES AND THE POOL AND SPA SAFETY BILL

    Before I turn to Mr. Regula, in anticipation of questions 
or discussion with Ms. Wasserman Schultz, let me just ask, her 
pool and spa bill, which we supported, did not, in classic 
congressional form, nothing personal, did not include the 
territories. Would you be supportive of making sure that the 
reauthorization, as is the desire of this chairman, is expanded 
to the territories? Around here, as you know, every time we 
legislate, unless you include the territories, they are 
excluded.
    Would you have any problems with including the territories 
in the pool and spa bill? After all some of those tropical 
places have more pools than we think. Guam, Samoa, Virgin 
Islands, Puerto Rico, they have something in common.
    Ms. Nord. Of course, I would support that.
    Mr. Serrano. Mr. Regula.

                         FOREIGN MANUFACTURERS

    Mr. Regula. Seems to me your big problems is enforcement. 
Am I correct you have more tools with the U.S. manufacturer 
than you do with an importer; is that correct?
    Ms. Nord. Well, our statute makes the product seller 
responsible for the safety of the product they sell and this is 
defined as the retailers, the distributors, importers and 
manufacturers, it goes all the way down----
    Mr. Regula. Shouldn't it be the manufacturer?
    Ms. Nord. Well, the statute, since the beginning, has made 
clear that everyone in the chain of distribution has 
responsibility for safety. Now the issue of course with this 
new world that we find ourselves in with much of our product 
being manufactured abroad is we don't have the ability to reach 
the foreign manufacturer so therefore we do look at the 
importer, distributor and retailer.

                     REGULATING IMPORTS FROM CHINA

    Mr. Regula. It seems to me a case of everybody's business 
is nobody's business, so you have all the people in the chain 
and they point to somebody else, but there has to be finality 
as to where that responsibility lies. Do the Chinese, which of 
course is subject to their goods, probably get most of the 
recalls? Is there any internal regulatory structure in China to 
govern what they send out in terms of health and safety?
    Ms. Nord. The Chinese tell us that there is. That is an 
excellent and really profound question, Congressman. We have 
regular conversation with our counterpart agency in China. They 
tell us that they do inspect factories, they tell us they have 
pulled hundreds of export licenses, they tell us that an export 
license is not granted unless the factory can certify that the 
products they make, if they are intended for export, meet the 
foreign country's requirements. And while we are pleased to 
hear that, obviously we trust but verify in capital letters 
here.
    We have done a number of things to address this issue. We 
had a rather, actually I think, historic meeting last September 
with our counterpart agency from China where we signed 
agreements with them to do specific quality control procedures 
in four different product areas, toys, electrical products, 
fireworks and cigarette lighters. The Chinese also agreed to 
put in place a program to assure that lead paint was not used 
in toys for export. The challenge we have now is to make sure 
that we can hold them to those agreements. And the challenge 
they have is that they really do need to just undertake a 
systemic change in their manufacturing.
    Mr. Regula. They must ship a lot of their materials to the 
European market. Do they get the same kind of pressure from the 
European counterparts of your agency for products coming into 
the European market?
    Ms. Nord. Yes, they certainly do and the Europeans are as 
concerned as we are about these issues. But frankly, the United 
States is the leader in product safety in the world so we are 
taking a lead here. Now, I have had discussions with my 
counterpart in Europe about the problem that we both face with 
respect to China. In fact, at the end of this month, I am going 
to be testifying before the European parliament on these 
issues, and we will be having ongoing conversations. So it is 
something that we need--the rest of the world needs to speak 
with one voice and we are trying to do that.

                        U.S. MANUFACTURED GOODS

    Mr. Regula. It seems to me that the U.S. producers would be 
at somewhat of a disadvantage, because I assume that the safety 
laws and rules of toys and goods manufactured in the United 
States are perhaps enforced more strictly than those for 
similar merchandise coming from imports. And as a follow-up to 
that, is there any indication that manufacturing on toys and so 
on might be moving back to the United States, because if I were 
buying a toy, I would feel a little more comfortable if it were 
made in the U.S. versus an import?
    Ms. Nord. I think I would put it a little differently in 
that U.S. manufacturers are well aware of their product safety 
responsibilities. They know that if they are going to sell a 
product in the United States, there are certain obligations 
they have.
    Mr. Regula. Right.
    Ms. Nord. And that is something that they have been 
familiar with since the agency was set up 35 years ago. There 
is not that same sort of sense of responsibility amongst 
foreign manufacturers.
    Mr. Regula. So I would be more comfortable buying a similar 
toy made in the U.S. versus the import as far as safety and 
health?
    Ms. Nord. The U.S. manufacturer has been working with the 
Consumer Product Safety Commission for many years and 
understands their obligation. The challenge we have now is to 
make sure that products manufactured abroad and are imported 
into this country meet the same standards and that is the 
challenge that we have.

                      INSPECTION OF IMPORTED GOODS

    Mr. Regula. Do you have the tools to do that?
    Ms. Nord. We are working to develop the tools. The budget 
that we put forth, both of us----
    Mr. Moore. Yes.
    Ms. Nord [continuing]. Unanimously starts to build those 
tools. We have, for example, created an import safety 
surveillance division. So for the first time we will have CPSC 
full-time presence at our largest ports. We have been 
developing a very good, strong relationship with Customs and 
Border Protection. One thing you should be aware of is under 
our statutes Customs has the ultimate responsibility to stop 
and seize shipments. And so we are working very closely with 
them to make sure that they understand our procedures and 
criteria. We, they and I, think that relationship is developing 
in a very, very helpful way.
    Mr. Regula. Commissioner Moore, what would be your 
observation on somewhat of a double standard, if you will, of 
what is made in the U.S. versus what is imported? And should I 
as a consumer be as comfortable buying the imported product as 
I could buying the U.S. product?
    Mr. Moore. Well, apparently what we are looking at now is 
where are the imported product coming from? And increasingly, 
of course, they are coming from China. I think something like 
40 percent or more are coming from China. A number of issues 
have been raised with their products, but I think we ought to 
look more closely and lean more heavily on the retailers, 
because the bottom line is who is selling it.
    Mr. Regula. But how could a retailer know whether there is 
lead in the paint or whether there is a danger with this toy.
    Mr. Moore. They can come to us and try to find out, 
particularly since that issue has been raised so blatantly. 
They can come to us if they need to. We are looking to, for 
instance, putting in the marketplace independent research 
laboratories that they can take their products to, the 
retailers, if they want to and have them examined and 
certified. We would like the retailers to take a stronger step 
in that area. They know the problems, so why ignore it?
    Mr. Regula. I yield for the time being.
    Mr. Serrano. Gentlewoman from Florida.
    Ms. Wasserman Schultz. Thank you, Mr. Chairman. Mr. 
Chairman, given that I am only in my second term, I will hang 
the oversight of not having the territories included in the 
pool safety law on my inexperience. And I appreciate you 
pointing out that they absolutely should have been included, 
especially since like my home State, they are all warm weather 
States, which, I am sure, have a percentage of their population 
a drowning problem when it comes to young children. So I hope 
we can find a vehicle that we can add an amendment to so that 
we can make sure that the law applies to the territories. So 
thank you very much.
    Mr. Serrano. It is a 110-year-old problem.
    Ms. Wasserman Schultz. I know, and one I won't make the 
mistake of again, I can assure you.

                 POOL AND SPA SAFETY LAW IMPLEMENTATION

    Ms. Nord, I wanted to talk to you as you might imagine, 
about your plans for the implementation of the pool safety law. 
In your budget request, you have proposed flat funding for the 
agency and you have a new mandate in this pool safety law, 
which is not included in your request. And I am concerned about 
that, and so I am wondering, A, why did you not ask for the 
funding to implement the pool safety law, because I guess it 
would be pretty difficult for to you do it without the funding 
or at least fully? And if you could talk to the committee about 
what the Commission has been doing since the law passed to 
begin its implementation?
    Ms. Nord. Thank you. First of all, I would like to begin by 
commending you and your staff, the Baker Family and Safe Kids 
Worldwide, for all the hard work that went into the passage of 
the Pool and Spa Safety Act. With respect to funding, it is my 
understanding that the Congress is going to be considering 
specific appropriation to implement that legislation and we 
would welcome that funding and work with you.
    Ms. Wasserman Schultz. I am certainly going to press for 
that, but I am wondering if the law--the law passed before you 
submitted your budget request, why didn't you submit--why 
didn't you include this in the budget request? The budget 
request was due in February and the law passed in December.
    Ms. Nord. Well, it is our understanding that you all are 
contemplating a specific appropriation.
    Ms. Wasserman Schultz. I am wondering why not include a 
request to implement this bill and the funding for it in your 
budget request, why isn't it in there if you knew that you were 
going to have to implement it? Do you think you can implement 
within the resources of the agency?
    Ms. Nord. No, we certainly can't do the grant program, and 
we certainly can't do, I believe, a $5 million public affairs 
program within the budget that we have put out to you now. The 
Congress, it is my understanding, is contemplating specific 
appropriations.
    Ms. Wasserman Schultz. I know, that is the third time. We 
aren't, unless we add it to your request. Why did the 
Commission, knowing that the bill was law, not include a 
request for funding to implement the law?
    Ms. Nord. Because it was our understanding that this 
committee was going to proceed on a separate track for that 
funding and indeed we would welcome that funding. Let me just 
be very clear that we would welcome that funding.
    Ms. Wasserman Schultz. I am glad to hear that it is just 
that usually we use your budget request as a guide; we take our 
queues from you on what your priorities are. I would think that 
a significant new mandate like this one as important as this, 
you would at least ask for us to do that instead of relying on 
the possibility of us doing that. I mean, it is not that we 
were not going to pursue that, we are going to pursue it 
because the chairman has graciously agreed to work with us on 
pursuing that, but it seems incumbent upon the Commission to 
have asked for the funding.
    Ms. Nord. Well, we have been in close conversation with 
your office about this. It was our understanding that this 
would be pushed on a separate track and we have made it very 
clear that we would welcome that additional funding.
    Ms. Wasserman Schultz. It is just that there is no 
indication of that in the budget request so at least I am glad 
that you are indicating publicly that you are supportive of 
adding the funding to the budget.
    There are several States, Florida, Nebraska, California and 
Tennessee that have been contacting my office interested in how 
to go about accessing the grant funds if and when they become 
available. So can you talk to us about the Commission's process 
for implementation, what you are doing with the education 
program and the grant program?
    Ms. Nord. With respect to the grant program, as you know, 
the agency really does not have any history or mechanism for 
administering grants. Therefore, we have opened a conversation 
with the Centers for Disease Control which does have that 
administrative infrastructure. They are very, very supportive 
of this. They are eager to begin work and as soon as the grant 
money is appropriated, we will be continuing to move in that 
direction.
    With respect to the public education aspect of the 
legislation, we are doing a number of things now even though we 
don't have funding that was contemplated in the legislation. 
For example, we have a staff guidance document that is now 
being developed, that is being put out for public comment which 
will discuss how manufacturers can comply with the requirements 
in the legislation. We have created a multi-disciplinary team 
within the agency that is developing a public affairs program 
that will reach out and take advantage of the other 
stakeholders who have a role and an interest in this. And we 
have been in contact with them and are working to develop a 
program there.
    Ms. Wasserman Schultz. In terms of the education program, 
how are you specifically planning to communicate to public pool 
owners and operators the drain cover mandate, which is the 
provision that requires that all pools be retrofitted with a 
drain cover or built from now on with a drain cover installed?
    Ms. Nord. I mentioned we are developing guidance documents 
for pool owners, industry, and State agencies that describe the 
specific ways in which pools will need to meet the drain cover 
and the anti-entrapment device requirements of the legislation. 
With respect to the other aspects of this, we are launching a 
major education and media campaign. We are planning to reissue 
TV and radio public service announcements.
    Ms. Wasserman Schultz. Is that dependent on us providing 
the funding, or are you trying to that within existing 
resources?
    Ms. Nord. We are----
    Ms. Wasserman Schultz. I appreciate the effort the 
Commission has been making, I know you have been working very 
hard in developing what you can within the resources that you 
have.
    Ms. Nord. My concern here, of course, is that anything we 
do here we take from other things. And we have always seen 
water safety and drowning issues as one of our very important 
priority issues. So we have an ongoing program which we are 
implementing and we will continue to implement that. With the 
appropriated funds we will do more. We will enhance it and make 
it even more robust than it already is. I don't want you to 
think that we are doing nothing now, because we have a long 
tradition in this agency of working on this issue. With those 
very welcome appropriated funds, we will do more.
    Ms. Wasserman Schultz. I hope to welcome them with you. 
Thank you, Mr. Chairman.
    Mr. Serrano. We always welcome funds.
    Mr. Regula and I have to figure it out, but then we welcome 
them. Mr. Kirk.

                                 CHINA

    Mr. Kirk. Thank you, Mr. Chairman. In July, Congressman 
Larson and I introduced bipartisan legislation to increase your 
powers, and fines, and staff and you worked well with Chairman 
Dingell because of our concern over China. You remember, as the 
Queen of England would call it, your annis horribilis, your bad 
year.
    Ms. Nord. Not that bad.
    Mr. Kirk. 100 brands of pet food recalled, poison 
toothpaste found in Arlington Heights, Illinois, that I 
represent, Thomas the Tank Engine in the RC2 toys.
    In November, we went to my chairman here to urge a $20 
million increase for the Commission, and he was able to find 17 
million and that was good. In the middle of that, 4.2 million 
Chinese Aqua Dots recalled after a 20-month-old infant was 
killed. I note the Senate bill increases your fiscal year 
authorization of a request of $80 to $88 million. And I do see 
just in the last week for China, we have on March 4th, gas 
connectors for space heater that would trigger a leak and fire 
recalled, hooded sweat shirts and drawstrings posing a 
strangulation hazard from China recalled; March 5th, infant 
rattles presenting a choking hazard recall; March 6th, Hamilton 
Beach toasters that catch on fire recall--that is just 1 week 
of Chinese products.
    Now, Congressman Larson and I, we had a long discussion 
with our ambassador to Beijing, Sandy Rant, as you know, the 
U.S. embassy there is about to be completed in time for the 
Olympic games. In the other subcommittee we have worked to keep 
our old embassy, as well as expanding the consulate in Wuhan, 
population, 13 million.
    The question I have is you have announced plans to add 50 
new employees to the Commission, who are you going to send on 
permanent assignment to Beijing?
    Ms. Nord. Well, that individual has not been identified as 
yet, sir.
    If I could digress for a moment----
    Mr. Serrano. A very lucky person.
    Mr. Kirk. You are going to have permanent CPSC employees in 
Beijing.
    Ms. Nord. At this point, that is not formally in our plans, 
because the commission has not voted on doing that. And this 
budget was sent up before the conversations that I know my 
staff has had with your office. To open an office overseas 
would be a very large thing for our agency. It would be 
something that the Commission needs to vote on.
    Having said that, however, I, for one, would certainly 
welcome having some sort of CPSC presence in Asia. And we would 
again, I am speaking for myself because this is something the 
Commission has not voted on, I would welcome additional funding 
to have both a foreign national as well as an American citizen 
resident in our embassy in Beijing to act as our liaison in 
Asia. We have got to make sure that we don't look at this as 
only a China problem, because we are seeing more and more 
imports now coming in from other Asian countries, Vietnam is 
one that comes to mind. So having somebody on the ground would 
certainly be useful.
    Mr. Kirk. I am just worried that we have really known about 
this problem since July and the Commission hasn't even come to 
a vote yet.
    Ms. Nord. Well, we have known about the issue of imports 
for quite some time. This didn't come to anyone's attention 
just in July, other than the media. The media figured it out in 
July.
    Mr. Kirk. Congressman Larson and I met with Sandy Rant, and 
then met with Deputy Mr. Wen of AQSIQ, your counterpart agency.
    Ms. Nord. Yes.
    Mr. Kirk. He described how his predecessor had been 
executed because of this problem.
    Ms. Nord. Well, not quite.
    Mr. Kirk. On the FDA side of their house. So this has been 
front and center. July, 8 months now. How long does it take to 
get a vote in the Commission? Does it take more than 8 months?
    Mr. Moore. Probably.
    Mr. Kirk. Really? That would be stunning lethargy.
    Ms. Nord. Well, not really, sir. We didn't have a quorum 
until August, and our quorum evaporated this past February, 
however, that is just a side piece. This agency has been 
working very, very hard to deal with this question. Starting in 
2004 we negotiated a Memorandum of Understanding with China. We 
were the first agency, our tiny agency was the first. We had a 
safety summit in 2005. And then in 2007, we negotiated some 
very significant agreements with the Chinese government. Again, 
our tiny agency was the first to do this.
    Mr. Kirk. Hold on. Your tiny little agency, but in your 
testimony, you say 85 percent of the toys and 59 percent of the 
electrical products coming notably from China.
    Ms. Nord. Sure.
    Mr. Kirk. Your mandate is to protect the American people, 
and so if 85 percent of toys and 59 percent coming from China, 
it doesn't matter how tiny you are. You have got to deploy and 
protect us with the resources and then by adding 50 more people 
and not one identified for China yet.
    Ms. Nord. Again, I, speaking for myself, would certainly 
like to have somebody in the embassy. We have started those 
conversations with the ambassador. We have also discussed with 
you and your staff some of the issues that come about because 
of having staff in China. If we receive funding from this 
committee to have staff in China, I, for one, would be very, 
very pleased with that result.
    Mr. Kirk. When I brought it up to the chairman and said let 
us add $20 million, part of it was we know it costs $250,000 
per year to deploy. So you already got $17 million with a lot 
of us wanting you to deploy to China. And so we are already had 
the discussions with Ambassador Rant, he already sent a notice 
to Secretary Rice saying if CPSC identifies the person, we will 
house them immediately. So could I say, get the lead out of 
toys and hiring?
    Mr. Serrano. Ah, a pun.
    Ms. Nord. It is detailed in my presentation, and as 
Commissioner Moore did as well, that $17 million has been spent 
on additional staff at the ports, IT and our laboratory.
    Mr. Kirk. 85 percent of toys and 59 percent of electrical 
products, so I would say you probably have a China issue here.
    Ms. Nord. Again, it would be very helpful to have somebody 
there.
    Mr. Kirk. Thank you, Mr. Chairman.
    Mr. Serrano. I could have sworn you asked for 16 in your 
letter and I was able to get 17.
    Mr. Kirk. Appreciate all 17.
    Mr. Serrano. They are authorized to have three members and 
they have two, and they are both here. If we have a vote break, 
maybe they can have a vote while we are gone.
    Ms. Nord. We have no quorum.
    Mr. Serrano. Just kidding, they had a heart attack in the 
back.
    Mr. Bonner.

                            CPSC AGENCY SIZE

    Mr. Bonner. Thank you, Mr. Chairman. Madam Chair, could you 
tell us how teeny tiny your agency is in terms of the number of 
employees and how has it changed over the past number of years.
    Ms. Nord. Our agency, like many agencies in government has 
gotten smaller. We currently have approximately 400 employees. 
Our budget was $62 million, you have increased it to $80 
million and I appreciate that very much and thank you for it.
    Mr. Bonner. How would that compare with your counterpart 
agency in China, since so many of the headline stories we have 
read about over the last year or so have involved Chinese 
companies? How large is your counterpart agency in China?
    Ms. Nord. Our counterpart agency in China is known by the 
initials AQSIQ. It covers not only product safety but also FDA 
and other kinds of safety issues. So it is not a dead-on 
comparison, but when I asked my counterpart in China the size 
of his agency, I believe he said he had 120,000 people.
    Mr. Bonner. 120,000 people and we have 400.
    Ms. Nord. Yes.

                    INDUSTRIES IN NEED OF REGULATION

    Mr. Bonner. My colleague, Mr. Kirk and others, have 
outlined some of the issues that you obviously and Commissioner 
Moore know probably better than most people have caused us 
great concern over the last year. If you could look into your 
crystal ball and predict which industry that currently is not 
adequately regulated, that would pose the greatest threat to 
American households, where would you see the next area of 
concern that we need to provide you resources to put that fire 
out before it starts?
    Ms. Nord. Are you talking about imports?
    Mr. Bonner. Yes, ma'am.
    Ms. Nord. One thing that we are very concerned about is 
that we have seen a number of what I would call substandard 
imports of all terrain vehicles coming into this country 
without the kinds of safety equipment that you would expect to 
see and that you do see on products manufactured here.
    Another issue that I think we need to be thinking about 
pretty aggressively is the whole issue of generators. Our 
concern here is carbon monoxide poisoning. Our agency just put 
in place a very aggressive new labeling requirement that has 
gone into effect and that we are now enforcing and we are in 
the midst of rulemaking that would try to drive down the CO 
emissions of generators, but you are seeing more and more 
generators being imported from Asia. Obviously mattress 
flammability is something that we are concerned about because 
we have just put in place a major new rule dealing with 
mattress flammability issues. We are in the early processes of 
enforcing that regulation so we are very alert to making sure 
that any mattresses that are imported meet our requirements. 
Those would be three things off the top of my head, I would be 
happy to expand on that.
    Mr. Bonner. No. I just think it is good. We have seen 
before this committee several issues that it appeared that 
government was late in responding to. Last week we had a 
hearing on the subprime mortgage issue. And so it is good to 
know ahead of time if there are areas--I mean, you mentioned 
generators. I know the gentlelady from Florida and I are both 
from coastal States. So generators, especially during hurricane 
season, are very important. And if we are--we have had people 
die in the central Gulf Coast region because they were not 
adequately notified of the dangers of it. So we would just 
welcome some assurance that these are issues that you identify 
as areas that we need to put more attention to in the future.

                            EMERGING HAZARDS

    Ms. Nord. If I could expand on that. One of the challenges 
our agency has and it is so hard to deal with, and that is the 
whole issue of emerging hazards. If you have a regulation in 
place, you can pretty easily determine if somebody is in 
compliance with that regulation. But most of the consumer 
products that we all use don't have some government regulation 
imposed upon them. The marketplace is too dynamic, and so what 
we see is products that are coming in that may meet 
regulations, or are not regulated, that might pose a hazard, 
and you don't recognize the hazard is there until you start 
investigating, until, unfortunately, an accident occurs. And 
that is the thing that our agency is faced with all the time 
every day, and it is very difficult for us.
    Congressman Kirk referenced Aqua Dots. He said it killed a 
child. It did not. Anyway, that was a product that was a hazard 
that really couldn't have been anticipated. Once we saw it, our 
agency moved very, very quickly to deal with it. But the 
challenge we have is dealing with issues as they come up over 
the horizon.
    Mr. Bonner. Thank you, Mr. Chairman.
    Mr. Serrano. Thank you.
    Mr. Goode.
    Mr. Goode. Thank you, Mr. Chairman.
    Let me ask you this. With regard to the lead-painted toys, 
which I know has been touched upon, how many of those 120,000 
employees over there in China inspected the toys that were 
coming to Mattel and the other toy manufacturers in the United 
States?
    Ms. Nord. I have no idea.
    Mr. Goode. Do you think any?
    Ms. Nord. I don't have any idea.
    Mr. Goode. There are 120,000 that they allegedly have over 
there. Did they inspect--you know, we are talking about a 
product. But do they inspect anything like food products, or do 
they have a different agency in China?
    Ms. Nord. No. AQSIQ has responsibility for food. It is much 
broader.
    Mr. Goode. So if we were doing a little comparison, we 
would have to include the USDA along with you and probably 
several other agencies of the Federal Government?
    Ms. Nord. Yes.

                            TRADE WITH CHINA

    Mr. Goode. All right. Let me ask you this then. Do you know 
what the trade deficit with China was last year?
    Ms. Nord. Significant.
    Mr. Goode. Yeah. Probably over $300 billion. I am thinking 
about $350 billion. What is the trade deficit in getting toys 
in all the products you look at from China?
    Ms. Nord. You are getting beyond my--I can't at this point. 
I am sorry.
    Mr. Goode. But we are importing a whole lot more than we 
are sending over there, a whole lot more.
    Ms. Nord. Yes, of course.
    Mr. Goode. All right. Let me ask you this. I know the 
administration, as was President Clinton before the current 
President, was a big advocate of permanent normal trade 
relations with China. From your perspective, as head of the 
Consumer Product Safety Commission, would you say that the 
permanent normal trade relations with China has been an 
outstanding success?
    Ms. Nord. I really couldn't comment on the merits of that, 
other than to say that we have seen an increase in imports over 
the past 10 years or so. And our responsibility is to make sure 
that----
    Mr. Goode. Have we seen an increase in unsafe imports?
    Ms. Nord. Our recalls are primarily of imported products, 
but most products that we use seem to be imports.
    Mr. Goode. All right. Do you think that helps the economy 
in the United States, those jobs that we are giving them in 
China to make the tainted lead products and whatever else they 
are shipping over here?
    Ms. Nord. Well, I would have personal views on the 
economics of it, but my responsibility is the safety, and that 
is what we really focus on.
    Mr. Goode. Thank you, Mr. Chairman.
    Mr. Serrano. Thank you.
    I at least run the risk of getting involved in foreign 
affairs, which I do. The Commission took the big hit on China. 
That is a fact. But we were all responsible, Congress and 
administrations have always kind of given China a pass. I mean, 
we forget--in fact, if you read and listen to our commentators, 
communism is dead, supposedly. It ended with the end of the 
Cold War. Mathematically, that is totally incorrect if the 
largest country in the world, most populous, still is a very 
serious Communist country. I am all for trade and all. But in 
general, China has gotten a pass. I can't help but think how 
upset we would be over these products if they had come from 
Venezuela.
    Mr. Goode. Mr. Chairman----
    Mr. Serrano. No, no, no, present company excluded. You have 
always been pretty strong on that, and I say that publicly. But 
China has gotten a pass, and we are outraged now that the 
Commission didn't catch everything. Well, I think every arm of 
government, every agency, has not been catching what has been 
coming from China both in that area and in other areas.

                        REAUTHORIZATION FUNDING

    We already spoke about the database and the cost for the 
database. What else do you see in the reauthorization that 
gives you funding concerns? What should you tell us about so 
that we are aware of it ahead of time?
    Ms. Nord. There are a number of directions in the 
legislation for us to promulgate regulations that are not 
contemplated right now in our regulatory agenda. So we will 
need to be starting new regulatory proceedings, and that will, 
of course, be a staffing issue. A management issue that I have 
is the whistle blower provision of the legislation. Right now 
our agency, like all other Federal agencies, is subject to the 
general whistle blower provision. The Senate bill does, 
however, overturn long-standing CPSC policy regarding our 
employees making decisions as to whether they will make 
themselves available to testify in either court proceedings or 
legislative proceedings right now. It is a decision that is 
made by their supervisors and their management and the 
legislation makes it very clear that the individual employee 
would have the ability to make that decision. That poses some 
concerns to me about how we are going to be able to manage our 
employees and projects. And that has fiscal concerns as well. 
Those are two things that come to mind immediately. What I 
would like to do if I might, sir, is pull together just a list 
of the new regulatory and administrative enforcement 
requirements and price them out for you.
    Mr. Serrano. Sure. I am sure that you have done it to some 
extent, maybe to a full extent. But these issues are of such 
concern to us, that if you look at the first bill put together, 
last year's bill, by this subcommittee, the preamble if you 
will, the opening statement of the report speaks strongly about 
this subcommittee's desire to have a theme of consumerism and 
protecting consumers. So we directed that. That was purposely 
done. So if you see us with great interest in your Commission, 
it is because the whole committee has decided that this is an 
issue of great importance to us and we want to make it a theme 
of the subcommittee. That is what we did last year. We intend 
to do it again.
    Assume for a second that the reauthorization bill is 
approved and signed by the President. Do you expect the 
administration to send Congress a budget amendment that 
reflects that increased cost? And would you encourage them to 
do so? I know OMB gets in the way, but would you expect one to 
come? I mean, there will probably be another 20 supplementals 
before the President leaves office.
    Ms. Nord. I think it is going to be very difficult for our 
agency to absorb those new requirements without new funding 
unless we take things away from what we have said we are going 
to be doing this year. So I would not be surprised to be in 
front of you again.
    Mr. Serrano. I know you would be in front of us again. 
Would you recommend--there is only us here. Nobody else has to 
know. The President won't know if you say it out loud. Would 
you recommend that they send us a budget supplemental request?
    Ms. Nord. Again, without knowing what final legislation is 
like, I feel I need to be cautious here, sir. But I do not see 
how we will be able to implement many of those requirements 
without new resources.

                        IMPORT SAFETY INITIATIVE

    Mr. Serrano. Let me talk to you about import safety. The 
2009 budget request includes an increase of $3.2 million and 24 
full-time equivalent employees for an import safety initiative. 
I know you have spoken about it somewhat, but what are the 
goals? What do you see happening here? And if an inspector 
finds a shipment of unsafe products, what happens then? Does 
the Commission have the power to stop the shipment from 
reaching the marketplace? At what point do you exercise powers 
that you have? And, you know, I would like to see people 
yelling and screaming that the Commission is overstepping its 
boundaries on behalf of the consumer. That would be a great 
thing, and you would get a standing ovation from this 
committee. At least from Mr. Regula and I.
    Ms. Nord. What we intend is to have a division within our 
Office of Compliance that has focused responsibility for import 
surveillance. And we have created that division now with this 
new funding. We just did it at the beginning of the year and 
have appointed a head of it, the deputy, and we are now in the 
process of staffing that. What that means is that we will have 
a full-time person, permanent person assigned to this country's 
busiest ports. And I would be happy in a closed session to 
discuss with you in more detail which ports those would be. We 
do see the phenomenon of port shopping, so I am reluctant to 
have our plans discussed fully and publicly, but would be happy 
to do that either in writing or----
    Mr. Serrano. I never thought there would be a top secret 
part of this committee. I am used to it in Homeland Security, 
where 90 percent of what is discussed is discussed, you know, 
``oh, we can't tell you that in public.'' But I understand. You 
don't want to alert people to----
    Ms. Nord. Port shopping is a phenomenon that we do see. So 
we obviously want to minimize that. But those people will have 
on-the-line responsibility to work with their counterparts with 
Customs at the ports specifically.
    We have had people at ports but not permanent full time. So 
that is one aspect of it. Another aspect of it is to really 
redefine our relationship with Customs and Border Protection 
through what is known as the ITDS system. We have now accessed 
Custom's Automatic Commercial Environment System, which is a 
database of basically the charts, the cargo that is coming into 
our ports. And by the end of the year, we will have 18 people 
who will have had the specific clearances and the training in 
order to access that system. What that means is that they will 
know that these products are coming before they get there, so 
that they can, in a more focused and targeted way, pull 
shipments and identify shipments. The other thing that this 
does is allow us to track the exporter and the importer. So 
that if we have some bad actors that we are aware of and we see 
them having other shipments coming in, we can focus our 
attention on those kinds of shipments. There is so much product 
coming in to this country every single day that what we have to 
do is develop a risk-assessment process, and that is one of the 
things we are doing with the new IT funding as well. So that 
will hopefully allow our inspectors to focus on higher risk 
kinds of cargos in a very effective way. Finally, we have 
arranged with Customs to get them to also test some of the 
product----
    Mr. Serrano. Customs?
    Ms. Nord. They have laboratories and----
    Mr. Serrano. They will blame it all on immigrants, trust 
me. Be careful. They have a knack for blaming everything on 
immigrants.
    Ms. Nord. Thank you. I appreciate that word of warning. We 
have also now purchased something that are called XRF machines, 
which are able to screen products, at least with respect to the 
lead paint issue, in a more effective and efficient way. We now 
don't need to send all of the product to the various labs for 
testing, only the product that fails the screening test. Again, 
that is another way of becoming more efficient.
    Mr. Serrano. Just one last question on this. What 
percentage of imported products do you think you will be able 
to review through this initiative?
    Ms. Nord. A miniscule percentage. Just a tiny percentage. 
Again, what we need to be working towards is a system that 
allows us to be focusing on the higher risk kinds of products. 
I mean, if I could give you what was a startling statistic to 
me, the FDA has well over 400 inspectors. I mean, their 
inspection corps is bigger than our agency, and they inspect 1 
percent of the incoming product. We have more things under our 
jurisdiction than they do. So we have to make sure that we are 
focusing on high risk kinds of shipments, and that is one of 
the things that is my highest priority, to get that 
infrastructure, those mechanisms in place. That is a daunting 
task, sir.

                         INDUSTRY-FUNDED TRAVEL

    Mr. Serrano. Let me ask you my last question. As you know, 
the subcommittee expressed serious concern over reports that 
members of the CPSC accepted industry-funded domestic and 
international travel. In fact, the subcommittee included 
provisions in the 2008 bill to prohibit industry financed 
travel by any regulatory body funded in our bill. This is your 
first appearance before the subcommittee since the reports of 
such travel were publicized. Could you comment on the reasons 
why travel was accepted, financed by entities that the CPSC 
regulates? Could you also comment on the internal procedures 
used to review and authorize such travel? I understand that in 
one case, for instance, the approval occurred after the trip 
was taken. This, I think, added to the woes of the Commission. 
It gave a very serious impression, and I think well based at 
times, that some how you were not protecting the consumer, that 
you were hanging out with some of the culprits. What can you 
tell us? What happened? Why did it happen? Can it happen again?
    Ms. Nord. Okay. Well, I agree that it added to the woes of 
the Commission, and it was not helpful to us. The Product 
Safety Act has a specific provision that Congress wrote 
originally when it wrote the act that allows us to accept 
gifted travel from outside entities. So that is one aspect of 
it. Two, the agency has been complying with the regulations 
that apply government-wide that were put in place by GSA 
dealing with the acceptance of funding from nongovernment 
sources. Both Commissioner Moore and I have taken trips that 
were funded by nongovernment sources, not on a regular basis; 
certainly not on the scale that was reported in the newspaper. 
In my instance, I think it was three trips, and Commissioner 
Moore's instance, it was two. All the trips were vetted before 
they were accepted.
    Mr. Serrano. By?
    Ms. Nord. By our ethics officer and our General Counsel's 
Office and were signed off by the executive director of the 
agency. You referenced one that was done after the fact. The 
vetting was done before the fact, and verbal approval was 
given. The paperwork in that instance was signed after the 
fact. But the vetting was done before the trip occurred. So we 
have in place a process that is fairly rigorous to look at 
these things. We certainly do not accept gifts of travel from 
an entity that is being regulated by the agency. Now----
    Mr. Serrano. When you say you don't accept, this is after 
this came to light last year? This is a new procedure or 
always?
    Ms. Nord. No, no.
    Mr. Serrano. Because if it is always, then you are making 
it sound like there was no basis for the concern, and the 
concern was pretty serious, and I think, you know, baseball is 
75 percent pitching. What we do is 75 percent perception.
    Ms. Nord. Sure.
    Mr. Serrano. And the perception was that this was no good, 
that this was bad.
    Ms. Nord. Well, each of the trips goes through an ethics 
examination before it is approved. And to my knowledge, because 
a lot of this happened before I was even at the agency, each of 
those trips did go through that vetting; certainly for the 
trips that I was involved in they did. But as soon as it came 
to light and questions were raised, I put in place a policy 
saying that we would not accept any nongovernmental funded 
trips. We have had conversations with you about how that is 
going to impact our budget because one of the reasons we do 
this is that you can either spend taxpayers' money to go and 
talk to manufacturers about their legal responsibilities or you 
can spend their money.
    Mr. Serrano. I understand that. I told you we were on your 
side in trying to make the agency work well; right?
    Ms. Nord. Sure. I appreciate that.
    Mr. Serrano. Let me give you some advice. Don't use that 
reason. That is the old police department thing about cops are 
taking bribes because they didn't make enough. And that was not 
a good reason for them to take bribes in the old days or in any 
time. I would hope that you understand that, first of all, this 
committee could not end this hearing today without bringing 
that issue up; secondly, that it does concern us, it concerns 
the public, concerns the media and that the perception was not 
good. And I hope that rather than spending time saying we did 
something that was under the rules at that time or within the 
rule, simply stick to this new plan that it can't be done. You 
don't leave that door open for any accusation, correct or not, 
that you are not on the side of the consumer.
    Ms. Nord. Well, I understand. And we tried to address it 
immediately when it came up. We recognized that you have 
recognized our need to be out there going around the country, 
policing the marketplace, and so very much appreciated the fact 
that you have designated specific funds for that purpose, and 
we will use them well in that way.
    Mr. Serrano. Thank you.
    And now a man who has never turned his back on the 
consumer, Mr. Regula.

                          PURCHASING SAFE TOYS

    Mr. Regula. Well, along that line, what would you advise a 
friend of yours who is going out to do a lot of shopping for 
toys for her children or family? How would you advise her what 
to look for and use her power as a purchaser to try to ensure 
that these toys that he or she is going to buy are safe?
    Ms. Nord. What I would tell that mother is to look for age-
appropriate toys, to be a label reader and make sure that the 
toy that she is purchasing is appropriate for her child. The 
toy market, where we see the most deaths and injuries from toys 
are children choking on small balls, children on skate boards 
and scooters, especially riding them into the street and into 
traffic. We saw several children die on trikes last year. In 
fact, two of them rode the trikes into the swimming pool. So 
there are dangers there. But parents need to make sure that the 
toys that they buy for their children are appropriate for their 
children. And that is the strongest piece of advice I could 
give.
    Mr. Regula. That would be appropriate in the judgment of 
the parent, in a way, to not buy something that is beyond their 
age level and using, but that doesn't address the problem of 
lead paint or possibly some of the manufacturing processes that 
might make these toys undesirable. I suppose there is really no 
way to get at that entirely.
    Ms. Nord. Well, there really isn't unless you choose to 
turn our agency into an agency that inspects all product 
manufacturers. But that would mean that our agency would be 
very, very different from the one it is now.
    Mr. Regula. Very large.
    Ms. Nord. It would be very, very large. So what we need to 
do is put in place procedures and processes to make sure that 
manufacturers know their obligations and comply with them; that 
we have the ability to police the ports; that we have the 
market surveillance operation in place; and that we enforce 
laws and do it in an aggressive way.
    Mr. Regula. The best tool is well educated purchasers.
    Ms. Nord. That certainly is true.

                            ROLE OF CUSTOMS

    Mr. Regula. One last question. What is your role vis-a-vis 
Customs? It seems to me like there is similar overlap here. How 
can you decide whether customs is going to be responsible for 
the safety of a product or your agency is going to be 
responsible?
    Ms. Nord. Well, our statutes are quite clear on that point 
in that Customs has the ultimate responsibility to seize and 
deal with the product. And we work very closely with them. If 
we can show a violation of a regulation, that is an easy call 
for Customs to make because then they will deal with the 
violative product. They will seize it. They will destroy it. 
They will send it back to where it came from.
    Mr. Regula. But does Customs have laboratories to evaluate 
products like paint? Do they have that capability?
    Ms. Nord. Well, they do have some laboratories, but they 
have never really been used in that way up until this past year 
when we forged this new relationship with them so that they are 
now making their laboratories, some of their laboratories 
available in appropriate circumstances. But what we have done 
with respect to the lead paint issue specifically is that we 
have some new screening tools and devices in place at the major 
ports. There is a screening machine called the XRF, please 
don't ask me what that stands for because I can't tell you. But 
it does allow us to screen for heavy metals right there on the 
spot very quickly. So that has been very, very helpful. But 
going back to the bigger question, we work with Customs. We 
consult with Customs. We ask Customs to do things for us, and 
generally they are very supportive and are helpful to us in 
that way. But, you know, at the end of the day, Customs' main 
focus is Homeland Security. So, you know----
    Mr. Regula. Homeland Security would certainly include the 
security of the children.
    Ms. Nord. Well, it has certainly been defined that way this 
year, sir.
    Mr. Regula. Do they have people in China, for example, that 
have some degree of oversight?
    Ms. Nord. Customs does have a big presence abroad, yes.
    Mr. Regula. Thank you, Mr. Chairman.
    Mr. Serrano. Thank you, Mr. Regula.
    Now a member who will never, ever forget to leave the 
territories out of any legislation in the future.
    Ms. Wasserman Schultz. Ever, ever again.
    Mr. Regula. She did that?
    Mr. Serrano. She did that.

                        POOL DRAIN COVER MANDATE

    Ms. Wasserman Schultz. Ms. Nord, going back to the drain 
cover mandate that is in the Pool and Spa Safety Act, how was 
the agency planning on enforcing the mandate? And are you going 
to be hiring inspectors to make sure that pools are compliant?
    Ms. Nord. Well, at this point, what we are doing is putting 
out a guidance document that will outline what the 
responsibilities are. And as it goes into effect----
    Ms. Wasserman Schultz. Who is that being distributed to?
    Ms. Nord. It will be distributed to the manufacturers, to 
the retailers, to the product sellers and also----
    Ms. Wasserman Schultz. This is a retroactive provision?
    Ms. Nord. Yes.
    Ms. Wasserman Schultz. So a pool owner, an existing pool 
owner isn't going to have any interaction with those kinds of 
entities?
    Ms. Nord. No.
    Ms. Wasserman Schultz. How are you supposing to make sure 
that existing pools retrofit their pools with drain covers?
    Ms. Nord. Private pools?
    Ms. Wasserman Schultz. Yeah.
    Ms. Nord. I would like to come back to you with that 
because there is an ongoing debate within the agency about how 
exactly we are going to be able to do that. There are some 
issues that we have discussed with your staff about the legal 
ability for us to do that. So it is a subject of ongoing debate 
within the agency.
    Ms. Wasserman Schultz. Okay. I mean, there isn't any 
question that that is what is required in the law.
    Ms. Nord. I understand. But----
    Ms. Wasserman Schultz. And I would assume that because it 
is required in the law, the law gave you the authority to 
ensure that the law could be enforced. I mean, that is what you 
are; you are an enforcement agency.
    Ms. Nord. There are going to be some legal issues with 
respect to retrofits that we are grappling with. And again, we 
have started the conversation with your staff, and we would 
like to continue.
    Ms. Wasserman Schultz. Okay. Well, let us know how we can 
help you with that.

                      POOL AND SPA SAFETY FUNDING

    Commissioner Moore, you stated in your testimony that the 
CPSC was compelled to achieve staff reductions through 
nontargeted means, such as attrition, early outs and buyouts, 
resulting in the loss of key staffers and experts in areas 
including drowning prevention. Now, the testimony here today 
maintains that the flat funding that is being requested of $80 
million is sufficient to meet the resource needs that the 
agency has. And I am not sure how that is true if you have a 
new mandate for pool and spa safety and you have lost your 
drowning prevention expertise.
    Mr. Moore. Well, that issue is not covered under the--what 
we are working within this appropriation process is the amount 
of funding allocated to us by the President's budget office.
    Ms. Wasserman Schultz. Did you ask, did the Commission ask 
the President to include funding for the Pool and Spa Safety 
Act?
    Mr. Moore. No. I don't think we did. No. No, we did not ask 
for that. So that is the foundation of what we----
    Ms. Wasserman Schultz. I am still not understanding why the 
Commission didn't ask for the funding to implement this if you 
have lost your drowning prevention expertise and you have asked 
for flat funding and you know you can't really fully implement 
the law without additional funding.
    Mr. Moore. Well, we expected that the Congress would make 
the increased funding available for us.
    Ms. Wasserman Schultz. Every agency gets new mandates every 
year, and the agency is expected to signal to the Congress in 
the budget request that they need the funding. How are we 
supposed to know, other than I am on the subcommittee, that you 
need the funding and want the funding unless it is included in 
the budget request? It doesn't just happen by osmosis.
    Mr. Moore. No, you are certainly right about that.
    Ms. Wasserman Schultz. Wouldn't you think that you should 
send a signal to the Congress that after getting a new mandate 
like the Pool and Spa Safety Act that it should be asked for in 
your budget since you can't fully implement it and not rely on 
the possibility of it being added on top of your budget 
request?
    Mr. Moore. Well, there is some uncertainty there in terms 
of what would be the next step in the Congress in terms of 
funding that provision.
    Ms. Wasserman Schultz. What uncertainty? It is authorized 
for the next 5 years, and then Congress should be appropriating 
it. Why wouldn't the Commission ask for it?
    Mr. Moore. I agree.
    Ms. Nord. A point of clarification. Our budget request went 
to OMB before the legislation passed. So we weren't dealing 
with a piece of legislation at that point.
    Ms. Wasserman Schultz. There were 2 months that elapsed 
between when the legislation passed and when your budget was 
submitted to Congress.
    Ms. Nord. But our----
    Ms. Wasserman Schultz. It isn't amendable after it goes to 
OMB?
    Ms. Nord. Our request went to OMB well before the 
legislation passed.
    Ms. Wasserman Schultz. When did your request go to OMB?
    Ms. Nord. Before the legislation passed.
    Ms. Wasserman Schultz. And is it not----
    Mr. Moore. We certainly agree with you and would very much 
like to see increased funding added.
    Ms. Wasserman Schultz. No. And you have established that, 
and I appreciate it. It is just that you, in your testimony, 
Commissioner Moore, said that you have lost your drowning 
prevention expertise. So if you haven't asked for the funding, 
and you have asked for flat funding for the whole agency, and 
we are not sure how much we are going to be able to give you to 
implement this, how are you going to do it without your 
drowning prevention expert? On top of the fact that last year 
you took this out--you took drowning prevention out of your 
list of strategic priorities. All of those combined are not 
very strong signals that the CPSC makes drowning prevention a 
priority any longer. Are you hiring a person to replace the 
drowning prevention expertise that you lost?
    Mr. Moore. I don't hire people for the Commission.
    Ms. Wasserman Schultz. It is just that it was in your 
statement. That is why I am asking you.
    Ms. Nord. Commissioner Moore's statement referenced one 
individual who did retire after many years of service. We have 
other people who have expertise in that area, and indeed, 
Congresswoman, our leading spokeswoman on this, who actually 
lost her child through a drowning accident, is out in 
California tomorrow giving a major speech on this particular 
issue. There are people within the agency who do have expertise 
dealing with this, as Commissioner Moore just referenced one 
individual who didn't happen to retire. But there are----
    Ms. Wasserman Schultz. Are you going to be adding drowning 
prevention expertise in the event that you get funding to 
implement the Pool and Spa Safety Act?
    Ms. Nord. If we get the funding, absolutely, of course we 
will.
    Ms. Wasserman Schultz. Thank you very much.
    Mr. Chairman. I yield back.

                 WARNING LABELS IN DIFFERENT LANGUAGES

    Mr. Serrano. Thank you. I have one last question before we 
wrap up today, and we thank you for your indulgence. One of 
America's probably best kept secrets is how much advertising is 
done in this country in languages other than English. I think 
the English-only movement would have a heart attack if they saw 
how much is spent on advertising in languages other than 
English. Now, consumer advocates have always held that there 
should be warning labels in languages other than English. 
Courts have said at times that there should be; other courts 
have said that there shouldn't be. But I think that if you 
advertise a product in a language other than English, you 
should have warning labels in that language. And I would like 
that to be the case. What is your thought on that? And I am 
specifically limiting it now, as bad as this may sound to the 
advocates of using many languages, I am specifically limiting 
to those who sell you the product in a language other than 
English. Should they not also give you the warning labels in 
that language? Big issue in New York and Florida and Ohio.
    Ms. Nord. That is something that we struggle with and have 
internal conversations about all the time in our agency. And 
indeed this issue came up most recently with our warning label 
that we are requiring on all generators. At the end of the day, 
the way the Commission addressed this issue was to say that we 
would encourage the use and allow the use of labels in 
languages other than English. There is a concern that when you 
put the label in different languages, the label size is 
impacted. The impact of the label is impacted, which I know is 
not at all what you want to hear in my response to this 
question. But I give it to you because I want you to be aware 
that this is something that we debate internally on a regular 
basis, and we have got actually a staff of human factors 
experts who advise us on these things.
    Mr. Serrano. Well, keep in mind that they advertise, for 
instance, in the case of Spanish, there are hundreds if not 
thousands of radio stations that are totally in Spanish. You 
now have a new trend in the last 4 or 5 years of stations that 
are bilingual in nature where the disc jockey may speak in 
Spanish, the commercials are in English or vice versa or you go 
back and forth during the whole day. In fact, the number one 
stations in New York and L.A. happen to be Spanish radio 
stations. And that is what they do; they mix it up for the 
younger crowd and so on.
    But here is my point. If you are advertising in Spanish, in 
the case of Spanish, you are doing it for two reasons: One, 
because culturally it is a nice thing to appeal to that group. 
But also because you know that there are some other older folks 
perhaps, not the younger folks, older folks that you can sell 
your product to easier in that language. Don't you then have a 
responsibility to warn them of the problems in that language 
also? And let me tell you that this is a big issue on another 
level, too. The Federal Trade Commission, I think, has no clue 
as to what is said on Spanish TV and radio when it comes to 
advertising and what is advertised.
    Ms. Nord. Really?
    Mr. Serrano. Oh, I don't think they really do. In fact, 
touching on a very touchy subject that I have done before, if 
you saw how many items are sold in Spanish that say, if you buy 
a particular crucifix, you will never be ill again--and I know 
that is a dangerously touchy subject--but I don't think you 
could see that in English. Somebody would be questioning what 
they have seen. The latest one has five bottles of water that 
come from the Holy Land.
    Ms. Wasserman Schultz. Will the gentleman yield?
    Mr. Serrano. Yes.
    Ms. Wasserman Schultz. At least 30 percent of my district 
is Hispanic, at least 25 to 30 percent. And the consumer 
products have even evolved to the point, as I am sure you know, 
where if we have a warning label that is only in English when 
many, many, if not most, products now--you go into a toy store 
in Florida, and you have two different sets of labels on what 
the product is called. If you have a Dora Exploratory, it will 
say doll in English--I am sorry, Mr. Chairman--whatever doll is 
in Spanish.
    Mr. Serrano. Mun'6eca.
    Ms. Wasserman Schultz. Thank you. So it is kind of mind 
boggling that you can have the labels for the product 
themselves promoting and advertising to Latino families to sell 
you the product and then not give them the appropriate warning 
labels because we are worried that we logistically couldn't 
figure that out. That means that, at least in my district, 30 
percent of the people, we don't care that they get the safety 
warning, but we want them to buy the product. That is really 
the wrong message to be sending.
    Mr. Serrano. Getting back to the Federal Trade Commission, 
I don't think they know what is advertised in Spanish, and some 
of it is scary. And like I said, I touch on a very touchy 
subject because some people would say I am touching on 
religion. They did bring in somebody who was selling a crucifix 
that supposedly would cure cancer, and they took care of that 
for a while. And, you know, again, faith versus selling you 
something for $29.99 I think are not the same issue. So I know 
internally you struggle with it. I think the message that we 
would like you to take back is, if someone is spending millions 
of dollars and the industry spends billions of dollars 
advertising in languages other than English, mostly in Spanish, 
if they can sell, as the gentlewoman has stated----I mean, 
depending on where I buy tooth paste, it is either in English 
or in two languages. And if I go to the south Bronx district, 
certain parts of my district, just about every product I buy, 
on the tube itself, and on the box, has two languages. Well, 
then why not warn me in two languages, too?
    Ms. Nord. I hear you.
    Mr. Moore. But generally, the Consumer Product Safety 
Commission, that is not our focus. Our focus is to get a 
product, that is dangerous to the family, off the market 
entirely, not have a label that is saying there is a problem 
with it. Our job--we get it off the shelves. That is what we 
do.
    Mr. Serrano. Well, I understand that. And we are all 
hopeful that you will keep getting unsafe products off the 
shelf. But you also do get involved in general consumer issues, 
and those issues have a lot of different tints to it, not just 
the simple one--or the dramatic one of taking a product off the 
market. We thank you both for your testimony. We thank you for 
your appearance before the committee. We thank the members of 
the committee, and we look forward to working with you to make 
sure that the Commission's work is carried out properly on 
behalf of the consumers. We stand ready to support you in any 
way that we can. This hearing is adjourned.

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


                                            Tuesday, April 1, 2008.

           U.S. NATIONAL ARCHIVES AND RECORDS ADMINISTRATION

                               WITNESSES

ALLEN WEINSTEIN, ARCHIVIST OF THE UNITED STATES
ADRIENNE THOMAS, DEPUTY DIRECTOR
MARTHA MORPHY, CHIEF INFORMATION OFFICER

                  Chairman Serrano's Opening Statement

    Mr. Serrano. Before we begin, I would like to announce 
that, unfortunately, this will be my last hearing as the 
Chairman. I will be resigning my seat. Senator McCain has asked 
me to run as his running mate in this Presidential--why is that 
so funny?
    Mr. Regula. You are trying to get my vote.
    Mr. Serrano. All right. You know. You were supposed to play 
along with the Chairman on the April Fool's joke. I guess 
McCain would not be picking me, so I guess that did not sell 
too well. Who else? Who would have picked me? No one.
    So the hearing will come to order, and we welcome you. I 
actually thought of another April Fool's joke where we would 
say we found $1 billion to give the Archives, but no one would 
believe that, so the intent is there, so you know.
    Today, we will hear testimony from the Archivist of the 
United States--I told Dr. Weinstein that, in Spanish, we say 
archivo for archives. The temptation to say ``the archeevist'' 
is really there, but I thought I would do it right--on the 
budget request of the National Archives and Records 
Administration for fiscal year 2009.
    NARA, as we all know, serves the vital role of the Nation's 
record keeper. It works to preserve and to provide access to 
the records of Government, from the original copies of the 
Constitution and the Declaration of Independence, to the 
service records of military veterans, to immigration and 
naturalization records, and many more. NARA also serves the 
vitally important role of publisher of the Federal Register, 
the Code of Federal Regulations, the U.S. Statutes at Large and 
Presidential documents.
    In the area of Presidential libraries, NARA has been quite 
busy in recent years in adding both the Clinton and Nixon 
Presidential Libraries to its inventory while at the same time 
preparing for the upcoming Bush Presidential Library in Dallas, 
Texas.
    Another current challenge for NARA is the growth of 
electronic government records and the need for special computer 
systems for these records. The Electronic Records Archives 
program at NARA is aimed at preserving electronic records and 
at making them permanently accessible regardless of future 
changes in computer technology. The program has experienced 
problems over the past year, which NARA is addressing, and I 
look forward to discussing the issue further today.
    I am pleased to note that, using funds provided by this 
subcommittee, NARA will restore the evening and weekend hours 
that have been cut back as well as add to its workforce of 
archivists, although it is unclear if NARA's fiscal year 2009 
budget request would allow for these efforts to continue. I 
look forward to discussing this issue further as well.
    Professor Weinstein, we welcome you back to the 
subcommittee. We also welcome NARA's Deputy Director, Adrienne 
Thomas, and NARA's Chief Information Officer, Martha Morphy, 
who are here to help answer the subcommittee's questions. Thank 
you all very much. We look forward to your testimony.
    Let me first say on a personal note that I was here this 
past weekend, working hard at my office. As I was driving down 
Constitution Avenue from Arlington, there were plenty of folks 
around, but the longest lines anywhere were in front of the 
Archives, and I kind of felt some kind of personal pride in 
that.
    Mr. Regula, the lines were incredible, especially those of 
the young people who were lining up. It was just wonderful to 
see. There were folks on the Mall. There were folks everywhere, 
but anywhere you went, the longest lines that were around the 
block were at the Archives, and that is a good sign for you, 
and it is a good sign for us, but it is also probably a greater 
sign for the country that there is interest in seeing those 
documents. So I congratulate you on that work. It is obviously 
part of the effort.
    Before we begin, I would like to recognize my colleague, a 
man who himself at the end of this year will have so many 
documents to turn over you cannot even begin to imagine. It is 
Mr. Regula.

                     Mr. Regula's Opening Statement

    Mr. Regula. Thank you, Mr. Chairman. There are not as many 
as you think, and the future is what we are talking about. I 
think the past is a prologue to the future. I believe that is 
chiseled on stone, and I use that often in speeches, but the 
past is a prologue, and we have to recognize that the past 
gives us the base on which to build our future as a Nation, and 
it is therefore very important.
    I think there will be three events that cause great focus 
on NARA this year: We have a Presidential candidate for whom 
NARA has preserved records from her time as First Lady. Of 
course, if she becomes the President, that will put the focus 
on those records more than there normally would be.
    Secondly, we have an upcoming Presidential transition, when 
you become legally responsible for President Bush's records, 
and I suspect the lines will be maybe not as long as the 
Chairman described, but there will be a few lines down there to 
take a look at those, I would suspect.
    We have the upcoming launch of the Electronic Records 
Archives prototype to see if this massive undertaking will be 
operational. You will be pioneering in that respect, because if 
you have success in using electronic records in the Archives, 
it will set a standard not only across this country but across 
the world. I assume you have some contact with other countries. 
I am curious--and I will ask this in the question period--if 
other nations have archival records to the extent that we do.
    Thank you, Mr. Chairman. I will have some questions at the 
appropriate time.
    Mr. Serrano. Thank you.
    Professor Weinstein, I want to congratulate the Archives on 
this publication you just handed me. That is really such an 
interesting one because those of us who know the history of 
Jackie Robinson know that he was not just a baseball player; he 
was a pioneer who took on issues. Very few people know about 
Lieutenant Jackie Robinson and the difficulties that he had in 
the military. This was quite an American. You know, he gets 
credit for integrating baseball. I submit that he integrated 
America, not just baseball. So I thank you for this.
    As you know, we ask you to hold your testimony to 5 
minutes. However, your full statement will go into the record 
so we can have time to ask you questions.

                      Allen Weinstein's Testimony

    Mr. Weinstein. Thank you, Chairman. Thank you, Congressman 
Regula and members of the subcommittee.
    First of all, if I may, before I begin my formal testimony, 
I think your comment about April 1st and what announcement 
could not be made means that I probably should not submit my 
billion dollar budget. I believe that for the moment.
    Mr. Serrano. That would be your joke on us.
    Mr. Weinstein. Chairman Serrano, Congressman Regula, 
members of the subcommittee, and subcommittee staff, I am Allen 
Weinstein, Archivist of the United States, and it is my 
distinct pleasure to be with you today. I want to thank you, 
all of you, for the time taken from your busy schedules to meet 
with us on this year's National Archives and Records 
Administration budget request and for holding this hearing 
today.
    I want at the outset to introduce my colleagues who 
accompany me at the table today. To my right is Adrienne 
Thomas, the Deputy Archivist of the United States, and who 
appeared before you last year in her role as Assistant 
Archivist for Administration. To my left is Martha Morphy, the 
Chief Information Officer at the National Archives. In that 
capacity, she oversees the development of the Electronic 
Records Archives, the ERA.
    I will provide a brief summary of my statement, and I will 
ask that my full testimony be included in the record, but I 
cannot forbear saying, Mr. Chairman, that here we have Serrano, 
Regula, Weinstein, Morphy, and Thomas. Is this an American 
blend or what? I am privileged to be with the subcommittee this 
morning.
    We are making steady progress towards an Electronic Records 
Archives that will ensure the preservation of and access to 
today's electronic records far into the future. After setbacks 
experienced last summer, Lockheed has achieved each major 
milestone on ERA development over the last 8 months, and we 
will be prepared to take in the largest corpus of Presidential 
electronic records to date, from the Bush administration on 
January 20th, 2009, in short, on deadline.
    The National Archives is working with the private sector to 
digitize key archival series to ensure the widest possible 
access for the American public. Firms in the private sector are 
digitizing some of the most popular records in our holdings. As 
part of the Civic Literacy Initiative, we have created a 
public-private partnership with the Boeing Corporation and with 
the Foundation for the National Archives to develop a learning 
center at the National Archives in Washington to make the study 
of American history and civics more widespread and more 
engaging. My staff is working with the White House to plan a 
smooth transfer of the textual and digital records of the 
current administration to the National Archives in January 
2009.
    During fiscal year 2007, the National Archives responded to 
1.2 million written requests; served over 135,000 researchers 
in Washington and across the country; hosted nearly 220,000 
people at public programs; welcomed 2.9 million visitors to our 
exhibits in Washington and at our Presidential libraries; and 
received 35 million visits to our Web site. In 2 weeks, evening 
and weekend research hours in Washington, D.C., will return to 
their 2006 schedule thanks to the funds you provided in our 
fiscal year 2008 appropriations, for which we are deeply 
grateful.
    In those lines, Mr. Chairman, you saw surrounding the two 
blocks of the National Archives downtown building, every day, 
there are 5,000 people or more. It is unprecedented. Mr. 
Chairman, the National Archives building in Washington was 
built as a monument to the Charters of Freedom: The Declaration 
of Independence, the Constitution and the Bill of Rights. 
However, this building and the entire agency are much more than 
a series of monuments. We house the records of all three 
branches of the Government, and we respond to literally 
millions of requests each year from the executive branch, the 
Congress, the courts, and from the American citizens who own 
these records. Each day, we host area school groups visiting 
Washington; men and women seeking the stories of their parents 
and grandparents; scholars writing the evolving story of our 
Nation; and teachers anxious to learn how to better teach 
history and civics through the documentary evidence held in our 
National Archives.
    Our records management staff works with colleagues in other 
Federal agencies, in Congress, and in the courts to assure that 
we continue to hold the documents necessary for an accurate 
history to be written in the future. NARA's preservation staff 
works to maintain the balance between preservation and public 
access to assure that these documents will be available for 
both research and display. Our museum staff and archivists 
assure that visitors and researchers alike find what they are 
looking for in the National Archives. The 1,350 people who work 
in the Washington, D.C., area and the 1,650 people who work in 
17 States and 40 facilities throughout the country and in the 
District of Columbia are dedicated to our mission, which is to 
serve democracy by safeguarding and preserving the records of 
the three branches of Government, ensuring that the people can 
discover, use, and learn from this documentary heritage to 
promote civic education and to facilitate a historical 
understanding of our national experience.
    Mr. Chairman, as to the details of our 2009 request for 
funding, George W. Bush has sent to Congress a proposed fiscal 
year 2009 budget that calls for $404 million for the National 
Archives and Records Administration. This request is framed in 
four categories: Operating Expenses; the Electronic Records 
Archives; the National Historical Publications and Records 
Commission; and Repairs and Restoration.
    For operating expenses, the President's fiscal year 2009 
budget request is $327,783,000, an increase of $12,783,000 over 
fiscal year 2008. This includes funds to prepare for the George 
W. Bush Presidential Library, to accelerate public access to 
the Presidential records in our holdings and to provide storage 
for records and to continue working on reducing the backlog of 
unprocessed textual records.
    The operating expenses budget provides for the costs of the 
general operation of the agency, which includes rapidly rising 
energy and security costs; increasing operational costs of 
National Archives facilities around the country; and annual 
cost-of-living increases for the National Archives staff. Let 
me offer one illustration, one example, of a program funded 
within our operating expenses that is of particular interest to 
Congress, the Center for Legislative Archives.
    The Center houses the institutional records of the House 
and Senate, from the First Congress to the present, one half 
billion pages documenting the history of representative 
government in the United States of America. It delivers more 
than a million pages of records annually to support the current 
conduct of congressional business.
    As Congress moves from the paper to electronic preservation 
of its material, the Center faces a new challenge. Recently, 
the Center acquired over 900 DVDs of Senate hearings from the 
108th Congress. These discs are the only copies of these 
hearings and are not reliable for long-term preservation. The 
challenge is to provide for the permanent storage and continued 
access to these important records. The answer to that challenge 
is Electronic Records Archives.
    The Electronic Records Archives, the ERA program, requests 
an increase of nearly $9 million. This higher funding level for 
ERA will allow the National Archives to accommodate a greater 
volume of electronic records; to bring more agencies into the 
world of electronic records scheduling; to provide public 
access with full content indexing and searching; as well as to 
provide a secure site for the Federal records.
    For fiscal year 2009, the President has declined to seek 
funding for grants for the National Historical Publications and 
Records Commission, the NHPRC, which is the National Archives' 
grant-making arm. The administration, instead, focuses the 
National Archives' increases on its core activities for the 
preservation of Federal records.
    For repairs and restoration to facilities for which the 
National Archives is responsible, such as the National Archives 
at College Park, Maryland, the National Archives building in 
downtown Washington and the Presidential libraries, the 
President's fiscal year 2009 budget requests $9,211,000 to 
maintain our facilities and to perform essential repairs. It is 
another vital part of our request.
    Mr. Chairman, in 2009, we celebrate the 75th anniversary 
year of the establishment of the National Archives. During the 
past 75 years, the staff of the National Archives has found 
itself on the leading edge of change. Almost 30 years before 
the creation of the Freedom of Information Act, for example, 
archivists were making available--or ``archeevists'' depending 
on which you prefer--the records of the U.S. Government to the 
public in National Archives reading rooms.
    Beginning with President Roosevelt's gift to the Nation and 
with Congress's help, we shepherded the growth and development 
of the modern day Presidential library system. In the 1970s, we 
heralded the era of archiving electronic records by taking in 
the first permanent computerized records from Government 
databases. Today, we are taking the lead in archiving digital 
information with the development of the Electronic Records 
Archives. We have always embraced these types of challenges as 
part of our unique and important mission as guardians of the 
records.
    I will close, Mr. Chairman, with a little story that 
President Eisenhower liked to tell about a fellow who had just 
come to Washington in 1955. He was driving around and saw the 
National Archives building. He asked what happened in that 
building, and he saw carved on one of its pedestals the phrase 
``the past is prologue,'' which you referred to. He asked the 
taxi driver what the motto meant.
    The reply was: Oh, that. ``The past is prologue,'' that is 
kids' bureaucratic talk. What it really means is, you ain't 
seen nothing yet.
    Mr. Chairman and members of the subcommittee, you ain't 
seen nothing yet. We will continue to meet the challenges of 
the future.
    I thank you, Mr. Chairman. This concludes my remarks, and 
we welcome any questions you may have.
    [The information follows:] 

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    
                           HISTORICAL PHOTOS

    Mr. Serrano. We thank you so much. Before I begin my 
questioning, let me just ask you a fun question.
    This weekend, there were some publications that were put 
out for the opening of the Nationals Park. A lot of it had to 
do with Congress, with the House and the Senate's involvement 
with the Washington Senators. There were games that were played 
to raise money a long time ago, and you see photographs, very 
old photographs, of Senators and of Members of Congress 
practicing right outside the Capitol for these charity games. 
We are talking about the 1930s and the 1940s. That kind of 
extracurricular activity, if you will, that is not legislative 
duty. The photographs of that, the films of that, who keeps 
that, if anyone?
    Mr. Weinstein. Well, I would say it is probably divided 
between material kept at the Library of Congress and material 
kept at the National Archives. I would have to go check as to 
who, more precisely----
    Mr. Serrano. It was quite interesting. You know, as a 
baseball fan, it was interesting to me. It was also interesting 
to see how now the first pitch is thrown out as President Bush 
did so well, right over the plate, one on one with a catcher. 
In the old days, they would stand in the stands and throw it 
out to a catcher. Roosevelt threw it out to the whole team, and 
they were killing each other to catch the ball. It was really 
great. It was a great way to get a lot of Senators killed.
    Mr. Weinstein. One point about that, Mr. Chairman, is there 
was a period when Members of Congress and their staffs spent 
much more time, if you will, in Washington; when moving around 
the country was much more expensive than it is today. 
Basically, you were here all the time, so there was much 
greater communal life going on with the Congress here, 
involving the Congress and the administration.
    Take the Supreme Court, for example. The Supreme Court 
building was not built until 1935 at least. So, basically, I 
remember Senator Moynihan was telling me that part of the fun 
of being a Member of the House or of the Senate was, if life 
got boring, you would just walk across the Capitol and watch a 
Supreme Court proceeding. So there was a greater measure of--I 
do not know what you would call it, but----
    Mr. Serrano. Now, it is a little different. If you want to 
see a real rush, just check the minute the last vote takes 
place when every Member goes running back to their districts.

                    RESTORING HOURS AT THE ARCHIVES

    Last year, one of the issues that we discussed was the 
extra hours, of restoring the hours. The subcommittee took care 
of that, and that was very important for this committee. Now we 
notice that there is no funding request for those hours. Does 
that mean that you might have to cut back again, or are we 
looking at a problem? Because, as you know, the subcommittee is 
very clear that we wanted those hours restored.
    Mr. Weinstein. We not only have the funds to restore the 
hours this year, Mr. Chairman, but thanks to your generosity 
and to the generosity of the Congress, we also have the funds 
to hire a dozen new archivists and to establish a training 
program and basically improve the services available. So that 
will start on April 14th. It has taken some time just to gear 
it up, but all of this will begin on April 14th.
    Ms. Thomas. Yes. As long as our base is funded at the level 
that was requested by the administration, then the extended 
hours and the restoration of the hours and the additional 
archivists are funded.
    Mr. Serrano. Okay. That is good to know.

                         FOIA MEDIATION OFFICE

    Another issue, as you know, is that the President signed 
legislation late last year to establish an office to mediate 
disputes between government agencies and individuals requesting 
access to government information under the Freedom of 
Information Act. However, the administration's budget request 
for fiscal year 2009 includes no funding for this office at the 
Archives but instead requests funding to house the office at 
the Department of Justice.
    In order to establish this office at the National Archives 
as the law requires, how much of an increase would be needed in 
the operating expenses account?
    Mr. Weinstein. Chairman, I think you can understand that, 
since the administration has basically taken another course in 
this regard, NARA cannot take action on this mission until 
there is the ability to--well, until we have been authorized to 
do that by law. We have not yet been authorized in that regard. 
The administration has gone in another direction.
    Mr. Serrano. But you are authorized by law to establish it 
within the Archives. And the fact that the administration may 
be going another way, we still, I think, have to make 
provisions for the establishment of this office within NARA.
    Mr. Weinstein. I think, if it comes to the fact of there 
being agreement on what the process is, you would find NARA 
capable of doing this. However, with the administration pulling 
this direction and with Congress pulling that direction, I can 
only guarantee one thing, which is that my arms are going to 
pull a little bit.
    Mr. Serrano. I understand. We certainly do not want to put 
you in that situation, but I think it is pretty clear what the 
congressional intent is. I cannot for the life of me understand 
why the administration is funding it into the Justice 
Department. Since the Justice Department is the 
administration's advocate in Freedom of Information Act 
disputes, wouldn't it be, in your view, a conflict of interest 
to house this office at the Justice Department? Or would you 
rather not comment on that?
    Mr. Weinstein. Well, with respect, I would rather not 
comment on that.
    Mr. Serrano. I understand.
    Well, let me just, for the record, say that it was the 
intent of Congress to house it within the Archives, and we are 
going to follow that up because we do not want this to be 
handled improperly. We felt that this was something that needed 
to be done. The President signed it into law, and that is the 
way it should be implemented.

                      MISSING WHITE HOUSE E-MAILS

    Professor Weinstein, I would like to ask you about the 
subject of the missing White House e-mails. As you know, a 
White House analysis of its records management system 
identified over 700 days in which e-mail records seem either 
impossibly low or completely nonexistent. Last September, the 
General Counsel of NARA wrote that NARA still knew nothing 
about the status of the missing White House e-mails. In late 
February, you testified before the House Oversight and 
Government Reform Committee on this issue.
    Has NARA made any progress since then in terms of getting 
cooperation from the White House on finding copies of the e-
mail backup tapes or computer hard drives?
    Mr. Weinstein. I would say that we have made progress but 
that we do not at this point have a complete accounting, and I 
would say that we are moving in that direction. If it is at all 
possible, Mr. Chairman, I would like to--Chairman Waxman has 
been very active on this front, as has Congressman Davis. We 
have met with them and with the White House folks on several 
occasions. It would be helpful to us--we have another meeting 
scheduled in the next week or two--if we see what happens 
between now and the next week or two before I make a firm 
statement on that issue.
    Mr. Serrano. You are saying you would rather have a private 
meeting in the next couple weeks?
    Mr. Weinstein. Let us see what happens in the next week or 
two.
    Mr. Serrano. Professor Weinstein, I want to be clear that I 
understand what happens when an agency or the Congress is 
dealing with the White House, any White House for that matter, 
not just this White House--this one may believe in secrecy a 
little more than other past White Houses--but historically, any 
White House, any administration. So we do not want to put you 
in a situation of making statements you do not want to make.
    When you say you have made progress, is this progress in 
obtaining records or progress in obtaining knowledge about 
these 700 e-mails?
    Mr. Weinstein. I would say progress in obtaining knowledge, 
but I would also say that it is my impression that Chairman 
Waxman and Congressman Davis have taken the lead in a 
bipartisan way in ensuring that progress should be made with 
monthly meetings between the White House and with NARA, and 
they are very firm on that point. We are prepared for these 
monthly meetings. NARA participated in one hearing and provided 
the committee documents and responses to requests, and it 
continues to meet and to work with the Oversight Committee. 
NARA also continues to work with the Executive Office of the 
President on this and related issues in anticipation of the 
January 20th, 2009, transition.
    I would simply say that the meeting we have coming up in 
mid-April is a very important one to basically examine how much 
progress has been made and will be made. I would respectfully 
request that we provide you and committee staff with a fuller 
account of this as soon as the meeting has taken place.
    Mr. Serrano. I accept that, and I appreciate your 
sensitivity of the issue.
    Mr. Regula.

                     INTERNATIONAL ARCHIVAL SYSTEMS

    Mr. Regula. Thank you, Mr. Chairman.
    Do other countries have archival preservation to the extent 
that we do? Do they have a similar agency?
    Mr. Weinstein. Yes, they do, Congressman. There are similar 
departments. To some extent, some countries are ahead of us in 
certain areas. Some are not quite where we are. We have a newly 
active group called the International Council of Archivists, of 
which there is now a caucus of the major democracies within 
that group. We are part of that process. So, in the last year 
or two, we have made great progress in this regard, but my 
former deputy, Dr. Bellardo, as you know, is now our 
representative on that.
    Mr. Regula. So there is a sharing of archiving techniques 
and information, et cetera, internationally?
    Mr. Weinstein. No question. No question. I would say also, 
this is extended out to some new programs and new initiatives 
that we are developing, including one in which we have brought 
together the Israeli archivists and Palestinian archivists. We 
have never done that before. Each have problems and issues--
training issues and other issues--within their own circles, and 
we have basically offered to work with them all on these 
issues. So we are taking an active role internationally.

                       AMERICAN HISTORY EDUCATION

    Mr. Regula. There is much written about the inadequate 
level of American history being taught in our high schools 
today, partly because, perhaps, the leadership in education 
does not realize the value of history. This is a joke: What is 
the name of the history teacher in U.S. high schools? The 
answer is, Coach. I think that is a problem. Jokes aside, I am 
concerned. Yet, in this age of Internet, access is easy.
    What are you doing, if anything, to contribute to the 
history education of high school students? I think that is so 
important. Maybe the John Adams series has emphasized to some 
extent.
    Mr. Weinstein. Every facility of the National Archives, 
from the Federal Register to the Presidential Libraries to the 
regional Archives to the Washington facilities, every one of 
these facilities has an educational program that has been 
expanded in the last 2 or 3 years, and the programs are very 
varied. They range from the wonderful initiatives of the Truman 
and Eisenhower Libraries which mirror the White House situation 
room decision-making, these students find out how these issues 
were resolved and why; to the learning center that the Boeing 
Company in partnership with us helped put together, where we 
are bringing in dozens, hundreds of students to think through 
the historical issues that the country has faced; to the 
timelines, in our Johnson Library, Presidential Timeline, which 
is now a very important educational instrument nationwide.
    As to all of these instances, we are very grateful for the 
support we have received financially from the Congress and from 
the private entities like the Boeing Corporation. All of these 
entities are designed to show the focus on education, on 
history education, by using documents to understand history, 
and they are having an impact slowly.
    Mr. Regula. If I were talking to high school teachers, 
particularly history teachers, could I suggest to them that 
they might contact the Archives, and you would have interesting 
publications you could send them to illustrate how they could 
access this tremendous resource?
    Mr. Weinstein. We welcome them 24/7, every day of the year. 
Just get in touch with us. We will have something that can be 
of use in their programs. We are now in contact with many of 
them.
    Mr. Regula. That is very interesting. I think it is an 
important role.

              HISTORICAL INFORMATION PRIOR TO THE ARCHIVES

    Incidentally, I am curious because of the John Adams series 
that has been playing on HBO, and we have these books by 
McCullough on 1776 and John Adams. Now, you said you are going 
to have your 75th anniversary.
    Mr. Weinstein. Right.
    Mr. Regula. What about the history, the information prior 
to that time? That is part of our Nation's timeline. How do you 
get the material that covers the period prior to this 75 years?
    Mr. Weinstein. Well, call Dr. Billington, and he will put 
you on to a great deal of this material. The Library of 
Congress, the Smithsonian. There are multiple sources of 
information. We do not rule out dealing with information that 
precedes 1934. That is just when the Archives was built.
    Mr. Regula. So, even though you are only 75 years in 
existence, you reach back and gain as much of that period as 
possible in your archival records?
    Mr. Weinstein. We have had a very good, cooperative program 
with our Canadian friends. I just went to Israel with our 
archivists. There is this collaborative effort. The Brits are 
now getting involved in this, as are other countries as well. 
But in the Canadian case, we are doing an exhibit that opens in 
May, and it will come here to Washington in October at the 
Canadian Embassy. It is on the Treaty of Paris and, basically, 
the result of that treaty is that the whole transformation of 
North America----
    Mr. Regula. Right.
    Mr. Weinstein [continuing]. Kind of goes in this direction, 
and we go in that direction all at the same time, and it has 
never been understood as a whole. We are bringing a new 
perspective to that, and we are going to take on projects of 
this kind, which can train students and teachers as to how to 
use these historical documents and how to understand history 
more effectively. That is a major portion of what we are doing 
now.

                         ARCHIVES AS A RESOURCE

    Mr. Regula. As to authors, such as David McCullough, or the 
film producers, such as those on HBO who produced the John 
Adams series, do they use your resources as a basis for what 
they do?
    Mr. Weinstein. I hate to speak for David--he is a good 
friend--but I think you will find, if you ask David or if you 
ask Ken Burns, as to his World War II series, the answer would 
be yes, in a very strong way.
    Mr. Regula. I would think it would be an invaluable 
resource to those that make historical series, such as Ken 
Burns and David McCullough.
    One other question, Mr. Chairman.

           REPAIRS AND RESTORATION OF PRESIDENTIAL LIBRARIES

    In 2008, we provided $20 million for repairs and 
restoration to the Presidential Libraries of Nixon, Roosevelt, 
Kennedy, and Johnson. What is the status of these improvements 
that are undergoing, I assume, as a result of that allocation?
    Mr. Weinstein. Well, we are finishing up the Nixon library. 
A new building of the Nixon library was called for, and that 
should be done a year from now.
    Ms. Thomas. We are at the point with the Nixon addition of 
having--the bids were received, actually, this past week, and 
we are beginning to evaluate those bids now. We expect to let 
construction contracts in May, and it will take about 18 months 
to build the addition and then maybe another 8 to 10 months to 
get all of the records moved out to California.
    Mr. Regula. Will this action go beyond making physical 
improvements to the facility? Will it include additional 
materials being put into the facilities of these four 
Presidents?
    Ms. Thomas. For Nixon, it will allow us to ship the records 
that have been located at College Park at Archives II out to 
California.
    Mr. Regula. Okay.
    Ms. Thomas. Some of the artifacts have already been moved 
into space that the Nixon Foundation renovated, and they have 
provided storage area for it, but there was not enough room to 
renovate within the existing facility to take all of the 
textual records, so that is what the addition will provide, 
storage for the textual records. That will allow us to move all 
of the Nixon papers eventually out to the Yorba Linda facility.
    For the Johnson Plaza, which is another one of the projects 
that was funded in 2008, it is the last installment, the last 
Government installment on the repair of that area at the 
Johnson Library. I think that they anticipate that they will be 
finished by February 2009, and we are basically doling out the 
funds as they need them to do the project.
    As for the Roosevelt Library, the funding in 2008 was to 
finish the design of the renovation of that library. Some funds 
had been provided before that to start the design process, and 
this will allow us in this year to complete the design of the 
renovation.
    Mr. Weinstein. Let me say something about the Roosevelt 
records. I took a tour of that place not 2 years ago. It was 
desperately in need of repair at every level, just from one end 
of the basement to--just basic maintenance, and that is getting 
it now. So that is becoming done. In the Kennedy Library, we 
are getting started on the extension. Basically, that money has 
gone to purchasing the land that is needed.
    Ms. Thomas. That is what this year's project is, to buy the 
land that will allow us to build an addition onto the library. 
That will provide the records storage for a lot of the museum 
materials that are now stored off site, and it will help us 
improve storage conditions of the papers within the library 
because they are, frankly, crowded. Sometimes they are in the 
aisles. It is not a good situation.
    Mr. Regula. That would expand scholarly access, would it 
not?
    Ms. Thomas. Absolutely.

               MILITARY CONFLICTS AND PERSONAL HISTORIES

    Mr. Weinstein. Let me make a point if I may, Mr. Chairman 
and Mr. Regula, about how one learns history.
    You were asking earlier about expanding the knowledge base 
of history. Last week, there was a story in all of the papers 
about bringing in a company called Footnote, which we work 
with, which digitizes a number of our Vietnam War records 
online, which is now basically managed by a technical process 
by which every name on the wall, on the Vietnam wall, has a 
file attached to it, which will expand and explain to relatives 
and friends and interested historians and scholars who that 
person was, what that person did, and what that person's life 
was like. We are very proud of the fact that that has come 
together at no cost to those who use our facilities in that 
regard with the cooperation of the private sector, and that has 
expanded our knowledge base for the Vietnam era history 
significantly. We look for bargains, if you will, in that 
regard. We have to. We have to.
    Mr. Regula. Thank you, Mr. Chairman. I will have questions 
for the record.
    Mr. Serrano. Thank you. I may also say that the Archives 
played a role in, almost a mediation, when Ken Burns, who I 
think is just fabulous, did the piece on World War II. There 
was a lot of criticism that no statement had been made about 
the role of Hispanic soldiers during World War II, and he 
agreed and the folks agreed to go back. We know that the 
Archives played a major role in the addition, so what you 
finally saw on the screen was what had been edited, if you 
will, edited in the sense that they added information to it, 
and we know the Archives played a major role in that, and we 
thank you for that.
    I always say ``our newest member.'' Although, he is having 
a fabulous attendance year, and this counts. You may end up 
having a rookie season on our committee close to what Robinson 
had in his first year.
    Mr. Bonner. Thank you, Mr. Chairman. I was excited when I 
heard you were--not leaving the committee--but were going on 
the ticket, but I am sorry that I fell prey to your April 
Fool's joke.
    Mr. Serrano. Do you think I would help him?
    Mr. Bonner. I know you would in Alabama, yes, sir.
    Mr. Serrano. Actually, he is more pro-immigrant than I am. 
No, I am only kidding. I am only kidding. That is the way to 
kill him. Just remind them he is pro-immigrant. Thank you.
    Mr. Bonner. Thank you, Mr. Chairman.
    Professor Weinstein, since so much has been mentioned about 
the National Archives' role in Ken Burns' film on the war, as 
the Member who represents Mobile, Alabama, one of the four 
cities Mr. Burns' featured, I want to thank you for the role 
that you all played in that. It was a proud moment for the 
Nation to see so many men and women from that important chapter 
in American history have a chance to put their voices on the 
record, and I think that what you provided certainly made it a 
much more comprehensive production.
    Mr. Weinstein. Thank you.

                    PRESIDENTIAL LIBRARY ATTENDANCE

    Mr. Bonner. I think you indicated in your statement or I 
read somewhere that the Archives owns and operates 13 
Presidential Libraries. What kind of attendance are we seeing 
at those libraries? I am sure some are, probably because of 
their locations, perhaps, getting more traffic than others, but 
what kind of records in terms of people coming in and out of 
those could we look at?
    Ms. Thomas. Well, we may have to provide the numbers for 
the record since I do not think either one of us has got them 
on, you know, the tip of our tongues. However, libraries go 
through cycles. Obviously, some of the smaller and older 
Presidential Libraries, like the Hoover Library, evolve over 
time and become more of a service to their local communities 
and go beyond just the study of President Hoover to the 
community at large and the impact that he had on the area. The 
Eisenhower Library, too, is in that point in its history, I 
guess.
    You get, obviously, a lot of researchers coming into the 
most recent library, in the Clinton library, filing a lot of 
FOIA requests, trying to get access to the records as soon as 
they can. There is a lot of interest in the museum there, and I 
do not think that there has ever been a time when the 
attendance at the Kennedy library has dropped off. That is 
assisted by the fact that it is in a major city with a lot of 
population and in a city that draws a lot of tourists, so 
location does have a lot of impact on whether they continue to 
be a big draw or whether they tend to trail off a little bit 
like Hoover's.
    Mr. Weinstein. If you want your Presidential Library to be 
at the top of its form, attracting the maximum number of 
visitors, there are three things:
    First of all, it helps to keep your President alive, a live 
President who comes in from time to time and whose family comes 
in, who can mingle, who can raise interest in the general 
public nationally in the area.
    Secondly, location, location, location. It is the worst 
mistake one can make in picking his library without looking at 
the location. Can people get to the library easily? Are there 
other attractions in the area that other people can go to so 
that it becomes a day trip or a week trip and not simply some 
500-mile out-of-the-way trip to the place.
    Finally, to what extent have you been creative, ``you'' 
being people at the Presidential Library, in using your 
foundations that call attention to the library and in 
developing relations with universities in the area?
    They are just matter-of-fact things. If one has paid 
careful attention to all of that, then you have done everything 
you can.

              FUNDING OF PRESIDENTIAL LIBRARY FOUNDATIONS

    Mr. Bonner. Well, the foundation part of your answer, 
Professor Weinstein, raises an interesting question because a 
lot has been written about who, prior to the National Archives 
becoming owner and operator of these libraries, helped pay for 
them during their inception. I know a foundation is often 
involved in funding the construction and in helping to run 
libraries while contributors to a foundation are sometimes kept 
confidential, and that has been the source of some controversy 
in recent months.
    Do you have an opinion about whether or not funding to a 
foundation should be more transparent and open, and whether or 
not donors should be disclosed?
    Mr. Weinstein. I do not think we have any objection to 
identifying donors to foundations. I think, at some point, it 
becomes less than helpful to identify the donors of the 
Eisenhower Library, long dead and so forth. In the early years 
after a Presidential foundation takes shape, I think, if I am 
not mistaken, we would not object to that.

             RECOGNIZING THE MILITARY SERVICE OF HISPANICS

    Let me, if I may, go back, because you and the Chairman 
said something before that I want to respond to. It had to do 
with whatever role we played in trying to get people talking to 
one another, getting a dialogue started between Mr. Burns and 
his colleagues on one hand and Hispanic leaders on the other. 
It was easy in this sense for us because both sides wanted to 
talk. They wanted to express their strong support for the 
purposes of the film, and they tried to make suggestions as to 
how it might be changed to make it more impressive.
    What we did more than anything else that, I think, sent a 
signal to people is that we invited two distinguished 
veterans--I will not mention their names here--to come to our 
Fourth of July celebration, which we do right on the steps of 
the Library. One was a decorated combat photographer, not 
Hispanic. One was an Air Force lieutenant colonel, Hispanic. 
They worked together to preserve the model for others to begin 
that discussion. I do not know what else happened, but that is 
what we did, and it worked from our point of view.

                       ``NATIONAL TREASURE'' FILM

    Mr. Bonner. It did work. I guess the only thing I would add 
to what we have talked about this morning would be just a 
question that is sincere in its motive even though it may sound 
trite when I throw it out to you.
    The chairman indicated that this weekend he saw large 
crowds, and you have indicated there are large crowds here at 
the National Archives when people come to Washington, D.C.
    How has the movie ``National Treasure'' helped put you on a 
tourist map, say, compared to 3 years ago? Have you seen an 
increase in interest because of Hollywood?
    Mr. Weinstein. Can we prove it? No. Have we seen it? Yes. 
Have we seen it in spades? Basically, the movie put us on the 
map for a lot of visitors. The question I had to answer more 
than any other question the first year I was an archivist was, 
``Oh, you are the National Archivist. Do you work for the 
Smithsonian or for the Library of Congress?'' I do not have to 
answer that question. So, yes, the movie ``National Treasure'' 
was an enormous help, and if we could step outside, I would 
tell you the things we would do if we could only get them to 
come back and do a sequel.
    Mr. Bonner. Well, as the father of a 12-year-old and of a 
10-year-old who watched that movie repeatedly, when they came 
to see me in Washington a few weeks later, it was the first 
place they wanted to go.
    So, Mr. Chairman, thank you very much.
    Mr. Serrano. Thank you. Thank you.

                  ELECTRONIC RECORDS ARCHIVES PROGRAM

    Let us talk about Electronic Records Archives program.
    With regard to the program, I understand that there has 
been some progress to report but that their initial operating 
capability has been pushed back from September 2007 to June 
2008, that there has been at least $14 million in cost overruns 
and that the contractor has had to replace a significant number 
of his own staff working on the project.
    How confident are you, Professor, that the program will not 
experience any more setbacks, especially as NARA prepares to 
receive the electronic records of the Bush administration just 
over 9 months from now?
    Mr. Weinstein. Congressman, I am going to let my colleagues 
handle that, but I want to say, maybe, a few points of a 
general nature first.
    When we began experiencing difficulty and when it was 
brought to our attention, our first thought was not, how do we 
bury this, or how do we hide it, or how do we avoid having our 
overseers in Congress and appropriators not look at them? Our 
first thought was, who do we tell, the GAO, the congressional 
committees? You can check this out with your own staffs. Are we 
totally candid? What can we do to correct this in a minimum 
amount of time and with a minimum amount of damage to the 
system? That was our thought. That has been the impulse.
    This is a simple explanation. We meet every week. All of 
the senior leadership of the National Archives is involved in 
this. We meet. We go over things precisely. We demand the 
replacement of certain people. We have made a few changes in 
the staffing at Lockheed and with the rest. We have done that. 
Things, by and large, have gone fairly well. How confident am 
I? I am much more confident than I would have been a year ago. 
I would like Martha Morphy to replace me on the griddle and 
talk.
    Ms. Morphy. I think one reason that we are much more 
confident about the program is because we restructured the 
contract. As a result of the restructuring, the way that the 
contract is set up is that there are small milestones or 
checkpoints that the contractor has to meet, and once they have 
met that checkpoint, we do extensive testing both functionally 
and technically to make sure that the pieces of the software 
are working and the funding is tied to the success of the 
testing.
    So we have employed this over the past 8 months, and 
Lockheed has met every milestone. We do plan to deploy on time 
in June, at the end of June of 2008. At that point in time, we 
will be deploying the records management piece of the system. 
We will be working closely with four agencies to get their 
schedules in place and also to transfer records into the 
system. The goal of the first increment, besides getting the 
records into the system, is to make sure that they are stored 
safely. Then, in late November of this year, we are going to be 
deploying the additional capabilities that are required for the 
transfer of the Bush records, and that will include search-and-
access capability down to the record level, and we will also be 
deploying the classified instance of the ERA system, but we 
really feel, just based on meeting those milestones, that we 
are on schedule and within cost.
    Mr. Weinstein. The point, Mr. Chairman, I would like to 
make is that we are not waiting for some magic moment when 
things will be seen to be all in place or not. We are dealing 
with the detailed minutia of this process day by day, week by 
week, and we are happy to lead members and the staff of the 
committee--we are happy to take anyone through our facilities 
here, whether they are facilities in the College Park area or 
the ones in West Virginia, and I am happy to give them the most 
extensive briefings as possible and to answer any questions 
they may have.
    Mr. Serrano. You are confident this time that this will 
work out?
    Ms. Morphy. Yes. Because of the change in staff that 
Lockheed put in place, this is actually a very good thing. They 
are much more experienced and a much more technical staff than 
we had previously, and I think we are seeing a commitment on 
their part to get the project done as well.
    Mr. Weinstein. Chairman, there will be no question as to 
whose responsibility it is if it does not move ahead on 
schedule. It is mine. It is mine. I am confident enough that it 
is moving ahead on schedule.
    Mr. Serrano. Thank you.

                       RECORDS PROCESSING BACKLOG

    Professor Weinstein, you have noted in your testimony that 
the backlog of records processing continues to rise. How can 
NARA balance the need for backlog reduction and the need to 
have adequate staffing to pull records off the shelf and to 
provide other assistance for the public?
    Mr. Weinstein. The short answer to that question, Mr. 
Chairman, is difficult because we have conflicting comparatives 
here, but we are hopeful that with some of the changes that we 
have proposed, particularly in the area of dealing with records 
that are classified, that we can have an impact on the backlog. 
Let me give you a small and, my staff tells me, oversimplified 
example of this.
    Until recently, if we were going to declassify records, we 
would have to talk individually to every person making a claim 
on that record, and we would have to do this step by step. For 
example, if there were an FBI file or a CIA file, we would have 
to spend months looking and going back and would have to go to 
any other agency that would have an interest in that. Now we 
are trying to develop a system whereby we can collaborate with 
all of the agencies together. We can engage in dialogue as to 
whether something should be declassified or not. We classify 
way too much, and that has got to be dealt with. I think most 
of the agencies, interestingly enough, and others are very 
supportive because they, too, feel that they can develop a much 
more rational system for declassification, but step by step, we 
have no magic bullets here.
    Mr. Serrano. You feel we have classified too much?
    Mr. Weinstein. I think so over the years. I mean, you are 
talking to an archivist who for better or worse won the first 
freedom of information case for files of Government records 
from an Intelligence Agency back in the 1970s. It is now 2008.

                PUBLISHING THE FOUNDING FATHERS' PAPERS

    Mr. Serrano. There is an issue that I know is of interest 
to Mr. Regula and also to Mr. Cramer and to this subcommittee. 
It is the amount of time it is taking to publish the papers of 
the Founding Fathers. For example, at the current pace, the 
papers of George Washington will not be fully published until 
the year 2023. The papers of John Adams will not be fully 
published until 2050.
    What can you report at this point about NARA's plan to 
speed up the process for publishing these papers and for making 
them widely accessible?
    Mr. Weinstein. Mr. Chairman, David McCullough and I and 
representatives of the Library of Congress and others testified 
to the other body recently on this issue. We have been charged 
by Congress, as you probably know, to deliver a report on how 
we may speed up production and make the papers more accessible, 
particularly online for those who use it online. We anticipate 
the delivery of that report by the end of April. That is the 
commitment we have made as to when we will have that done. We 
anticipate the report will address each and every one of these 
issues, but I think it will be unfair to people who are talking 
to us prematurely to discuss the issue now. Bear with us until 
the end of April. I will be happy to come in even before that 
to give you and your staff----
    Mr. Serrano. At the end of April?
    Mr. Weinstein. Well, near the end of April. We will try to 
make it as early as possible. I will be happy to give you and 
members of the subcommittee and staff the full report once we 
have delivered it.
    Mr. Serrano. Okay. My concern, Professor--and you know that 
I am one of the easiest people to get along with--is that too 
many things may be put off for further discussion because they 
cannot be discussed now. I just hope that at a certain point 
the subcommittee at least gets the information it needs to know 
where we are going with those issues.
    Mr. Weinstein. You will have a full report this month.
    Mr. Serrano. Thank you so much.
    There was a question also--I do not know if it is related 
to this, but there is an issue where some of these papers are 
being sent over to universities so that they can help in 
footnoting and in coming up with information.
    Am I on the right track here?
    Mr. Weinstein. Yes.
    Mr. Serrano. But then that creates, maybe, a legal issue as 
to when they publish it. Does it belong to them or does it 
belong to you--to us? Or is that also under internal discussion 
now?
    Mr. Weinstein. Yes.
    Mr. Serrano. Okay. You are taking the Fifth on a lot of 
these, but that is okay. We will call it the Fourth.
    Mr. Weinstein. All of these questions will be addressed, 
including the one about where we are going with the e-mails and 
so forth.
    Mr. Serrano. Mr. Regula, I am sure you are aware that this 
is the issue where, if you just publish the papers as they are, 
the average citizen will not know what they were talking about 
in those letters or in those documents. So folks who know about 
these things look at them, and then they put them in the 
perspective of what happened at that time--``he wrote to him 
about this because they were trying to talk about slavery and 
this is what resulted.'' That is fine, but then they publish it 
at the local university press. There is a question there as to, 
do they now end up owning that stuff? They could be 
collaborators, but I do not think they should own it. These 
documents belong to the public.
    Ms. Thomas. One thing to remember, though, is that most of 
the projects are not solely funded by Federal grant money. 
There are many private donors and contributions from 
universities that go into these projects, so you have got mixed 
funding sources, which complicates the issue.
    Mr. Serrano. I understand that, but just because somebody--
and I am not being sarcastic but honest. Just because somebody 
takes the Constitution and cleans it up does not mean that they 
own it now because they cleaned it up. It is still my 
Constitution. They just helped clean it up as a public service.
    Incidentally, one of the big arguments--and we mentioned 
Mr. McCain before, Senator McCain--is how much we earmark to 
schools so that every so often they can actually do something 
for the good of the country and not just for themselves.
    Mr. Regula.

                 PRESERVING RECORDS OF EARLY PRESIDENTS

    Mr. Regula. Thank you, Mr. Chairman.
    As I understand it, you have responsibility for 13 of the 
Presidents in the preservation of their archival materials; is 
that correct?
    Mr. Weinstein. From Herbert Hoover to the President.
    Mr. Regula. What about those prior to that time? Who takes 
responsibility for the preserving of records of the earlier 
Presidents?
    Mr. Weinstein. Well, I am afraid that until the mid-20th 
Century when Franklin Roosevelt made this whole process 
fashionable by donating his own papers to the Government by 
building a facility for himself, before that, it was catch as 
catch can. In the case of the Founders, of course, there were 
people all too ready to collect their papers, but in the case 
of many Presidents between the Founding generation and the 
middle of the 20th Century, papers were disposed of in a very 
disorderly fashion. Some Presidents simply burned their papers. 
Others took them home with them. There is no, ``What 
happened?''
    Mr. Regula. There was history made there that has not been 
recorded.
    Mr. Weinstein. Yes, sir. I am afraid so.
    Mr. Regula. As to the issue of publicizing the records of 
the Founding Fathers, I can understand it is a complicated 
process and that there are those who want NARA to take a 
leading role in digitizing these records. Is that possible?
    Mr. Weinstein. We have digitized 28 million pages this year 
alone.
    Mr. Serrano. Wow.
    Mr. Weinstein. That is largely through public-private 
partnerships, through various firms that have basically met our 
specifications. We have been very clear as to public ownership, 
public use. We are not digitizing to lock up. We are digitizing 
to improve access by and large; 28 million online in 1 year.
    Mr. Regula. I notice the President's budget requests no 
funds for the National Historic Publications and Records 
Commission. I, personally, have felt that we should fund this. 
If there are no funds, that is one more step backwards in 
getting the historical records archived; is that correct?
    Mr. Weinstein. Well, I guess what I can say, Congressman, 
is that, without funding, a great many projects would be 
delayed.
    Mr. Regula. I am sure that is true.
    Mr. Weinstein. We wish it were otherwise.
    Mr. Regula. If we were to include money for this program, 
then you could achieve the goals of the National Historical 
Publications and Records Commission; is that correct?
    Mr. Weinstein. From your mouth to God's ear.
    Mr. Regula. Well, we have to look at that, Mr. Chairman.
    Mr. Serrano. We should.
    Mr. Regula. I have a number of other questions for the 
record.
    Mr. Serrano. I also have questions for the record.
    I would like to recognize a member who has never thrown 
away a piece of paper in her life.
    Ms. Wasserman Schultz. You sound like my husband, Mr. 
Chairman. You do not know how true that is. If you look in the 
dictionary for ``pack rat,'' you will find Debbie Wasserman 
Schultz.

                        CULTURAL HERITAGE MONTHS

    It is good to see you, Dr. Weinstein. Thank you so much for 
all of your efforts, particularly on the highlighting of the 
cultural heritage months that we have adopted by resolution and 
that the President has issued via proclamation. The one that I 
am partial to, obviously, is the Jewish-American Heritage 
Month. You do such a wonderful job with each of those months in 
developing programming.
    I wonder if you can talk a little bit about how we might 
expand your ability to do more, what your outreach efforts are 
beyond just encouraging people to come to the Archives to 
attend that programming and just if we are doing enough to help 
you advance those months.
    Mr. Weinstein. Congresswoman, let me start by saying all of 
you are doing enormous amounts for us. The fact is that the 
budget has increased significantly in the last 4 years, and I 
cannot tell you how grateful we are. It translates into major 
stuff happening. So that is a big ``thank you'' for all of you 
and for all the staffs.
    One of the things I should have done this year and did 
not--at least not yet, but I will start now--is have meetings 
with those who represent the various heritages and who would 
like to be acknowledged and responded to. I do not know how 
many folks would turn up for things like that, but it is worth 
finding out. I am going to start to have those discussions this 
week.
    In connection with the Jewish Heritage issue, I think this 
was discussed before you got here, but one of the things that I 
started doing with my staff and with the Canadian archivists 
just last year is trying to develop a program that will bring 
together the Palestinian and the Israeli archivists, and we 
have done that. It is a positive, simple, constructive move 
designed to help technically both societies. So I do not know 
if that fits under Jewish Heritage or under Palestinian 
Heritage, but it fits somewhere.
    What else could we do? I just do not know. I am open to 
suggestions, hopefully to cost-effective suggestions, but I am 
very open to suggestions.
    Ms. Wasserman Schultz. I look forward to hearing about your 
plans for the Jewish-American Heritage.
    Mr. Weinstein. I would like to come see you and talk to you 
about it.
    Ms. Wasserman Schultz. Please do. That would be great.
    Mr. Serrano. Thank you. The Bronx will play a major role in 
that month.
    Ms. Wasserman Schultz. I hope so.
    Mr. Weinstein. There was a column on the Bronx in the New 
York Times just a few days ago. You probably noticed that. 
Those of us who went to Yankee Stadium as kids are very 
interested in this new prominence given to the Bronx. The 
chairman and I share a passion for Puerto Rico. My wife is 
Puerto Rican, and her heritage is Puerto Rico. I am sure we 
will have something on Puerto Rican heritage in this program.
    Ms. Wasserman Schultz. Do you share the same passion for 
the Yankees?
    Mr. Weinstein. Yes. I grew up with the Yankees.
    Ms. Wasserman Schultz. Me, too.

                         HISTORY OF INDIVIDUALS

    Mr. Serrano. Professor Weinstein knows how to get a good 
budget out of me.
    Before we let you go, we were just talking about history. 
It is so interesting. I know this is a very touchy subject if 
you do not prepare and say it properly. We all celebrate--and I 
mean this sincerely--the importance of Jackie Robinson. What is 
interesting about history is Larry Doby came up in July of that 
year, and it really proves the point of being number two. I 
mean, was the American League in the United States that Larry 
Doby found dramatically different from the one that Jackie 
Robinson found in April? Yet, you have to work hard to find 
information on Larry Doby. You know, it is very interesting.
    Well, Professor, we thank you. We are not going to keep you 
any longer. We have some questions for the record. We applaud 
the work you do.
    On a personal basis, as you know, one of the things that I 
find that troubles me the most about our political system or 
the way people behave toward elected officials is, if you come 
from a certain district, people want to classify you as only 
being an expert on issues having to do with that district. So, 
when you represent the poorest congressional district in the 
Nation, people want you to talk only about social services and 
so on. Yet, one of my favorite issues is this concern of mine 
that our country just does not pay enough attention to its 
history, the history of individual people. I mean, what you 
have done, for instance, this month in showing Lieutenant 
Jackie Robinson and what he faced as a member of the military 
before he took on the incredible fight that he faced as a 
baseball player. These are American stories.
    I feel sadness to hear, as you told Mr. Regula, that before 
Herbert Hoover we basically kept no history. As I have told 
you, there is a lack of including the history of our 
territories--Puerto Rico, Guam, Samoa, the Virgin Islands--in 
the history of the United States. We need to know what role all 
of these people played--the Native Americans and so on. So some 
folks have questioned through our time: Why do you devote so 
much time to that? Well, I guess, if you do not know where you 
have been, you do not know where you are going. That is why I 
applaud the work you do. As long as I am on this committee, I 
will do whatever I can to help you do your work properly.
    Mr. Weinstein. Mr. Chairman, is it now the time for me to 
ask you for that billion dollars?
    Mr. Serrano. No. It would be your April Fool's joke to me, 
and it would be not nice to do that. We thank you for your 
testimony today. We thank all of you and for the fine work that 
you do and for your service to our country.
    Mr. Weinstein. Thank you to all of you. First of all, thank 
you for being here. You do not have to be here. There are many 
other places to go to, but you are here, and it shows an 
interest in history. It shows an interest in NARA and in the 
National Archives. We are all very grateful for that. We have 
3,000 people, which is not a huge number, around the country, 
but I can assure you and this committee and Congress is getting 
valuable money out of this staff. These are not work-too-little 
people. These are people who work 24/7 throughout the year.
    I want to tell you that I never in my wildest dreams 
imagined that a kid who grew up in the Bronx, whose parents are 
immigrants like yours, would end up with the privilege of 
overseeing this agency. I can tell you that I honor that 
privilege and will try not to disappoint you in any respect.
    As to the heritage day, we have got to get started on that. 
I would like to see you and everybody here. Let us develop a 
robust program that does not have to be repeated year by year 
but which can be assumed. It is time for an event.
    Mr. Serrano. Well, I feel the same way coming from where I 
came to where I am today.
    Mr. Weinstein. Thank you, Chairman.
    Mr. Serrano. We thank you. Just remember that Ms. Wasserman 
Schultz is closely looking at Jewish Heritage Month--that is 
important--and that Mr. Regula has 1,357,000 volumes of papers. 
So we are very glad to have had you today.
    The hearing is now adjourned.

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    
                                          Wednesday, April 2, 2008.

             UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                WITNESS

LINDA M. SPRINGER, DIRECTOR, UNITED STATES OFFICE OF PERSONNEL 
    MANAGEMENT

                  Chairman Serrano's Opening statement

    Mr. Serrano. The subcommittee will come to order. I welcome 
you to this hearing of the Financial Services and General 
Government Subcommittee.
    Today's hearing is on the fiscal year 2009 budget request 
of the United States Office of Personnel Management. The 
director of OPM, Linda Springer, is here with us and we welcome 
you.
    Director Springer has been at the head of the agency since 
2005, and this is the second time she has appeared before the 
subcommittee. This is the second year of the subcommittee, so 
that makes a lot of sense. Last year you testified at our 
hearing on issues in the Federal workforce at which we 
discussed the many challenges the government faces in 
recruiting, training and retaining qualified employees. We hope 
to discuss these important issues again today well as get a 
better understanding of your fiscal year 2009 budget request.
    The Federal workforce is changing and OPM has a leadership 
role in managing this change. We must therefore be certain that 
OPM has the capabilities and resources to do this job.
    OPM has asked for a discretionary budget in fiscal year 
2009 totaling $228,900,000, which is a $50 million decrease 
from the fiscal year 2008 appropriation. Aside from this 
relatively small discretionary budget, OPM also has 
responsibility for managing tens of billions of dollars in 
retirement, health, and life insurance trust funds for Federal 
employees. An important component of OPM's budget request is 
$15.2 million to continue the retirement system's project. The 
goal of the new retirement system, also known as RetireEZ, is 
to transform OPM's retirement recordkeeping and annuity 
processing so that Federal employees and retirees are better 
served.
    The first stage of implementing RetireEZ occurred in 
February, and the subcommittee looks forward to discussing this 
as implementation is moving forward. I am sure we all share the 
opinion that the timely and accurate payment of employee 
retirement benefits is an extremely high priority. Do you 
handle the congressional pensions also?
    Ms. Springer. Yes.
    Mr. Serrano. So it is important that they deliver those 
checks on time.
    Mr. Regula. Absolutely.
    Mr. Serrano. Especially next January for you.
    Mr. Regula. Right. And I am on the old system.
    Mr. Serrano. Don't remind me of that.
    And we need to be certain that RetireEZ will deliver on 
this promise made to employees and retirees. The success of 
this new system is particularly important in light of the 
significant number of retirements from the Federal workforce 
that are expected in the near future. OPM's retirement system 
needs to be ready to address this surge.
    The increase in retirements will also have an effect on 
human resource management across the government. The expected 
loss of experienced employees, or the brain drain, from Federal 
agencies means that agencies must work hard now to recruit the 
best and the brightest people.
    The capacity to recruit such talent will depend on the 
opportunities and work environment that agencies have to offer 
and also on the ability of this government to provide 
competitive compensation that is commensurate with employees's 
abilities. Congress has an important role in this regard since 
we must ensure that the funds are available to offer 
competitive salaries and benefits. Congress must also support 
funds for employee training and investment as well as support 
policies that promote equality and fairness in the workplace.
    Unfortunately, the President's discretionary budget request 
across most government agencies falls short of providing the 
resources that are needed to ensure a strong Federal workforce. 
This troubles me because I believe this budget lacks the 
recognition that we must invest in a strong Federal workforce 
now in order to avoid costly problems in the future.
    I know, Director Springer, that it is not your fault that 
the overall discretionary budget is, in my opinion, inadequate, 
so is this is not a criticism of you or OPM, and we want to be 
clear on that. However, I raise my concern to you because OPM 
needs to be a forceful advocate for Federal workers in all 
respects, including budgeting for human capital needs within 
the government as a whole.
    So we welcome you here today, we look forward to your 
testimony. We look forward to working with you to make sure 
that our Federal workforce is strong. We in this committee try 
not to bring personal items to the table, although before the 
Supreme Court Justices, I asked them whether a person born in 
Puerto Rico could run for President. They said if they settled 
McCain they could settle Serrano. Unfortunately, Mr. Regula is 
leaving Congress and come January, I want no problems with his 
payments. The man has been here long enough to earn every 
single bit of that money. He will be out there on the farm 
providing good milk and good beef for us in the city. And I am 
very happy.
    Mr. Regula. What an introduction.

                     Mr. Regula's Opening Statement

    Mr. Regula. Thank you for the commercial, Mr. Chairman. 
Well, I hope I will be out there helping OPM recruit talented 
young people. Because the success of any enterprise depends on 
people, whether it is an education system, good teachers make 
all the difference in the world. I used to say when I was 
funding the Department of Education, good principals, good 
schools, and good teachers, good schools. And effective 
agencies depend on talented people.
    The challenges of the Federal Government today are ever 
changing and ever new. Terrorism, we did not hear about that 15 
years ago, pandemic flu, competitiveness, an aging workforce, 
all of these challenges are really in your department. And the 
agencies have to depend on you to help them recruit good 
people.
    And what I would hope to do is to make young people, 
particularly those that have a political science inclination, 
to realize the potential that exists in the Federal Government 
as well as State and local government. I remember, and I said 
this to any number of classes of students I have talked to, 
that you said when you were here last year, that 60 percent of 
the Federal workforce will be eligible to retire in the next 10 
years. This is the baby boomers. And that is going to open up a 
lot of new jobs. It also it is going to create a huge need for 
qualified people to fill those jobs. And so your agency has an 
extremely important role to play in ensuring that there are 
good people available in the Federal Government to make this 
system work.
    I am interested that you are hosting a career fair in 
Columbus at the Ohio State University. I like that idea. I hope 
that I can help you get some more in Ohio. And perhaps some up 
my way. Because people need to understand the opportunities 
that exist. So we appreciate your leadership and I look forward 
to hearing your testimony this year.
    Mr. Serrano. Thank you, Mr. Regula. Director Springer, we 
hope that you stay within the 5-minute testimony period. Your 
full statement will go in the record. And then we will be able 
to have a back and forth on the issues. Thank you for being 
here with us today.

                     Director Springer's Testimony

    Ms. Springer. Thank you, Mr. Chairman, and members of the 
subcommittee. I do appreciate the opportunity to appear before 
you again this year to discuss OPM's appropriation request for 
fiscal 2009. As you know, OPM does provide a variety of 
products and services to nearly 1.8 million employees in the 
Federal Government. Some of our products and services include 
managing health insurance for about 8 million current and 
former Federal employees and their families, administering 
retirement services as you have noted for nearly 2.5 million 
retirees from all branches of Government, and completing 90 
percent of background investigations for contractors and for 
Government agencies.
    We are requesting $20 billion to carry out our mission in 
fiscal 2009. Of that total, about 99 percent, or 19.8 billion, 
is requested for mandatory programs with the balance of 228 
million for discretionary activities.
    The discretionary request reflects 211 million for salaries 
and expenses and 18 million for the Office of Inspector 
General. The total discretionary request reflects a net 
decrease of 15.4 million compared to the fiscal 2008 enacted 
level. I also want to note that OPM operates a revolving fund 
for the administration and operations of a number of our 
programs including the Federal investigative services and our 
Governmentwide training efforts.
    OPM's request does include funding to improve services that 
we provide to Federal employee annuitants and their families 
through our retirement and benefit programs, most notably. On 
February 25th of this year, OPM did begin the rollout of the 
automated new Federal retirement system, RetireEZ. This budget 
requests an additional 15.2 million for the continuation of 
that project. And we appreciate the support that you have given 
us in the 2008 budget and previously with respect to the 
program, and you will see a good return on your investment.
    These funds will allow us to continue the conversion of the 
paper records to electronic format as well as continued 
implementation and rollout of the technology and the new 
system.
    As administrator of the Federal Employees Health Benefits 
Program, one of the things we do is negotiate with all of the 
private insurance carriers to ensure the viability of the 
system. There are 283 health care plans that cover over 8 
million people, as I mentioned earlier. Over the years, we have 
been pretty good at negotiating and maintaining our benefit 
levels while we have kept premium increases on average 
relatively modest. Compared to the private sector we had an 
average increase of 2.1 percent in premiums compared to 8.7 
percent for the private sector for the year 2008.
    In the area of human resources management, our 2009 budget 
will allow OPM to develop new workforce recruitment strategies 
and tools. It builds on the things that were mentioned as far 
as the on-site programs at colleges and universities, and we 
will be developing an end-to-end life cycle reform of the 
current recruitment and hiring process.
    We are particularly proud--I want to note--of programs that 
we have initiated at three of the Nation's military hospitals 
across the country. In those programs, we provide on-site 
counseling, training and assistance to wounded warriors who are 
looking for job opportunities in the Federal Government. I get 
letters from those people saying that without this counseling, 
they were finding it difficult to break through the process. 
And so we are very proud of that.
    In the area of ensuring oversight of agencies, we will be 
using funds to implement best practices in human capital 
management, making sure that agencies are complying with merit 
system principles, veterans preference and other standards that 
are the hallmark of how the Federal Government treats its 
people. And as you say, people are at the heart of what the 
agency's success is focused on.
    I can tell you at the beginning of fiscal year 2008, 15 of 
the 26 major agencies that are scored in the President's 
management agenda have met those standards. That was zero in 
2003, so we are making good inroads there. And most people, 99 
percent of Federal employees, are at agencies that are meeting 
those standards. But we have to continue to be vigilant.
    OPM will continue funding with this budget our HR line of 
business and enterprise human resources integration. Those 
support e-Government efforts that have brought us things like 
the e-Payroll initiatives going forward.
    Our 2009 request will also help us provide a variety of 
ongoing services that relate to security activities and other 
compliance that we need to do as an agency.
    Now, I mentioned the revolving fund. This covers ongoing 
services that are financed by other agencies through this 
revolving fund agreement. It is essentially a business service 
provision that allows us to provide various e-training 
products, professional development assistance, technical 
assistance in consulting on human resources management, as well 
as very notably the investigative services that we do for the 
purposes of security clearances and also making sure that 
people are suitable for employment.
    For those revolving fund responsibilities, the budget 
includes an estimated $1 billion in obligations; again, those 
are spread across other agencies' budgets that, in effect, are 
our customers.
    The OPM budget request includes mandatory appropriations--
as I have noted that is the biggest part of our budget--to fund 
the Government contributions to the health benefits and life 
insurance programs for our Federal annuitants.
    I am happy to take your questions, but I do want to 
conclude by saying that OPM is proud of the broad role that we 
have in supporting the Federal workforce. By doing our job 
well, we believe every other agency and department will be 
better able to carry out their mission because in the end it is 
a function of people as you have noted. So again, I thank you 
for the opportunity to testify and look forward to your 
questions.
    Mr. Serrano. Thank you so much for your testimony.
    [The information follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    
                            RETIREEZ PROGRAM

    Mr. Serrano. Let's talk about the RetireEZ program. You 
unveiled it on February 25, 2008. How many retirements have 
been processed by the new system since it began operating and 
what is your assessment of how well the initial rollout of the 
system is going?
    Ms. Springer. We believe it is going well. Since our 
rollout, we have had from the group that is eligible, wave 1, 
which is 26,000 employees, we have received 37 requests for 
retirement. Of those 37, there are three that are still 
pending, so that means 34 have actually been processed. 15 of 
those had functionality that was not yet programmed into the 
system, and as you know, we are doing a phased rollout of 
functionality that means the calculations. So 19 could be 
calculated using the system.
    Of those 19, 13 matched completely. The other six had some 
element that did not match completely. So we have essentially a 
70 percent batting average on the new system for the 
retirements we have gotten so far. And that is why----
    Mr. Serrano. What was the percentage?
    Ms. Springer. About 70 percent. So that is why we are 
continuing to calculate in parallel using our old process as 
well as our new process. Because we look at every case to make 
sure that it matches up.
    If we find that it does not, that tells us something that 
we need to fine tune. And what we are talking about are fine 
tunings for those that did not match 100 percent. 70 percent is 
about what we would have expected going out. But again, 
everybody gets that parallel safeguard quality control of the 
old system check.
    Now, even the old system goes faster, and this is important 
to note. Every single one of these people have gotten their 
checks the first month in the full amount. No interim checks 
for any of those 34. And the reason is that even for the ones 
that are outside the system, we are now using automated data, 
not the paper data we had before. All of that paper data has 
been converted as part of this project.
    So all the data is there, the errors have been fixed and 
the holes have been plugged and that means, even in the old 
process, we can get this done faster because of this project at 
the same time that we are fine-tuning the other 30 percent.
    Mr. Serrano. You said the batting average was 70 percent, 
which early in the season and people do hit 700 in the first 
few games easily. Now their batting average usually goes down 
to 300. Do you expect your 700 to go up?
    Ms. Springer. Yes.
    Mr. Serrano. Okay. So unlike the Yankees, yours will go up?
    Ms. Springer. Well, we want to win the World Series. Let's 
put it that way.
    Mr. Serrano. Some reporter who just walked in would not 
think we were talking about something this serious.

                             LEGACY SYSTEM

    OPM issued a formal response on Monday to the Government 
Accountability Office review of retirement systems 
modernization. The report notes that OPM has continued to use 
legacy systems to check retirement applications for accuracy 
and that the new system matched the legacy system in the 
majority of cases, was your wording.
    Could you describe the cases in which the new system and 
the legacy system did not match? How many such cases have there 
been and what actions is OPM taking to address them? Are you 
incurring any additional costs by processing retirements using 
both the new and legacy systems? And how long do you expect--
the last part of this question is how long do you expect to be 
using both?
    Ms. Springer. All good questions. We are not incurring any 
additional costs because, in effect, this becomes part of our 
testing protocol which is ongoing. All of the functions in wave 
1 apply to waves 2, 3, 4 and beyond. So if we find something 
that does not match--and again, the percentage and the numbers, 
as I said, was a 70 percent match, 13 out of 19 cases, the 
others were ones that had functionality that hadn't been 
programmed yet. So the example numbers I had in the report were 
13 out of the 19. And so the people whose cases are running the 
parallel process, again, this is a very small subset of what we 
do. We process well over 100,000 cases a year, so for this 
small sample to run in parallel is not incurring any extra cost 
to OPM. For those six cases that did not match precisely, we go 
back to our programmers on this team and say this is something 
that needs some fine-tuning. Build that into our test plans 
and, in effect, it becomes real live testing.
    Mr. Serrano. Let me ask you a question on the issue of 
diversity in the workforce. And on the prior questions I would 
hope that you keep the committee informed as we go along as you 
go along as to how we are doing.
    Ms. Springer. Absolutely.
    Mr. Serrano. I want your batting average to be 1,000 for 
the whole season.
    Ms. Springer. Yes.
    Mr. Serrano. If you could keep us informed, that would be 
very helpful to us.
    Ms. Springer. Yes, we will.

                       DIVERSITY IN THE WORKFORCE

    Mr. Serrano. The most recent annual Federal equal 
opportunity recruitment program report to Congress notes that 
minorities continue to make gains in representation within the 
Federal workforce. However, the report also notes that women in 
general and Hispanics lag in representation within the Federal 
workforce as compared to the civilian labor workforce.
    How does OPM assess agency efforts at achieving a diverse 
workforce and how does OPM assist agencies to make these 
efforts successful? Why do women, in your opinion, and 
Hispanics continue to lag behind other groups in their 
representation within the Federal workforce?
    Ms. Springer. The progress, as you note, has been very 
modest. It is going the right direction, but it is going very 
slowly, and in particular, in the areas that you mentioned.
    And how does OPM deal with this? There is a monitoring and 
oversight part that we do and then there is a guidance 
component. The monitoring is related to our human capital 
assessment program that this budget funds and that requires 
agencies to report to us on their efforts with respect to 
diversity, with respect to hiring, training, development, 
professional development opportunities within the agency, 
because, as the report notes, this is an issue at senior level 
as well as through the General Schedule ranks, and in some 
cases more so at senior level. So there is an oversight piece 
of this. And those scores become part of what is reported on in 
the President's Management Agenda, in addition to our own human 
capital assessment that OPM does for each agency.
    But more specific than just oversight and reporting is what 
guidance that we provide and how is OPM engaged with agencies 
and the broader community. There are a number of ways we do 
this. There are standards that we publish. You could see them 
at OPM.gov. We work with the chief human capital officers as 
well as within OPM itself to direct agencies on how to achieve 
greater diversity. This is one of the things we do regularly 
and keep up to date.
    We also are participating with the broader community, 
including individual nongovernment groups, running training 
sessions, and running things with respect to our candidate 
development program to try to get people to apply for 
opportunities to move into senior ranks. So, we believe that 
there are a number of fronts on which we are acting, both from 
the guidance and promotion standpoint as well as in oversight 
and ultimately reporting. But it continues to be an area where 
we have not achieved the level that we should achieve and want 
to achieve, and even though the progress is going in the right 
direction, it has been very small.

                  OPM PROGRAMS TO ENCOURAGE DIVERSITY

    Mr. Serrano. Let me just do a--before I turn to Mr. Regula, 
a follow-up on this. Your 2007 annual employee survey asked 
employees to respond to the statement that: OPM's policies and 
programs promote diversity in the workplace. That was the 
statement. Over 46 percent of the employees selected ``neither 
agree nor disagree,'' ``disagree,'' ``strongly disagree'' or 
``don't know.'' what programs are established or planned at OPM 
to encourage the recruitment and retention of a diverse 
workforce and how will OPM follow up on these survey results to 
ensure that employees are aware of the agency's diversity 
initiatives and can actively participate in fostering their 
success?
    Ms. Springer. Let me just add a little window into that. I 
want to make it a little more granular. The numbers that 
disagreed or strongly disagreed were less than 10 percent 
there, and I don't have a basis of comparison from the previous 
to see if these have improved or not. But clearly, you know----
    Mr. Serrano. Well, it was ``neither agree nor disagree.'' 
24.9 percent.
    Ms. Springer. Yes.
    Mr. Serrano. ``disagree,'' 4.7 percent. ``strongly 
disagree'' 4.7, ``Don't know,'' 11.9.
    Ms. Springer. That is right. And each of those has 
significance. So what do we do? We have I would say just about 
every month some element of awareness and championing of 
diversity at OPM, combined with people from outside the 
organization as well as inside. We have guest speakers, and 
promotion of people within the agency, and what they do, 
particularly with respect to their heritage.
    Also, if you look in important leadership positions at OPM 
we have a diverse group. I won't say as diverse as some people 
would like it to be, but I know in hires that I have made that 
I have been mindful.
    But again, if half of our workforce is saying that either 
they are not sure or they disagree with that statement, then 
that is the value of the survey it helps us to say that we need 
to do more than what we are doing.
    Mr. Serrano. Thank you so much. Mr. Regula.

                       RETIREMENT PLAN INVESTING

    Mr. Regula. Thank you, Mr. Chairman. You manage the Federal 
retirement system. I assume that is every dimension. Do you do 
the investment policies or do you hire professionals to invest?
    Ms. Springer. The Treasury Department handles the 
investment. That's the one thing we don't do.
    Mr. Regula. So that the money that is set aside for these 
retirements like in the 401(k)s, Treasury does all of that 
investing?
    Ms. Springer. The 401(k) is the Thrift Savings Plan and so 
that is separate. And that is essentially self-directed. We 
choose, each of us, that is, in the Thrift Savings Plan, choose 
our own options. OPM has nothing do with the Thrift Savings 
Plan. But with respect to CSRS and FERS and all the others, 
Treasury handles the investment.

                           AGENCY RECRUITMENT

    Mr. Regula. Do you recruit for agencies or do they do their 
own recruiting of new people?
    Ms. Springer. Agencies do their own recruiting. It is not 
centralized. However there are times that we will assist them. 
For example, the Department of Homeland Security at one point 
had a very large need for people in a short time, and we 
actually helped them with their recruiting.
    There are various things we do along the way, and we 
certainly operate the USAJobs Web site. That is an OPM 
responsibility. But the actual hiring and interviewing is 
decentralized.
    Mr. Regula. Is that all done here or do you have satellite 
offices around the country?
    Ms. Springer. That hiring is done throughout the country.
    Mr. Regula. But they are an extension of your agency?
    Ms. Springer. To the extent that OPM is involved, yes.
    Mr. Regula. Yes, that is what I mean. I noted that you had 
a career fair in Columbus. I think it is over, perhaps.
    Ms. Springer. I think it is going on today, right now.
    Mr. Regula. Is this a first or have you done several of 
these?
    Ms. Springer. We have been at Ohio State before and there 
are several locations, universities across the country, that we 
have developed a relationship with. And so we have found that 
it is good to continue a presence as opposed to hopping around 
from place to place. At the same time, though, we do have an 
annual Web cast that is interactive that we run from here with 
the Partnership for Public Service that covers thousands, 
essentially every college or university is able to join that 
Web cast. And so this is just one way. The Ohio State one is a 
continuing relationship.
    Mr. Regula. In career fairs, you would make available 
information about the huge variety of careers that are 
potentially in the Federal Government; is that correct?
    Ms. Springer. Yes, yes, and this is not just open. We have 
various agencies on campus. Agriculture, NASA, VA, Homeland 
Security, we expect that this particular one, about a thousand 
students will come.
    Mr. Regula. So the agencies put some of their people in the 
career fair, you manage them, but they have their people there?
    Ms. Springer. Yes. There are about 50 agencies overall that 
will have a presence.

                           TRAINING PROGRAMS

    Mr. Regula. Do you have any programs to train or educate 
people coming into the workforce?
    Ms. Springer. We do, and they are at various levels. Some 
are agency-specific. USDA for example has a whole host of 
programs, and there are other agency programs, too. But we have 
some programs that OPM runs. We have various e-learning 
programs, distance learning so you don't actually have to be in 
a classroom.
    And at the supervisory levels, we have actually bricks-and-
mortar management development schools on the east and west 
coasts, and at the highest level, we run the Federal Executive 
Institute for the Senior Executive Service.
    Mr. Regula. Well, with a change in administration, many 
jobs change that are of a political nature but you don't get 
involved in that do you?
    Ms. Springer. No, I don't.
    Mr. Regula. Just the employees who are career employees, if 
you will?
    Ms. Springer. Yes, which is the vast majority.

                           REHIRING RETIREES

    Mr. Regula. I noticed you have some authority to rehire 
retired people who can take their pension and then come back to 
the agency, and in effect, they are drawing from two different 
sources. Is that commonplace?
    Ms. Springer. It is not commonplace today. What we have 
today is the ability to grant a waiver to allow, under very 
specific limited circumstances, a retired Federal employee to 
come back and be able to get their pension, continue to get 
their pension and be paid for the work they are doing today.
    But that is very limited. What most organizations have is 
the ability to bring a retiree back and let them get paid for 
their current work. Under our proposal, if they are qualified 
to do that, then they would be entitled to be paid and not have 
to have an offset with their pension. We can't do that 
generally. We can't just do that because we have openings or we 
want someone to come back and train new employees. We can't do 
that at Federal agencies today.
    Mr. Regula. As an agency you can't.
    Ms. Springer. No agency can unless they have a waiver 
authority that Congress has granted specifically for them. And 
a couple of agencies have that. NRC has that for example, but 
most agencies don't. They have to come to OPM for specific 
permission, but it is only in very narrow circumstances.
    What we have proposed to Congress, and it came last March, 
March a year ago, still working its way through, is a part-time 
availability to bring back retirees from the Federal Government 
who know these jobs better than anybody. This would still be in 
very limited circumstances, and I have offered some additional 
limitations to try and get this through, such as a cap on the 
number at any one agency, for example, or a sunset.
    But I hope we can get this done because we are in the 
position today where we can hire a retiree from General Motors 
who is getting their pension from General Motors, and we will 
pay them for their full salary for coming to work at the 
agency. They don't know the agency. The person that retired 
from that agency 5 years ago that wants to come back and help 
us that knows the job won't get paid the same way. And I think 
that is unfair. This bill would fix that.

                      ELECTRONIC RECRUITMENT TOOLS

    Mr. Regula. Have you moved into using electronic devices to 
assist you in the recruiting and providing of qualified people 
for the agencies?
    Ms. Springer. We are using it and we are increasingly using 
it. The biggest thing is probably the USAJobs capability that 
lets people apply online. It coaches them in their resume but 
lets them start the whole process electronically. We are doing 
things to make ourselves more visible on search engines like 
Google and others so if someone is looking for a job, a student 
or whatever, we will show up at a higher priority. We did not 
used to do that. There are other electronic tools along the way 
that will, I think, be employed over the coming year.
    Mr. Regula. Thank you, Mr. Chairman.
    Mr. Serrano. Thank you. Senor Kirk.
    Mr. Kirk. Mucho gusto, gracias.
    Mr. Serrano. He probably just broke some Federal work force 
rule; right?
    Mr. Kirk. Habla Americano, no Espanol.

              ROLLOUT OF THE ELECTRONIC RETIREMENT SYSTEM

    We have looked at the deployment of electronic retirement 
system as you described, and I would first like to ask for the 
26,000 employees that you have, those are GSA employees; right?
    Ms. Springer. They are partially GSA. Also OPM, Railroad 
Retirement Board, National Archives, but GSA manages the 
payroll for that group. So, mostly GSA, but some others.
    Mr. Kirk. I am particularly happy that the rollout is OPM.
    Ms. Springer. Well, we are too.
    Mr. Kirk. So that it is OPM first working out the kinks in 
the system. Can you briefly describe for us the rollout of the 
rest of the system, the other bureaucracies that will be 
encompassed in the schedule.
    Ms. Springer. Yes. There are four other waves. Of those 
waves, three of the four are related to payroll systems, 
payroll providers. So where GSA was the first group, another 
one would be the defense group, with DFAS, their payroll 
provider. The National Business Center, Interior Department, 
has a group. That will be the third one. Then there is one run 
out of the Department of Agriculture National Finance Center.
    The fourth will be the Postal Service, and actually that is 
the next one that is to come. Postal Service by itself is about 
700,000 people, so that will be a very large group compared to 
what we have done.
    Mr. Kirk. When we talk about of the 37, we are talking 
about a very small number right now. Fifteen the functionality 
did not fit yet. Is there a set of functions that you saw from 
the 15 that were not foreseen that suddenly were foreseen? Why 
did those 15 not fit?
    Ms. Springer. Good question. And in the GAO report, our 
report back to GAO, I should say, and to Members of Congress 
just issued on Monday, if you look at appendix 2, what you 
would see, there is a list of 150 functions. And these 150 
comprise the inventory of all the calculations that RetireEZ 
will have to do once everyone is in.
    Mr. Kirk. This is what the legacy system told you is 
everything that we do?
    Ms. Springer. Yes, and our experts that do these 
calculations. So they are things that are rated on two bases. 
Would they apply to wave 1 and how frequently are they 
encountered? Of the 150, 100 roughly would apply to wave 1. 
Some are related to congressional plans, by the way, and you 
are in one of those other waves. So they would not apply.
    Of the hundred, we said we can't have all hundred on day 
one. What are the most frequently encountered functions? And so 
on that chart, you see that they are rated frequent, occasional 
and infrequent. We selected the 15 that we thought were going 
to be the most frequently encountered. But there are some 
others on there that can and do show up.
    Mr. Kirk. So you actually planned for a lack of full 
functionality in the rollout?
    Ms. Springer. That is right. And this is one of the 
comments from GAO. You don't want to put something out there if 
it has not been fully tested.
    Mr. Kirk. When do you think you will have all 150?
    Ms. Springer. The first step is to get the rest of the wave 
1 functions, the rest of the 100. We are planning to have those 
around late May, maybe early June.
    Mr. Kirk. Is this is an imminent issue that you are 
involved with?
    Ms. Springer. Yes, absolutely. And it should be viewed as a 
continued rollout. We will, every few months, add something 
new. The next thing would be the balance of the hundred, the 
wave 1 functionality. That is what we are shooting for. Is it 
possible it might be just 90 out of a hundred, but we are 
shooting for the balance of that.
    Mr. Kirk. It is very good that, first of all, we have this 
applied to OPM, and second, it is good is that we have this 
apply to Congress and we are experiencing what our Federal 
workers are. Which wave do you expect Congress to be included?
    Ms. Springer. Congress is in a wave that is toward the end 
of this calendar year.
    Mr. Kirk. So would you be able to set up so that Members 
could walk through them and see sort of how the system works 
and how the legacy system works? Because what I want to do is 
get the awareness of what our Federal employees will see and go 
through and the best way to do that is to have Members of 
Congress look at their own.
    Ms. Springer. Yes, the answer is yes, we can do that. What 
we are doing first, and this has actually been scheduled for, I 
believe, Monday, this Monday, is a demonstration of the 
functionality, not with specific Members of Congress as test 
cases, but just how it actually will work. And it is important 
to note that this tool will become available to every one of 
you. Right now it is available only to the benefit officers at 
the wave 1 agencies.
    But ultimately, as we get more data cleaned for the 
employees--we don't want people going on and finding that their 
data has problems--you will see what you will all be able to do 
with this new system, in modeling and in estimating.
    Mr. Kirk. So you think that an individual member would be 
able to see their own records sort of in the fall?
    Ms. Springer. I am going to say later this year. That is 
our plan.
    Mr. Kirk. I want to be able to see what my military 
retirees and my postal workers are looking at because of how 
this program is rolling out. I am very aware of this system. 
But for all of my colleagues, I want to get them sort of up to 
speed.
    The last thing, when does the burden of proof shift from 
the legacy system calculating this to the automated system 
calculating it? When do you see that the legacy system then 
becomes advisory only? When does that happen?
    Ms. Springer. Let me say when it won't happen and then when 
I think it will happen. It won't happen until we have all of 
our waves moved over, and that is scheduled for spring of next 
year. So I think it is some time after that. It most likely 
would be some time in 2010. However, in other words what I am 
saying is we won't shut it off. But it isn't as if it is 
actually a system, it is people.
    Mr. Kirk. Right. Last thing. I am trying to think critical 
mass for the experience of Federal workers. When do you think 
instead of 37 we have 100,000 who have gone through the 
electronic? When do we hit that number, do you think?
    Ms. Springer. That is roughly the amount that we do in a 
year, in a full year. But putting in the population of 700,000 
of Postal employees is going to mean that we get more like 
2,000 requests a month as opposed to the 30 or so that we get 
out of wave 1. So that is going to accelerate pretty quickly in 
the summer. And so I think we will have achieved a volume that 
will be very informative to us in the summer.
    Mr. Kirk. Thank you, Mr. Chairman.
    Mr. Serrano. Senor Bonner.
    Mr. Bonner. Thank you, Mr. Chairman. I am bilingual as 
well, but I speak South Alabamian, you might need a translator.
    Mr. Serrano. I am from the south Bronx, I understand that 
well.

                    HIRING ADMINISTRATIVE LAW JUDGES

    Mr. Bonner. Madam Director, I appreciated hearing you tell 
the Chairman that you were looking forward to winning the World 
Series and I fully acknowledge that my question may be 
parochial so I don't expect you to win it necessarily with the 
ability to answer these questions as this moment. But if you 
could work with your staff to get answers back we would 
appreciate it.
    As you may be aware the House Ways and Means Committee and 
the Social Security Administration were very critical of OPM's 
efforts to facilitate the hiring of new administrative law 
judges, while more than 700,000 people awaited Social Security 
hearings last year. I understand that OPM is responsible for 
developing qualifications standards, conducting examinations 
and developing a register of candidates from which agencies can 
hire. And I know that litigation and the development of a new 
examination of candidates has delayed hiring significantly.
    Unfortunately, that does not change the fact that in my 
home district in Mobile, Alabama in 1996 we had a backlog of 
more than 6,000 cases. Today that number has grown to almost 
8,000 cases. Of the 12 ALJ positions in the Mobile office, only 
nine are filled. And with the nfew hirings announced by the 
Social Security Administration in February of 2008, some of 
these positions may be filled this month. But even those ALJs 
would not be handling a full docket until the end of the year, 
some 9 months from now.
    Last spring, I believe, OPM opened for the first time since 
1999 a registry for applicants. For 8 years, some of my most 
qualified constituents waited to apply for these ALJ positions. 
Unfortunately, the registry was shut down within a few hours 
after it opened. Of the 1,250 applicants reviewed, I am told 
that roughly 600 were ranked and available for hiring in 
October of 2007. Of those 600, the Social Security 
Administration has announced that it will hire 175 new ALJs. 
And I have also been told that this was not a one-time 
opportunity and that the registry was the first in a series of 
vacancy announcements that will be posted.
    So here is the question. When do you anticipate that the 
600 candidates will be exhausted and when will the next vacancy 
posting occur?
    Ms. Springer. Okay. That is a good recap, I think, of how 
we have gotten to where we are. There was lots of litigation, 
most of it predated me, but partly as a result of the oversight 
of the Congress, we really did get into high gear last fall, 
and very quickly did open up and reestablish the register, if 
you will. And I can't speak to all the reasons why Social 
Security disability claims backlogs have increased, and it is 
certainly not just a matter of ALJs but at this point as you 
said correctly, the register was refilled.
    The short period of time for applying was part of the fact 
that, for expediency, because Social Security did have an 
immediate need, we limited to the 1,200 plus amount the 
application pool from which we would interview, review, and 
rate and score and ultimately establish the new register. If we 
have kept it open longer, it would have delayed our ability to 
get people on the register and available for Social Security 
and others.
    So at this point, as you said, Social Security has hired 
off of that register. And we are in the process right now of 
polling Social Security and others as to what their need is 
going to be going forward. If the balance of the register is 
not going to be sufficient based on what they tell us, we will 
get ready to do another replenishing, if you will, and go 
through that process again.
    Obviously, we are in a position to do that quickly because 
we don't have to go back and reestablish the credentials and 
the priorities and the questions. It is there. It is current as 
of last fall. And so it is just a matter of executing.
    So we will be able to do that, do that quickly, and it is a 
function of what our customers tell us they are going to need.
    Mr. Bonner. I think a follow-up would be that given that 
there was an announcement and it was closed a few hours after 
it opened, how can OPM assure us that the next posting will be 
open for a reasonable period of time in order to allow the 
receipt of some of the most qualified applicants. It is one 
thing, in my view, if you get 600 people in and say that is 
what we need to start the process, it is another thing to know 
whether those 600 are the most qualified applicants.
    Ms. Springer. Of course, if we did not think they were 
qualified, the 1,200 wouldn't get through the process. So we 
believe that the ones that were added were fully qualified.
    But I think there are two things that are going to make 
sure that people who want to apply get into it. One is that 
this has gotten so much publicity. We don't have years and 
years that have gone by where it has been dormant and it has 
been off the radar screen. Now it is very much on the radar 
screen, and I think there are some things that we learned from 
last fall that will allow us to be very visible when that opens 
up again. I don't expect same problems.
    Mr. Bonner. Would some of those things that you learned 
allow you to perhaps prepare for the next round, learn from 
some of the things that have happened in last time? And 
specifically, is OPM considering announcing that the current 
list of candidates would sunset in X number of years and do a 
total redo of the list or just periodically top off the list 
with new candidates? And if you were to do a redo, how often 
would that be? Every 5 years? Every 10 years?
    Ms. Springer. I would like to get back to you, Congressman, 
I don't have that answer with me right offhand, if I may.
    [Clerk's note: OPM provided the following response:]

    OPM will reopen the ALJ examination to new applicants as 
the need arises. As part of its determination, OPM monitors the 
size of the current register as it responds to agency requests 
for new ALJs and regularly requests that agencies with ALJs 
projected how many ALJ hires they are likely to make over the 
next few years. In addition, it should be noted that the 
current examination can be opened for 10-point preference 
eligibles under 5 CFR 332.311. Those 10-point preference 
eligible veterans who successfully complete the examination are 
added to the register even while the examination is closed to 
other candidates.

    Mr. Bonner. Two more quick points, one more quick point. I 
am hopeful that OPM and Social Security Administration have 
established a better working relationship as a result of this 
and that at some point in the near future, we could see as you 
have indicated in your testimony that we will be getting things 
done.
    Ms. Springer. Yes, I can assure you that we do have a 
better relationship. We have people that talk on a weekly 
basis. And as I say, we are proactively reaching out to them as 
we do our other customers to know what their needs are in 
advance as it relates to the ALJ piece of their overall process 
so that we can be more proactive.
    Mr. Bonner. Thank you. Thank you, Mr. Chairman.
    Mr. Serrano. Mr. Ruppersberger. And no baseball jokes.
    Mr. Ruppersberger. No baseball jokes. This is my 5 minutes 
and since you were strict----
    Mr. Serrano. No, no, I wasn't strict. He went over.
    Mr. Ruppersberger. I would hold back for the second one if 
you would like.
    Mr. Serrano. Any comments I would make about the Orioles 
would never go off your time.
    Mr. Ruppersberger. That is good. We are rebuilding. We are 
having a psychological issue in Baltimore right now. We cannot 
all be Yankees fans with all the money in the world. At least 
we don't have Steinbrenner.
    Mr. Serrano. I did not say a word. By the way, I got your 
earmark request.
    Mr. Ruppersberger. Thank you very much. You are a really 
good chairman. I appreciate it. You have to have a sense of 
humor sometime.
    Ms. Springer. I am just hoping that the Phillies get to the 
World Series this year.
    Mr. Ruppersberger. Does Philadelphia have a baseball team?
    Ms. Springer. This year we do.
    Mr. Ruppersberger. National League though; right?
    Ms. Springer. Right.

                          SECURITY CLEARANCES

    Mr. Ruppersberger. I want to get into the issue of security 
clearances. I know it is a major issue. I happen to be on the 
Intelligence Committee and I chair the Technical Tactical 
Subcommittee that oversees NSA, and the overhead architecture, 
so I deal a lot with the clearance issue. It is my 
understanding that OPM does about 90 percent of the clearances.
    Ms. Springer. Yes.
    Mr. Ruppersberger. And that anything above top secret goes 
to the intelligence agencies. Do you agree with that?
    Ms. Springer. That is essentially right.
    Mr. Ruppersberger. Do you agree with that process?
    Ms. Springer. Yes, I do.
    Mr. Ruppersberger. Good, so do I. And the reason I say that 
from the Intelligence Community and what is really at stake 
with respect to penetration from China, Russia, Al Qaeda 
whatever, it is important that that clearance I think is 
handled within the intel agencies.
    On the other hand, when you look at the whole clearance 
process, I think it is a positive move trying to get 
reciprocity within and among clearances. If you have 25,000 
government workers every year that move from one agency to 
another and yet their clearances don't come to where they need 
to be, that seems to me to be really not a good system at all. 
Do you agree?
    Ms. Springer. Absolutely. Absolutely.
    Mr. Ruppersberger. Are you supposed to come out with a 
report April 30?
    Ms. Springer. Yes.
    Mr. Ruppersberger. Where are you now, can you give me a 
heads-up?
    Ms. Springer. Yes, there are four of us that are champions 
of that effort. One of them is director McConnell. We both have 
significant responsibilities in this area.
    Mr. Ruppersberger. McConnell is DNI, Director of National 
Intelligence.
    Ms. Springer. Yes. And we have DOD and OMB as well. What we 
are doing there is looking at not just adding more people or 
automating certain pieces of what was previously a manual 
process, because those are things that OPM already is doing and 
can do. That is how we have gotten the backlog down and made 
things faster, but what we are looking at in this group under 
the President's direction is a whole new way of doing this 
balance between risk and technology, and reciprocity and the 
governance over this. Are there too many steps? Who sets the 
standards? If we have separate standards for seeing if someone 
is suitable for a job versus whether they are executable for a 
security clearance, are we asking the same types of questions 
twice?
    Are we using the best automation possible? Are there things 
going on in the private sector, in financial services or other 
areas that maybe are doing things in the way of clearance 
technology that we need to use? That report on the 30th will 
identify areas that we need to look for and things that we need 
to do that will redo the whole process, and modernize the whole 
thing.

                           CLEARANCE PROCESS

    Mr. Ruppersberger. How about the issue of implementation? 
We have so many studies on Capitol Hill and we don't get to the 
implementation. This is very important for the national 
security. I would suggest to you that 50 percent of the 
clearances we have we don't need. If you really looked at 
clearances that are necessary are the ones that involve our 
national security, things that are very, very classified and 
confidential.
    There are many, many workers whether it is NSA, CIA, 
Department of Energy, wherever they may be that probably don't 
need the clearances that they are getting right now, now 
because they are really not into the area where you need to 
have that. And another thing, and I would suggest, and I ask if 
you are doing this now. That we look at the whole clearance 
process and see whether or not we need all the clearances being 
processed. I don't think there has been a strong study or 
investigation into that. I know GAO had a hearing about 2 years 
ago before the Government Reform Committee and they were 
starting to examine the situation. But I think they were afraid 
to take it on, to be honest with you. Have you looked at the 
whole structure to see whether or not we need the clearances 
that we have now, which would save a lot of time. Then we could 
put more effort into the ones that we need.
    There is still a big backlog of contractors that costs us 
money and affects national security. And with NSA and NRO and a 
lot of these other places that we have to rely on the 
contractors, and yet we are not getting those cleared as 
quickly as we need.
    Ms. Springer. The answer to your question is yes. That is 
something that is part of this. Do we need the level--not just 
the clearance, but which level of clearance is it? How can we 
look at the standards that go with those different levels to 
ensure that we are asking and investigating to the extent that 
we need to but not beyond that. That will help the process go.
    The other thing this involves is not just the investigative 
piece, but the adjudication piece. The adjudication piece 
today, which is where the agency takes the results of the 
investigation and makes the decision, that can range anywhere 
from 5 or 7 days to a year in the amount of time that an agency 
takes to make that decision.
    And so we could use all the technology in the world to get 
the information, but if it stays there at the agency that 
person isn't going to get hired or get their clearance. It has 
to be an end-to-end review, and that is what we are looking at.

                       CLEARANCE COMPLETION TIMES

    Mr. Ruppersberger. Sometimes it seems that we ought to look 
at where agencies do things right and agencies that are not 
doing as well as they should. I think the NSA does an excellent 
job in what they do. They can complete a clearance in 3 months 
and their investigation process is a lot more thorough because 
of what is at stake because their clearances are above top 
secret.
    Has your department looked at the NSA how they do it? And 
have you been able to learn from what they do versus where you 
are now? The problem is that you have a heck of a lot more 
volume than they do.
    Ms. Springer. I believe we have, because I know we work 
with all of those agencies not only in this task force, but 
more broadly. One of the things that I know that we do as well 
though is we monitor how every agency's doing in all the 
facets. We know who is doing well within our realm in 
adjudication. At OPM, for example, on average we get it done in 
7 days. So it is a wide range, and with OMB's leadership, all 
of those agencies are counseled on ways they could get faster. 
They are making progress, but you know they are not where they 
need to be.
    Mr. Ruppersberger. You have been working on the timeline 
target of 90 days. Where you are actually as far as your 
average? I know that is your goal, but I assume you are not 
quite there yet.
    Ms. Springer. We are on average end-to-end, for the Secret 
clearance, I believe--I will get back to you for sure on this 
but I believe we are around 112 days.
    [Clerk's note: OPM provided the following response:]

    The Intelligence Reform and Terrorism Prevention Act of 
2004 requires 80 percent of the background investigations for 
initial security clearances to be completed within an average 
of 90 days. OPM is meeting and exceeding these statutory goals. 
Of the 586,569 initial clearance investigations OPM received 
during Fiscal Year 2007, 80 percent were completed in an 
average of 67 days (92 days for 64,722 Top Secret and 63 days 
for 404,534 Secret/Confidential).]

                            POLYGRAPH TESTS

    Mr. Ruppersberger. When do you use polygraph?
    Ms. Springer. I need to get back to you on that. That is at 
a level that I don't know.
    Mr. Ruppersberger. I have tried because of the committee 
that I am on, the other committee, the Intelligence Committee, 
we look at a lot of these issues, and sometimes we track where 
we have certain individuals whether they are contractors or 
actual employees. And you have situations with it that 
polygraph is mandated because of the type of clearance that it 
is. And you have individuals that would take a polygraph, and 
they would fail the polygraph on an issue such as relationships 
with terrorists which is really kind of absurd if you look at 
somebody's background.
    And then the polygraph examiner, you fail that polygraph, 
they say come back in 3 months or 6 months and we will redo it. 
And that is usually when we get calls to Members of Congress. 
They are told if they failed they must wait, that is 
ridiculous, this person should have another polygraph examiner.
    My concern there is the issue quality of the people who are 
giving the polygraphs. And when you have someone whose 
background is such that the polygraph is the last issue that 
needs to be done, yet they are put back 6 months later, when, 
in fact, we have gone this far, we have spent the money that we 
need to do. We need to have a consistent program and make sure 
we have a background on the quality of our polygraph examiners.
    In the one case, another polygraph examiner came in, they 
relaxed the person, the person passed. Now that is costing our 
government a lot of money. And are you evaluating that? Are you 
looking at that issue? I would like to hear you get back to my 
staff on the issue of polygraphs and how you handle that, how 
you make sure that we have consistency with polygraphs, and 
when somebody fails it and they have gone through all the 
background checks that we do not just put them in the queue for 
6 months later.
    Ms. Springer. Let me get back to you. That is out of my 
range. I am not even sure that we use polygraphs or to what 
extent. Let me get back to you.
    [Clerk's note: OPM provided the following response:]

    OPM does not conduct polygraph examinations as part of its 
personnel security investigations. Only an executive branch 
agency that has a highly sensitive intelligence or 
counterintelligence mission directly affecting the national 
security may use the polygraph for employment screening and 
personnel investigation of applicants and appointees. However, 
OPM approves and annually renews the use of the polygraph by 
these agencies under the authority of Executive Orders 10450 
and 10577, as ameded. OPM follows the standards it formerly 
presecribed in Federal Personnel Manual Chapter 736, section 2-
6, title Use of the Polygraph in Personnel Investigation. 
Renewal requires the requesting agency to recertify that it 
continues to meet OPM's standards for use of the polygraph in 
employment screening and personnel investigations.
    In addition to meeting OPM's standards, agencies seeking 
renewal must meet the uniform personnel security community 
standards agreed to by the agencies in the U.S. Security Policy 
Board's Polygraph Memorandum of Agreement.
    Finally, the Department of Defense's Polygraph Institute 
(DoDPI), the executive agency for polygraph screening, conducts 
quality assurance reviews of agencies' polygraph programs 
pursuant to the procedures in the Federal Psychophysiological 
Detection of Deception Examiner's Handbook. The reviews are 
conducted at least every two years, and the results are 
provided to OPM and the respective agency's security office.

    Mr. Ruppersberger. Probably more polygraphs are used in the 
Intel community.
    Ms. Springer. I don't think we do. I think that is strictly 
in the Intel. Let me get back to you.
    Mr. Ruppersberger. I think it is. You don't have to get 
back unless it isn't.
    Ms. Springer. Okay.

                     RECRUITMENT IN THE TERRITORIES

    Mr. Serrano. Thank you. Part of what I have been doing 
Director Springer, is trying, since I became Chairman of this 
committee, to make our government aware of something that it 
seems not to be aware of at times, and that is outside the 50 
States, we have territories where American citizens live and 
work and are covered by Federal laws and by the Constitution, 
as well as serve in our Armed Forces. So whenever possible, I 
try to inject the whole issue of how are you working with the 
territories.
    With the issue of recruitment, most agencies tend to 
recruit within the 50 states. What would it take for us to 
begin to recruit, something that I would encourage, outside the 
50 States and recruit in the territories also? On the issue, 
for instance, of the lack of sufficient Hispanics in the 
Federal workforce, there are plenty of territories where you 
could certainly recruit. I use, as an example, my birthplace of 
Mayaquez in Puerto Rico. No one knows how this really happened, 
but a long time ago, NASA went there and recruited some folks. 
The success they had was such that they have come back and back 
and back.
    On many of these space flights the folks on the ground were 
folks who were born in Puerto Rico, educated in Puerto Rico, 
recruited in Puerto Rico, and like any other American citizen, 
moved to Maryland and to other places and they work at NASA. 
And for some good reason NASA keeps going back to recruit 
there.
    So can you encourage this governmentwide? This recruitment? 
And how could we put that in place?
    Ms. Springer. You are right. Another agency that had good 
experience in Puerto Rico very specifically was VA. So how can 
we tell other agencies about that and promote it? One of the 
ways is, under an executive order, we have an interagency 
Hispanic council that meets twice a year at least and there are 
other interim meetings, and we have asked agencies who do a 
good job with this to come and tell us what they have done.
    I wasn't aware of NASA, so that is one that I will ask to 
come to the next meeting. But I know that VA, for example, did 
a very lengthy presentation on their experience. And so we are 
showcasing those, encouraging agencies to do more of that, and 
there is someone there from every agency. Maybe the thing to do 
is to follow up to see if they have actually started to do it.
    But I will add NASA to the next meeting also.
    Mr. Serrano. I would like to see something--I don't know 
how possible it would be--where it is an initiative that we put 
forth where the encouragement is more than an encouragement, 
but a semi-mandate that they include the territories in their 
recruitment. Keep in mind that we are talking about territories 
who are governed by these agencies, so to recruit folks to work 
here with them--and at their local places also--but certainly 
in the Federal agencies makes a lot of sense.

                       FUNDING ELECTION OBSERVERS

    Let me talk for a second about the voting rights 
observation. The fiscal year 2009 budget request proposes that 
the Department of Justice reimburse OPM for direct costs 
relating to providing trained election observers to monitor 
elections in areas designated by the U.S. Attorney General. Up 
to now OPM has received direct appropriations for this 
activity.
    What are the reasons for shifting the direct costs of 
deploying observers to election sites to DOJ? DOJ is funded 
under a different appropriations subcommittee. Is OPM confident 
that DOJ will receive appropriations for this purpose? What 
will be the impact if funding is not provided to DOJ?
    Ms. Springer. The reason that we worked with DOJ and OMB on 
this change is that DOJ is responsible for determining where 
and when the observers are needed. Even when we had the 
funding, DOJ was the one that would tell us that observers are 
needed in New York or in this State or somewhere else. They 
would do the estimates, and so it was really out of our hands 
to know where the need existed and to what extent it would be.
    Our role, which we value candidly, is that we train people 
and make sure that those people are equipped to do that job. 
But the estimation of the need, and that drives the funding, is 
really something that we are not in a position to be 
knowledgeable of. That is a Justice function. So we felt that 
the budgeting for that was more appropriately placed with the 
people who have to do the estimate of the need. And that is 
Justice.
    The funding that we retain is just the funding for the 
training program. And so that is why we have a very small 
amount in our 2009 appropriation. We are sure that Justice is 
requesting an appropriate amount, and if we ever felt that 
there was any jeopardy there, obviously we wouldn't have done 
it.
    Mr. Serrano. So Justice would always tell you where to send 
the folks?
    Ms. Springer. They tell us where and to what extent.
    Mr. Serrano. These were not decisions that you made?
    Ms. Springer. No.
    Mr. Serrano. I am aware that they sent for many years, they 
may still do, to my congressional district, to the whole county 
as the result of a race I was involved in for another office in 
1985 where they are still looking for some missing voting 
machines, but that is another issue altogether. I am glad I 
lost that and I am here.
    What changes then? There are some people who have said this 
could be a bad thing. Why? What changes? What problem could 
exist? DOJ you say gets part of the funding then. To do what? 
To do the assessment?
    Ms. Springer. DOJ gets the funding to pay the people, to 
pay the observers.
    Mr. Serrano. Right. So you get the funding to train them?
    Ms. Springer. Just to train them.
    Mr. Serrano. Put yourself in the position--and this is a 
difficult one to put you in--of a good and fair elections 
advocate. Was it better the way it was before or will it be 
better now? Does it make a difference?
    Ms. Springer. I would say to that person, it is better now, 
because before DOJ did the estimate, like they do today, that 
has not changed and they would give us the estimate, but they 
were never on the hook for the money. So the people who were 
requesting the budget at OPM were dependent on DOJ and we were 
not as close to it to be able to say this is really the right 
amount versus DOJ who is close to the courts. It is their area 
of expertise, and by including it in their budget they are 
going to be very attentive to that amount. So I think that it 
makes sense.
    Mr. Serrano. Okay. That is one we are going to be looking 
at, because certainly as we get closer to November of this 
year, everything is up for grabs. And if what we see now is any 
indication of how tight races can be all over the country, how 
these races are conducted and who is there to observe become 
major, major issues. We will be staying close with that.
    Ms. Springer. May I add one other thing, Mr. Chairman? If, 
for some reason, the DOJ estimate understated and it turned out 
there was a greater need, in the past OPM would have to find 
that extra money out of our small discretionary budget, a 
little over 200 million. DOJ has a much bigger budget from 
which they could go and pull that extra million dollars, $2 
million. So I think that is an extra benefit to it being there. 
It is a lot harder for us if we would have to be in that 
position.
    Mr. Serrano. I was ranking member of that committee and I 
know they have a much bigger budget.
    Mr. Regula.

                        AGENCY RECRUITING NEEDS

    Mr. Regula. Thank you, Mr. Chairman. As I understand it, 
the agencies give you a heads up as to what their needs are 
going to be down the road in terms of personnel?
    Ms. Springer. We, periodically, for certain professions, 
work with them on their gap analysis, particularly for IT, 
acquisition, financial and human resource positions.
    Mr. Regula. So you could help to recruit for them to meet 
their needs?
    Ms. Springer. We work with them. We work with them in 
identifying what their need is and working with the different 
councils to help go out, sometimes run workshops or job fairs 
or things like that to help meet those needs.

                          STUDENT RECRUITMENT

    Mr. Regula. Do you get information out to colleges, 
universities. They have personnel people who counsel students 
graduating, et cetera, and for that matter, any new students as 
to what potentials exist? Do you give them information they can 
have so that they can better advise students about the 
potential of Federal employment?
    Ms. Springer. We do. And one thing that we are doing that 
we just started last year and we will be doing it again this 
year, is to actually create a Web-based set of information 
about those professions, about how to find Federal jobs. All of 
these things are almost like a how-to guide. Then we do the Web 
cast available to thousands and thousands, and we invite all 
the job counselors at the schools, to get on. Then we archive--
--
    Mr. Regula. They could watch it to get that information in 
the college library, could they not?
    Ms. Springer. This way we know that it is up to date. So it 
is archived on the OPM Web site. Even if they missed that Web 
cast, they can come back to that again and again and again and 
be refreshed on how to find it.
    Mr. Regula. So these students and the colleges have an 
opportunity if they take advantage of to determine what is 
going to be potentially available for them?
    Ms. Springer. Yes, they do. And we think that is the most 
cost efficient way to do it using the technology on the Web.
    Mr. Regula. Your job fairs are part of that too.
    Ms. Springer. They are part of that. Those are actually on 
site, bricks-and-mortar type visits. But you can't go to 8,000 
colleges and universities, so that is why we do the broad 
approach as well.
    Mr. Regula. I know one out of the 8,000 you might want to 
get to.
    Mr. Serrano. You are not going to be a university President 
when you leave here are you?
    Mr. Regula. Not yet. No, no, no.

                     ATTRACTING AND RETAINING STAFF

    Congress has provided many new personnel authorities to 
give agencies the flexibility to attract and retain staff. 
Bonuses, annual leave bonuses, reimbursing students.
    There are a lot of tools available to agencies to keep 
their particularly qualified personnel. Do you advise them of 
what they potentially can do to keep personnel?
    Ms. Springer. We do. We do it several ways. And one of the 
things that we have done is for different types of people at 
different stages of their career, at different points in their 
life, different types of jobs, we actually put together a 
matching program between those criteria and the flexibilities 
that Congress has given us and which ones we think best serve 
those people at those points in their career. We constantly 
reiterate that to help the hiring officers and the chief human 
capital officers to understand it and use them more, and we 
track how they use it.
    You know, I don't mean to be flip here, but you can lead 
the horse to water but you can only do so much in making it 
drink. So I don't think it is a matter of getting more 
flexibilities. I think the flexibilities that we have are fine. 
I think we just need to help agencies to use them more fully.
    Mr. Regula. Are most Federal employees members of a union?
    Ms. Springer. I don't have those figures for you.
    Mr. Serrano. The President isn't.
    Mr. Regula. No, he can set his own rules.
    Mr. Serrano. Neither are we.

                         PERFORMANCE-BASED PAY

    Mr. Regula. The pay for performance personnel systems in 
Homeland Security and Defense, I understand they have been 
disputed in court and are very unpopular. What is your 
experience on pay for performance? I am involved in the 
education side, and the education unions do not like pay-for-
performance systems. What is happening or what is the attitude 
in government?
    Ms. Springer. There are surveys that OPM does every year of 
areas of government, employees in government agencies that are 
under a performance-based pay system. We have had ones that 
date back for several decades that are mature and well run.
    What we find in those, and I am saying that that covers, I 
don't know, well over a 100,000 people, we find that somewhere 
around 70 or so percent would not want to go back to a system 
that does not give them the opportunity to be rewarded more 
fully for excellence. There are always going to be some people 
who are going to make less, get less than they would have in a 
fixed schedule where everyone gets exactly the same. But the 
vast majority would not go back.
    Now, the DHS elected, because of all their other 
organizational issues of a new agency coming together, to not 
go very far and to focus just strictly on the performance 
element and to not actually link pay. That was their choice. 
DOD, on the other hand, with all of its established training 
capabilities elected to go to the point where they actually 
brought people under a performance-based pay system.
    We have been in the process of evaluating how well they are 
doing, and it has been challenged in the courts. There was 
legislative direction that will limit, particularly in the 
union population, what DOD will be able to do.
    It is too early to tell, in my judgment, how they will rate 
it. But I can tell you that I think they are doing a good job, 
and I think that in time, people will get comfortable with this 
system there. But you are never going to get 100 percent. The 
systems that have been around for decades and decades said 
typically there will be close to the 70 percent range of 
satisfaction with it.
    Mr. Serrano. Thank you. Mr. Bonner?

                 SOCIAL SECURITY ADMINISTRATION BACKLOG

    Mr. Bonner. Thank you, Mr. Chairman. Let me come back to my 
question and try to get two more quick questions in. Going back 
to the list of 600 qualified that was comprised last year, did 
this most recent list get added to the prior list of a decade 
ago or did this new list of applicants replace the old list?
    Ms. Springer. It did replace that old list, because 
essentially that old list was, if you will, stale.
    Mr. Bonner. Okay. And then going--and you mentioned in your 
testimony or in your answer, I think that there are many 
reasons for the current backlog, and I certainly accept that. 
It is true. But the Social Security Administration's Inspector 
General just last month issued an audit report on ALJ's 
caseload performance. In a nutshell, ISSA ALJs processed cases 
ranging from a low of 40 cases to a high of 805 cases per ALJ 
in fiscal year 2006.
    In my only district in Alabama, we have 55 percent of the 
ALJs that have fewer than 500 cases. And in my distinguished 
Chairman's district in the Bronx in the office of the Bronx, 75 
percent of ALJs have fewer than 500 cases. And when we talk 
about ALJs and cases, we are really talking about our citizens 
who come to us as their ombudsman to try to get the process 
issue system to work on their behalf.
    So what can and should be done about underperforming ALJs 
in your judgment? And if there are some 501 underperforming 
ALJs at the Social Security Administration, how would those 
positions be filled in a timely manner to ensure that the 
Social Security Administration can effectively work through the 
case backlog?
    Ms. Springer. Ultimately, our role--I can only speak for 
our role--OPM's role is to make sure that there are enough 
qualified ALJs available to Social Security. How they are 
geographically assigned--actually the importance for us in that 
one is to make sure that we do get people from the different 
geographic areas because if all the ALJs on our register are in 
Washington, D.C. but they need someone in San Francisco, we 
could have 1,000 qualified ALJs, but none where they need them.
    So that is one of the things that is important for us to 
find out from Social Security. What we are doing now is a more 
refined enlightened approach that says where do you need--not 
just how many, but where do you need them?
    To the extent that the caseload varies, it is up to Social 
Security to be sure that they have the right number of ALJs in 
a given location. Our role there is to make sure that we do the 
register with that foreknowledge of where they are going to 
need them.
    And from the standpoint of the performance or productivity 
of a government ALJ, we think our qualification standards are 
rigorous enough that we are weaning out ALJs that don't have 
the qualifications that would allow them to be productive to 
the extent Social Security wants. But if Social Security, for 
whatever reason, thinks that is not there, then they--it is 
certainly within their power to say this ALJ isn't the one that 
we want, isn't the right one for us. They don't have a pay-for-
performance type system. So you don't have that type of 
incentive-based approach. But we hope through our screening, we 
are eliminating ALJs that are not qualified to handle that.

                          UNDERPERFORMING ALJS

    Mr. Bonner. Madam Director, what about ALJs that are simply 
underperforming? Does Social Security have within their own 
authority the ability--we have had judges in my district that 
were hearing five and 10 cases, and then I get calls from 
constituents that are looking at 2 and 3 years to get an 
answer. Sometimes they die before the family gets an answer. 
Does the system allow for underproductive, nonproductive, 
poorly performing ALJs to be rooted out of the system so that 
your operation can bring in qualified candidates that will do 
their job well?
    Ms. Springer. Let me get back to you for sure on this 
because I don't want to be misleading. I think that the agency, 
whether it is Social Security or any other, has the capability 
of taking action with respect to these ALJs, but let me get 
back to you. At that point, it is out of our hands. All we do 
is periodically reassess that they are still qualified. But let 
me get back to you because that is a good question.
    [Clerk's note: OPM provided the following response:]

    An agency may remove, suspend, or reduce in level an administrative 
law judge for good cause established and determined by the Merit 
Systems Protection Board on the record and after opportunity for a 
hearing before the Board as prescribed in 5 U.S.C. 7521.

    Mr. Bonner. Okay. Thank you. Thank you, Mr. Chairman.

                          HUMAN CAPITAL REPORT

    Mr. Serrano. Thank you. I have just have one more question 
on the issue of agency human capital officers. In a July 2007 
report by the Partnership for Public Service, Chief Human 
Capital Officers and other key Federal human resource officials 
across government gave OPM mixed reviews. While there was 
acknowledgment that OPM ``does many things well,'' two-thirds 
of the interviewees reported that OPM does not fully understand 
or appreciate the needs and resource limitations of agency 
human capital officers.
    There was also concern expressed regarding the need for 
more consultation and better communication between OPM and 
agencies. Has OPM responded to this report by addressing the 
concerns raised by the human resource officials? And what 
actions has OPM taken to become more responsive?
    Ms. Springer. I am aware of that report. And I chair the 
Chief Human Capital Officers Council. And so the answer is I 
would not disagree with the areas. I think I would take some 
exception with the extent to which they think those concerns 
are prevalent.
    However, we have done some things. First of all, I 
reorganized the Chief Human Capital Officers Council 
subcommittee structure, and I assigned people at OPM to be 
linked to and to work with each of those subcommittees. So 
there is much more collaboration and mutual goal setting. We 
have just finished setting goals for the council, including the 
Chief Human Capital Officers who were interviewed for this 
report, so that their goals and OPM's goals are aligned in 
their areas of concern.
    I have also added deputies, and by the way, about half of 
the Chief Human Capital Officers are career officials. They are 
not political appointees. I think all of the deputies--and I 
established that deputy position--are also career because I 
want to make sure there is continuity on these people issues 
from year to year to year. This is not something that should 
have to restart when a new administration comes.
    So I think we are better linked; people are assigned; there 
is mutual goal setting and much more contact. I think if that 
survey were done in 2008, those scores would rise. I am not 
going to say they are 100 percent batting average but they 
would be better than they were in that survey.
    Mr. Serrano. Did you say 100 percent?
    Ms. Springer. Or 1,000. 1,000, excuse me. I am more of a 
basketball fan than a baseball.
    Mr. Serrano. I understand. This committee is heavy on 
baseball. I have some questions that I will put on the record.
    Mr. Regula. I have questions for the record.
    Mr. Serrano. Without objection, those will be inserted in 
the record.
    Director Springer, we thank you for your testimony. We 
thank you for your work. We will continue to stay in touch with 
you, the committee will, on the issues we discussed. So that 
you could keep us--you can alert us to what the changes are. I 
would encourage you to see if we can come up with a plan for 
recruiting in the territories. That would make this committee 
very happy, and that is not a bad thing. And with that, we 
thank you for your service and we thank you for your testimony 
today.
    Ms. Springer. Thank you, Mr. Chairman.
    Mr. Serrano. Thank you. The subcommittee hearing is 
adjourned.

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                                           Thursday, April 3, 2008.

                    GENERAL SERVICES ADMINISTRATION

                                WITNESS

LURITA DOAN, ADMINISTRATOR OF GENERAL SERVICES, GENERAL SERVICES 
    ADMINISTRATION

                  Chairman Serrano's Opening Statement

    Mr. Serrano. The subcommittee will come to order. Good 
morning to all.
    The subcommittee will hear testimony today on the subject 
of the fiscal year 2009 budget request of the General Services 
Administration, GSA. GSA has been supporting Federal agencies 
and their workers since 1949 by acquiring goods and providing 
services and facilities to support the needs of those agencies. 
The GSA performs a wide range of services, from the 
construction of Border Patrol stations to the management of 
many e-gov initiatives. Additionally, the GSA coordinates and 
evaluates governmentwide policies related to the management of 
government property, technology, and administrative services.
    With all of these duties, it is important to ensure that 
GSA conducts itself in an unbiased and fair manner in 
negotiating and awarding contracts for the very services our 
government uses on a daily basis. I am especially troubled by 
the refusal of a vendor, the fairness of whose contract has 
been called into question, to cooperate with an inspector 
general investigation into the matter. Additionally, I am 
concerned about the recent court ruling ordering GSA to stop 
work on a $50 billion contract award. I believe that all of us 
here owe an obligation to ensure that money spent by the GSA is 
money well spent. And to do that, we must have cooperation from 
all sides, both at the GSA and by the private vendors hired.
    Today we welcome back GSA Administrator Lurita Doan to 
discuss her agency's fiscal year 2009 budget. This is Ms. 
Doan's second appearance before this subcommittee in support of 
her agency's budget request.
    While much of GSA's activity is driven by fees, 
approximately $8 billion of the budget request will require 
action by this subcommittee. This year's request includes some 
interesting proposals, including a new pilot program for real 
property disposal, as well as requests to reorganize some of 
the agency's citizen services. Additionally, the request 
includes funding to assist agencies in the Presidential 
transition.
    Administrator Doan, this subcommittee looks forward to the 
remarks you will make today. I would like to ask you to please 
keep your opening statement to 5 minutes. Your entire written 
statement will be submitted for the record.
    At this time I would like to remind you, Ms. Doan, that Mr. 
Regula will be leaving Congress at the end of the year. So, you 
know, renaming every building in his State is not improper 
since he did not ask for it. It would be improper if he asked 
for it. I am not asking for it either. I am just saying it is 
not a bad idea.
    Mr. Serrano. Mr. Regula.

                     Mr. Regula's Opening Statement

    Mr. Regula. Thank you, Mr. Chairman. You said it just 
exactly right. I was kidding.
    Well, we are happy to welcome you, Ms. Doan, and you do 
have a very important responsibility. It is one of those unsung 
parts of the Federal Government that most people do not have 
any idea what is involved. Nine thousand different buildings, 
historic structures, management of government operations. It is 
really a management challenge. And I am sure one of the really 
great challenges you must have is maintenance. I chaired the 
Interior Subcommittee of Appropriations for several years, and 
that was one of the big challenges that we had; and also as a 
member of the Smithsonian Board for several years, the same 
thing. And I am sure you find this true. Fixing up buildings 
and doing the heating system and electric and all that is not 
glamorous, and I would suspect, and maybe you want to comment 
on this, it adds some real challenges to ensure that there is 
adequate maintenance of these 9,000 or so structures.
    I guess it goes back for me at least a little bit, having 
grown up and still living on a farm, if you do not fix the 
roof, the barn is going to fall down eventually because of the 
water damage. And you must have the same kind of a challenge of 
maintenance. And so we will do all we can to help your agency 
meet these challenges. And they are always expensive.
    Thank you, Mr. Chairman.
    Mr. Serrano. Thank you.
    Mr. Serrano. So if you do not fix the roof, the barn will 
leak?
    Mr. Regula. Absolutely.
    Mr. Serrano. Here I grew up and still live in an apartment 
building. If the guy upstairs overflows his sink, is that 
similar?
    Mr. Regula. Yeah, very similar, although you do not have a 
mound full of hay underneath it that is going to rot.
    Mr. Serrano. No.
    Mr. Regula. There may be other dimensions to it.
    Mr. Serrano. Just a rug, and it will stink for the next 
year. This is wonderful. It is a shame that he is leaving, 
because we could have made an incredible standup duo.
    Ms. Doan. There is still time.
    Mr. Serrano. There is still time.
    Ms. Doan. Please.

                     Administrator Doan's Testimony

    Ms. Doan. Chairman Serrano, Ranking Member Regula, and 
distinguished members of the subcommittee, I am honored to 
appear before you today in support of GSA's 2009 budget. I have 
submitted a written statement, and I thank you for entering it 
into the record.
    A year ago I came before the subcommittee and reported that 
GSA had made some difficult, necessary, but innovative choices 
designed to improve our service to our customers and provide a 
better return on taxpayer dollars. I am pleased to report that 
GSA has made significant progress. The budget is balanced, we 
had a clean audit. Yesterday the GSA's 2007 Performance and 
Accountability Report was awarded the Cetificate of Excellence 
from the Association of Government Accountants, and this is the 
highest recognition in Federal Government management reporting. 
We are really proud of that.
    We leverage the buying power of the Federal Government to 
provide quality workplaces, best-value products, services and 
solutions, and we also provide government services and 
information to citizens. Last year USA.gov and GobiernoUSA.gov 
received more than 100 million visits.
    GSA's fiscal year 2009 planned total obligations are 20.973 
billion, with over 20 billion of these funds coming in the form 
of customer reimbursements for purchases or rent paid for space 
under GSA jurisdiction, custody or control.
    GSA is a real bargain. We are requesting appropriations of 
706.4 million, which is really just 2.2 percent of the total 
budget. For the Public Buildings Service, GSA requests 8.387 
billion in new obligational authority. And of these funds, 620 
million are requested for the construction and acquisition of 
critical facilities for the Department of Homeland Security, 
the FDA and the Judiciary. We also request new obligational 
authority of 692 million to address the backlog of repairs and 
projects.
    I would like to urge the committee to support the 
consolidated DHS headquarters at St. Elizabeths West Campus in 
Washington, D.C. We believe that the consolidation is a high 
priority both for GSA and for the administration. We have 
experience as stewards of over 425 historic properties, and GSA 
can preserve this historic landmark, while providing DHS with a 
consolidated campus and home for the agency, and avoid hundreds 
of millions of dollars in rent payments over the life of the 
project.
    We also request 36.6 million for items that will conserve 
water and energy in Federal buildings between major 
renovations. GSA is doing truly exciting work in this area, and 
we have just completed a 1-megawatt solar power system located 
on 6 acres at our Denver Federal Center. We are going to be 
planning a dedication in June of this year at the solar park, 
and I invite all the members of this committee to join us for 
that ceremony.
    GSA is also the Nation's premiere procurement agency. Since 
creating FAS, the Federal Acquisition Service, in May of 2007, 
we are recognizing the gains from our reorganization and the 
elimination of red tape, as well as the reassignment of 
underutilized employees to more demanding requirements.
    But our budget is important for what it does not contain. 
Our efforts to create a better working environment, to reward 
innovation and creativity is directly helping GSA to retain our 
existing contracting officers. So I am happy to report that as 
a result, GSA is one of the few agencies that will not be 
requesting new authorities to hire a large number of new 
contracting officers. GSA has developed a more aggressive 
telework strategy that will encourage eligible government 
employees to telework. And GSA has expanded our offerings in 
State and local government, and for the first time these 
governments are able to save taxpayer dollars by leveraging the 
overall purchasing power of GSA. And I am pleased to say that 
our State and local government purchases are now one of the 
fastest-growing programs in our portfolio, and the taxpayers 
are benefiting from these lower costs.
    Just to summarize, I began my tenure as the Administrator 
fighting against wasteful spending and duplicative costs within 
the Federal Government. We have submitted a fiscally 
responsible budget request, representing the minimum resources 
required to continue GSA's commitment to excellence in the 
business of government. Where possible, we have returned funds 
and implemented planned savings ahead of schedule. And I am 
particularly pleased that GSA has identified a number of cost-
cutting and wasteful sources of Government spending, any of 
which I will be happy to discuss in detail.
    I am committed to ensuring that the funds entrusted to GSA, 
which represent the hard-earned tax dollars of our citizens, 
are used in a prudent manner. We have a great workforce at GSA. 
We are doing innovative work on several important national 
initiatives. Approval of our budget is vital to help us achieve 
our mutual goal of providing superior service to our client 
agencies and, by extension, the public. I look forward to 
continuing the discussion of our fiscal year 2009 budget 
request with you and with the members of your subcommittee and 
with the staff. Thank you.
    Mr. Serrano. Thank you for your testimony.
    [The information follows:]

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                       SPANISH-LANGUAGE SERVICES

    Mr. Serrano. Before I begin my series of questions I had 
planned to ask you, I look at the presentation board you have 
displayed. We have some folks in this country, I would call 
them misguided folks, who think that English has to be the 
official language of government and of the country. It is, but 
they think it has to be made official through a law. Do you 
catch any flak for having information in Spanish--do you get 
any e-mails, people telling you not to be doing this?
    Ms. Doan. Absolutely not. This is probably one of our most 
popular Web sites, the GobiernoUSA.gov. When we launched it 
last year, it was widely praised. It is enormously popular, as 
you can see, from 100 million hits. This is no small 
achievement. I think it has been enormously successful. And I 
will say coming from New Orleans, where we, of course, consider 
ourselves a bilingual State, no problems there.
    Mr. Serrano. Right. Right. So you have not gotten any e-
mails or anything of people complaining?
    Ms. Doan. Not to my knowledge.
    Mr. Serrano. That is interesting. I will show you some of 
the e-mail I have. But anyway.
    Ms. Doan. If I could say, this is a site designed to aid 
the American public.
    Mr. Serrano. We know that. Sure.
    Ms. Doan. However we can reach out to them, whether it is 
in English, whether it is in Spanish, that is what is 
important, to get that information out to them in a way that 
they can use it.
    Mr. Serrano. I congratulate GSA on that. It is very 
important.
    Ms. Doan. Thank you.

                    BUILDING PROJECT PRIORITIZATION

    Mr. Serrano. I would like to start with a few questions 
about construction and renovation of buildings. Your budget 
request includes $620 million for new construction projects, 
over $400 million of which is for the Department of Homeland 
Security. With the competing demands of other projects, such as 
courthouses and the headquarters for FDA, for example, how does 
your agency decide what project is a priority? Are the affected 
agencies engaged throughout the budget-formulating process, or 
is the decision-making process centralized at GSA or OMB?
    Ms. Doan. GSA has always tried as much as possible to 
follow the priorities of our customers. As you know, we are an 
agency who gets most of its funding from our customers using 
our services or our goods. So when we compile these lists, we 
work very closely, for example, with the Department of Homeland 
Security, and they identify what their priorities are. They 
submit them to us, and then we incorporate them, wherever 
financially possible, into our budget. We do the same with the 
U.S. courts as well as with our other government customers.
    Mr. Serrano. I see. So the decision is made in a joint 
effort. Who would advise you on which projects to move on?
    Ms. Doan. It is very basic, because the customers, DHS, for 
example, has said that having a home, a home where everyone is 
collocated, is their number one priority. For example, in this 
year they said their number two priority is the San Ysidro, the 
largest port of entry in the United States. It is very easy to 
know where you have to go when you have a customer who 
identifies for you what the priorities are.
    And the same is true with the Administrator of the Courts. 
They give us letters; we meet with them on a regular basis. Our 
PBS Commissioner and our Deputy Commissioner probably talk to 
them daily, on a regular basis, and they identify the 
priorities. It makes it very simple when you lay that out. At 
the same time, obviously we have fiscal constraints, and we 
have to balance those requirements within those fiscal 
constraints.
    Mr. Serrano. Any complaints recently about folks who feel 
their project should be ahead of somebody else's that you would 
be willing to tell us?
    Ms. Doan. I think there are always folks who would love to 
be able to see their project move to the top of the list. There 
is no denying that we have an enormous number of truly 
important and critical needs throughout the United States, and 
that is why it is so important to go to our sister agencies and 
rely on their guidance and advice.

                  REAL PROPERTY DISPOSAL PILOT PROJECT

    Mr. Serrano. Ms. Doan, I understand your budget request 
includes a proposal for a real property disposal pilot program. 
Please explain the details of this request and how it differs 
from other real property disposal programs requested as a 
governmentwide general provision, which the committee has 
rejected in past years.
    Ms. Doan. I think what is really important about this is 
that one of the things that it offers is this new authority to 
allow for the redeployment services to other agencies. A lot of 
times it seems like some of the agencies are not willing to 
dispose of property because it actually costs money for them to 
do the assessment to determine whether or not the property 
should be disposed of, and so perhaps sometimes these 
properties are lying vacant, underutilized.
    This new authority allows us to provide this redeployment 
service, this assessment, to the agencies, and then we can then 
be refunded through the disposal process for any costs to do 
that assessment. At the same time, it also allows us to return 
a portion of those proceeds from the sales to the Federal 
Building Fund and sort of, you know, revitalize that fund, 
which, you know, is so critical to ensuring the continuity of 
all of our building projects.
    So I think these two significant kinds of authorities are 
truly important. I really do believe that we need to look at 
this entire portfolio of properties that we have. As you know, 
there are many, many properties in the United States that have 
huge maintenance costs, and we want to provide class A office 
space, top-of-the-line office space, to all of our government 
customers.
    Mr. Serrano. Due to the fact the committee rejected similar 
proposals in the past, what would you say to the committee this 
year to try to convince us this time we should roll with this 
proposal?
    Ms. Doan. I would say that if you have not been briefed by 
GSA, we are happy to offer a briefing. But the needed repairs 
and renovations, maintenance in this portfolio is huge. We are 
looking at somewhere in the neighborhood of $7.4 billion 
estimated in 2007 and growing. There are many properties that 
are underutilized, and this is a drain both on the Federal 
Building Fund as well as on the American citizens who pay taxes 
to maintain these empty, vacant, underutilized buildings.
    We have got to take a strong look and do something truly 
innovative to solve this problem. I think the return for the 
American taxpayer is huge, because when these proceeds revert 
back into the Federal Building Fund, we can then recycle that 
right back out again in new construction projects, additional 
renovations and alterations, or just maintenance on existing 
buildings. It is good for everyone.

                     REAL PROPERTY DISPOSAL PROCESS

    Mr. Serrano. Without mentioning a specific site that might 
get Members of Congress, not necessarily on this committee, to 
react to it, give the committee an example of a piece of 
property you would dispose of and how would you get rid of it. 
Would you sell it to someone? What do you do? Is there an 
auction? How does that work?
    Ms. Doan. I actually think there is a series of ways----
    Mr. Serrano. Are these post offices?
    Ms. Doan. Sometimes they are just land. Sometimes it is 
land, sometimes it is vacant buildings. It is a lot of 
different types of properties. But I think what has to happen 
is when you do the assessment, you decide is it better to 
dispose of it by--we do auctions, and, in fact, we have had 
several auctions in the past year where we have been happy that 
the return from the auctioned property is actually even higher 
than our original assessment. So that is one way. And that 
money will then--funding will revert to the Federal Building 
Fund.
    Another way is that we could put it out for private 
development. It could be developed, and then after 20-plus 
years that property could revert back, the building reverts 
back, the renovated, new, brand new building could revert back 
to the Federal Building Fund for us, our portfolio.
    Mr. Serrano. But these were all buildings that were being 
used by Federal agencies at some time?
    Ms. Doan. Maybe in the very distant past, sometimes as many 
as 40 years ago.
    Mr. Serrano. Really?
    Ms. Doan. Many of them are very old buildings. A lot of 
them have serious environmental issues, maybe asbestos 
abatement which needs to occur, which is enormously expensive. 
I would be happy to follow up with you on all sorts. If you 
need the laundry list, we are happy to do that.
    Mr. Serrano. Okay. We would like to see that. Forty years.
    Ms. Doan. That might be a slight--they are probably going 
to correct me. Is it 40 or 30? Okay. It is 40.
    Mr. Serrano. More than 5.
    Ms. Doan. Oh, absolutely.

                  FEDERAL CONTRACTOR DATABASE PROPOSAL

    Mr. Serrano. Before I turn to Mr. Regula, I have one 
question in this round. The House Committee on Oversight and 
Government Reform is considering a bill which would require GSA 
to keep a database of criminal, civil, and administrative 
proceedings involving Federal contractors over the last 5 
years. The bill is intended to give contracting officers more 
information when deciding on awards. Currently, does the GSA 
not know whether contractors are involved in criminal or civil 
suits when the agency accepts a contractor onto its schedules 
or when it awards a contract?
    Ms. Doan. I think the database proposal is one that is 
going to be comprehensive across the entire government. 
Certainly with our Schedules, our GSA Schedules as well as our 
Multiple Award Contracts, in the process of making the award, 
there is a certification process where a vendor, a contractor 
is required to certify that he has adhered to all the rules and 
regulations, has not violated any laws of that nature. And so 
we certainly enforce that. I believe the database proposal is 
much more comprehensive because we can accomplish actions 
across the entire Federal Government.
    Mr. Serrano. So there are moments when GSA--or you are 
speaking about other agencies, but GSA in particular would not 
know that a contractor is caught up in that situation?
    Ms. Doan. Well, I think it would be hard--and I do not want 
to speak out of turn. The Department of Justice has a very--
they have their own rules and regulations, and many times when 
they are in the process of looking into a matter, we may not be 
briefed on it until they are very, very far along or actually 
ready to follow through on an indictment or something of a 
legal nature.
    Mr. Serrano. Right.
    Ms. Doan. So very often we simply do not know. Oftentimes 
we are actually instructed by them not to take action until 
they come to the close of their investigation. So there is this 
sort of a ``limboland'' you could almost describe it as where 
action may be being investigated, there may be a process 
happening with the Department of Justice, but we ourselves are 
not allowed to act on it because this is America, and you are 
truly, at least in contracting, innocent until proven guilty.
    Mr. Serrano. No, I understand that. But let me just close 
by saying this: It just seems strange to me that when a person 
is going to be hired by the Federal Government, as folks you 
have behind you that work at your agency, the background check 
is so serious, and yet you would think it would be the same 
thing for a contractor. Yet it seems that we do not know as 
much about them as we do about the individuals we hire, and 
there is my concern.
    Mr. Regula.

                             BUILDING GREEN

    Mr. Regula. Thank you, Mr. Chairman.
    And as you know, Ms. Doan, it is fashionable these days to 
build green. And your San Francisco building, which I was there 
for the dedication, is, perhaps your first venture into green 
building, at least on a major scale. I have two questions. One, 
how is it working in terms of the mission of being more 
efficient in fuel use, et cetera? And secondly, what is the 
employee reaction to it? Because it had some unique 
characteristics, including requiring employees to hike the 
stairs a little more than using the elevators. So I would be 
interested in your observations, after having a year or so 
experience with that building.
    Ms. Doan. GSA has an incredible record actually in green 
buildings, and, in fact, we have one very close to here, our 
Census building which we opened up last year, which is a LEED-
standard green building.
    The San Francisco Federal Building has received enormous 
praise. It has won many awards. It is an interesting building 
because it is truly innovative. Yes, it does require the 
employees to take the stairs. I have not checked to see if 
everyone is slimmer after a year of climbing up and down the 
stairs, but I do believe that there has been the unintended 
consequence of this green building, which is pride of the 
Federal worker, because they see this building cited for all 
the awards and all the architectural magazines that featured it 
as the cover story. They know they are working in that 
building. They know it was the first of its kind. And there is 
a certain amount of pride that Federal workers perhaps have not 
had in many years of knowing that the government is actually 
the innovative entity. So it has actually been a great 
experience financially, I think, for the American taxpayer as 
well as psychologically for the Federal worker.

                           LEASE RENTAL RATES

    Mr. Regula. That is interesting. I notice you mentioned, 
$7.4 billion backlog in maintenance. In theory the rents 
charged should be adequate to cover maintenance costs of a 
given building, as well as the fact that it is being occupied. 
Do you think rents are high enough? And do you have difficulty 
getting an adequate return to at least address the maintenance 
challenges?
    Mr. Doan. Well, rents are normally--we are actually 
required to have them approximate the commercial charges. But 
at the same time, because these are government customers, we 
tried to make sure that we keep it within the bounds of a 
fiscally disciplined and conservative approach to rent. So our 
lease rental rates are based on the actual lease costs plus a 
very, very small fee.
    We have been trying to provide the rent estimates earlier, 
18 months in advance, so that they can get it into the budget. 
But we have actually reduced the gap so that the increase in 
rent is actually less in this upcoming year for our customers 
than it has been in previous years. And there is a cost to the 
Federal Building Fund for that. But we are trying to help our 
customers conserve their valuable resources.
    On the other hand, one of the things that we are trying to 
do is also work with receiving conditional gifts so that we are 
able to use these in public-private partnerships. And I believe 
that sort of innovative approach will help us also find new 
ways to replenish the Federal Building Fund.

                    AUTHORITY TO DISPOSE OF PROPERTY

    Mr. Regula. You mentioned a lot of unused buildings, et 
cetera. Do you have anything within the law that you could take 
a building that would be, say, in a city and provide either a 
transfer or a rent to another government agency, i.e., city 
government or local government, that they could perhaps get a 
better rate or a better opportunity than you might do to a 
commercial entity?
    Ms. Doan. We already do have that authority. And I do want 
to say that the legislation originally that Congressman Serrano 
and I were talking about was actually in that budget proposal 
actually was talking about other agencies having the ability to 
use us to dispose of the property. So we already have that 
authority to dispose of a property. However, as you may know, 
when we do go into that transfer or disposal, there is a 
certain hierarchy that we have to go through of offering it 
first to, for the McKinney Act, for the homeless.
    Mr. Regula. I understand.
    Ms. Doan. And then we have to get the exceptions. And yes, 
then ultimately we can share it if it is appropriate, and if 
price is right, with a city. There is a lot of different 
authorities----
    Mr. Regula. Under the right circumstances you could get 
less than fair market value, whatever that is, of an empty 
building for a local government that might be able to utilize 
that space.
    Ms. Doan. I am not sure about that, Congressman. I actually 
do not think we are allowed to get less than the assessment 
that we normally go in and do an assessment. And that starts at 
sort of like the low threshold that we have to start with. We 
are not allowed to sell beneath market rate. And they are going 
to tell me.
    Okay. If you do not mind, I will just read this to you. The 
pilot program is very contentious in the current Congress, 
because it would allow candidate properties to go directly to 
the sale for their fair market value without being screened for 
other public purpose conveyances, which would be the McKinney 
Act. Thus, homeless providers, State and local governments, and 
other no-cost recipients of Federal surplus properties would 
not be entitled to the property until--unless they paid fair 
market value.
    So I think there is positive and then there is maybe a 
slightly more contentious approach to it. I think actually what 
has to happen is we need to look at it on a case-by-case basis. 
I do not think we can cookie-cutter across the board for all 
property disposals.

                      ANTICIPATING RETIREMENT WAVE

    Mr. Regula. Yesterday we had the head of the Office of 
Personnel Management, and she pointed out there is going to be 
a wave of retirements in the next 10 years because the baby 
boomers will be retiring. How many employees do you have in 
your agency?
    Ms. Doan. We have 11,773.
    Mr. Regula. And have you taken any steps to anticipate 
meeting the challenge of filling these spots with talented 
people in the future?
    Ms. Doan. Yes. First and foremost, it is making sure that 
employee morale is high, and so that they want to work at GSA. 
And we can do that in a whole host of ways. We have put in 
place several innovative programs over the last 2 or 3 years, 
not the least of which is the most robust mentoring program 
that we have ever had at GSA, which we started last year, and 
we have just come across our first anniversary. We have an 
Advanced Leadership Development Program that takes someone up 
to an SES to encourage that growth in the management.
    But a lot of it has to do with the retention of valued 
employees. Our student loan repayment program is really 
important on that. We have a student career employment program 
where we try to attract new people into it.
    So it is both helping the exiting folks as well as, you 
know, growing that new generation of people in government 
service. And part of it actually is our One GSA, One Voice 
Initiative, which I have asked my folks never just say, I work 
for PBS or I work for FAS. Tell them the 2-minute commercial 
about GSA, which is, did you know that we are the largest 
credit card service in the world at 27 billion dollars in 
transactions? Did you know that we are one of the largest 
purchasers of environmentally, you know, friendly products for 
the Federal Government? Are you aware that we are the Nation's 
landlord? In other words, let people know, young people know, 
the full gamut of services and goods that GSA provides as a way 
to attract them into the Federal workforce.
    Mr. Regula. Well, I think you are right. I daresay that if 
I went down the street in a bar in Ohio and said, what is the 
GSA, I would be probably get very few--maybe New York would be 
different.
    Mr. Serrano. Good Service Award. I got it once.

                           BUILDING SECURITY

    Mr. Regula. Okay. One last question. In today's world, 
security for buildings is a tough challenge. Is your agency 
responsible for security; like if I go into a Federal 
courthouse or any building under your jurisdiction, do you 
provide the security, or is that up to another agency? And if 
you have to provide it, is this not a challenging 
responsibility?
    Ms. Doan. Well, most of the security is provided by the 
Federal Protective Service, FPS, which used to be a part of 
GSA, but during the organization of the Department of Homeland 
Security, that division got transferred to them.
    But security is a challenge, and, in fact, I would say when 
I came on board as Administrator, that was one of the largest 
challenges with our relationship with the courts, because as 
the cost of security had increased, we were then required to 
pass that cost along at least in part in the rent that we then 
charged our customers. And, of course, those kinds of increases 
often make hiccups. But we are constantly trying to balance the 
need for additional security with the costs of the security. It 
is a huge challenge.
    Mr. Regula. Thank you, Mr. Chairman.
    Mr. Serrano. Thank you.
    Ms. Kilpatrick.
    Ms. Kilpatrick. Thank you, Mr. Chairman.
    Good morning Ms. Doan. Good to see you again.
    Ms. Doan. Good morning.

                         FEDERAL BUILDING FUND

    Ms. Kilpatrick. Last we spoke of a Federal building in my 
district and the needed care and all the problems. I first want 
to commend you and the agency for correcting much of that. It 
is much better looking inside and out. Employees are more happy 
and more effective, I would say. So I want to thank you, first 
of all, for that.
    Ms. Doan. Thank you.
    Ms. Kilpatrick. In looking at the Federal Buildings Fund, I 
notice the appropriations, some $300-plus million, with the 
needed repairs that you have, and I understand that fund can be 
used for existing repairs and other kinds of things, along with 
the revenue that you receive from the tenants. Is that enough 
to meet the real need that you have?
    Ms. Doan. No, it truly is not. As I said, we do have an 
estimate of backlog of over $7.4 billion, so obviously 350 
million a year for the renovation, alteration, plus the larger 
identified renovation/alteration projects is probably not--
obviously, we could not address it all at one time. However, I 
think what we have tried to do is to balance repairs, 
renovations on buildings with the need for some fiscal 
restraint, which is, I guess, what the American taxpayers, all 
of us, are looking to make sure our tax dollars are spent 
wisely. It is a constant and very delicate balance that we are 
always trying to achieve.
    Ms. Kilpatrick. So incrementally you hope to get there?
    Ms. Doan. That is exactly what we are doing incrementally. 
But this is where I do believe that the new legislation that we 
have up requesting the ability to receive conditional gifts and 
to enable public-private partnerships, there are many, many 
groups which would love to contribute to important both 
historic and Federal buildings, whether it is at the land 
border ports of entry, it would be a way to address many of 
these needs.
    Ms. Kilpatrick. I agree. And that is pending, I know.

                PROPERTY DISPOSAL AND HOMELESS SHELTERS

    The other Senate bill, 1667, the pilot project, I have some 
interest in that. I know the Senate acted in November. I like 
the amendment. I heard you discuss it this morning that some--I 
do not know if it is a problem or just how you make that 
association with homeless agencies. Can you talk a little bit 
about what the actual legislation says and what appears to be 
the problem in it, if there is one?
    Ms. Doan. I cannot truly give you the details on what--
because it is all perception. This is actually, I guess, within 
Congress and the discussions among Members, yes, no, is this 
good or bad? Obviously, if it is offered, if you are sponsoring 
homeless shelters, you would like to make sure that homeless 
shelters always get offered the properties first. If you are 
trying to do urban renewal, you would obviously like to be able 
to see it go directly to the private sector for refurbishment 
or renewal. So I think it has to do with the different 
priorities and interests of the individual Members of Congress. 
But I would be happy to have my congressional team follow up 
with you or--and I could come and follow up with you also on if 
there were specific objections, especially if you are looking 
to help us on that.
    Ms. Kilpatrick. I want to help you with the revenue side, 
first of all. So what you mentioned about the gifts, that is 
one part. But I see this as certainly another----
    Ms. Doan. Okay.
    Ms. Kilpatrick [continuing]. With what did I write here, 
over 8,000 buildings, almost 9,000 buildings valued at almost 
$70 billion, some of them are old and not being used for 
whatever reason, if we could do that in legislation--and do 
both of those, by the way. I am not suggesting all of it be for 
homeless. I think some balance would be there.
    And I very much would like to meet with someone, because I 
think it is an important time for the agency to find additional 
revenue and also important for local communities, urban America 
as well, and the homeless population and those people who 
administer to them, to kind of come together and put something 
together. The 5-year pilot, I think, is a great way to start.
    Ms. Doan. Thank you very much.
    Ms. Kilpatrick. I would like to see some movement on that.
    Ms. Doan. I would be happy to follow up with you and try to 
arrange a time that is convenient to you.
    Ms. Kilpatrick. Thank you very much.
    Mr. Chairman, I am also on Homeland Security, so please 
excuse me. And when I leave, it is for another committee. 
Please excuse me.
    Ms. Doan. I appreciate that.
    Mr. Serrano. I understand.
    Ms. Kilpatrick. It is your committee, too.
    Mr. Serrano. Tell them that we are here and getting them 
nice buildings and stuff.
    Ms. Kilpatrick. I will do that. Thank you, sir.
    Mr. Serrano. And they want a building.
    Mr. Bonner.

                 NEW COURTHOUSE CONSTRUCTION IN MOBILE

    Mr. Bonner. Thank you, Mr. Chairman.
    Madam Administrator, I would like to, first of all, offer a 
compliment, because I know oftentimes all you hear are 
criticisms. My district office in Mobile, Alabama, recently 
made a move, and it was not into a GSA building. But one person 
on your staff, Barbara Dranesfield with the Federal Acquisition 
Service office in Mobile, was extremely helpful and 
professional and very easy to work with. And I want to do a 
shout-out to Barbara because she single-handedly ensured that 
our district office was up and running as soon as humanly 
possible. And I just think it is important to say thank you for 
a job well done.
    Ms. Doan. Thank you. The only thing is we have to now 
persuade you to move into our Federal space next time.
    Mr. Bonner. I would love to have a chance to do that.
    That raises my second question. I was very pleased to see 
the Judicial Conference include construction of a new U.S. 
Courthouse in Mobile among their top five projects for fiscal 
year 2009. Unfortunately, I was not pleased that our President 
did not include this project or any of the other four projects 
in his budget request for fiscal year 2009. Since you are from 
New Orleans and I am from Mobile, you can appreciate the fact 
the Mobile metropolitan area has recently been listed as the 
fastest-growing area in our country for a metropolitan 
community our size. So over the next 5 years, we are excited 
about the growth potential and the population change, but we 
are concerned about the lack of ability to get this project off 
of a wish list into reality.
    Now I am hoping that since I am a new member of this 
committee, I am going to be able to impress upon my good 
Chairman and Ranking Member that the construction of the 
Serrano-Regula Federal Courthouse in Mobile would be a high 
priority.
    Mr. Serrano. Where is this?
    Mr. Bonner. Mobile, sir.
    Mr. Serrano. Mobile?
    Mr. Regula. You better learn to speak Southern.
    Mr. Serrano. I am from Puerto Rico. That is the real South.
    Mr. Bonner. It is on the way home.
    Mr. Serrano. Our Southern accent is so different, it is a 
whole different language.
    Mr. Bonner. But I am hopeful that we can have a chance to 
look at this before this committee. But I know you are focused 
on San Diego and the Los Angeles projects currently. I guess my 
question to you is that if funding were somehow miraculously 
available for the Mobile courthouse in fiscal year 2009, how 
soon would GSA be prepared to award a construction contract? 
And can we assume that GSA could award a contract in fiscal 
year 2009 since it has been a priority project not just this 
year, but for several years? Also, once awarded, how long would 
it actually take to build such a structure? And I know that is 
a question that you may not have the specific answers to today.
    Ms. Doan. I have some, a little bit of an answer to that. 
First I would like to say that I think it is actually a very 
good sign that the Mobile courthouse is actually on the 
priority list of the courts. As I had discussed with Chairman 
Serrano, that is always the first step for our customers to 
indicate it as a priority. Yes, I know you were probably 
disappointed about the fiscal year 2009, but if the funding 
were made in fiscal year 2009, the additional site parcels 
could actually be acquired, the site could actually be 
prepared, and GSA could probably award a design build contract 
by the end of 2009, fiscal year 2009, and the construction on 
that would probably be--it would be completed by fiscal year 
'13, 2013, but that is only if the funds are made available in 
fiscal year 2009. And then, of course, there is always 
escalation every year after that.
    Mr. Bonner. We have artists working on the portraits of the 
two people for whom this building would be named already.

                      INCREASED CONSTRUCTION COSTS

    As you know, living in New Orleans and along the gulf 
coast, since Hurricane Katrina, construction costs have risen 
dramatically. And I believe just in 1 year the request for the 
Mobile courthouse increased by $43 million. Are construction 
costs the only reason for such a large increase? I know, or I 
believe I am right, that the San Diego project has seen large 
cost overruns as well, and I am wondering if that is due to 
construction cost increases or some other reason.
    Ms. Doan. From what I understand, Congressman, it is mainly 
due to factors that affect the construction, whether it is the 
labor, it is energy costs; and then it is also the actual 
materials, especially steel, that go into the construction. The 
combination of those is what has caused most of the escalation 
costs that you have seen.
    Mr. Bonner. Last question about this is would it be 
possible to get your staff to provide us with a written 
justification for the Mobile project, since I am going to be 
appealing to my Chairman and Ranking Member for their 
consideration later this year? And since it is on the list, I 
was hoping I could get something in writing that could justify 
it.
    Ms. Doan. We would be delighted to do that.
    Mr. Bonner. Great.
    Mr. Chairman, thank you.
    Mr. Serrano. You are quite welcome. And the Bonner 
Courthouse in the Bronx is on the way.
    Mr. Bonner. Thank you.

                         GSA CONTRACT EMPLOYEES

    Mr. Serrano. Ms. Doan, last year you testified that GSA has 
just over 12,000 employees. How many contractor employees 
currently work alongside and perform similar functions as 
federal civil service employees of GSA?
    Ms. Doan. I do not have the exact number, and I can follow 
up with you on that, but I actually do believe it is about 
47,000.
    Mr. Serrano. About 47,000?
    Ms. Doan. I think that is the last number we saw.
    Mr. Serrano. And you have how many employees?
    Ms. Doan. Right now we have 11,773.
    Mr. Serrano. So you would have four times as many 
contractors as your actual staff?
    Ms. Doan. Okay. But they are going--what they were saying 
in PBS, because of construction, it is a little bit different. 
I can probably follow up with the exact numbers.
    Mr. Serrano. That brings up the question that we asked 
before about different sets of ethics rules. Do the contractor 
employees have to abide by the same ethics standards as your 
employees?
    Ms. Doan. Absolutely.
    Mr. Serrano. We all in government have to behave a certain 
way. Are they covered by the same rules?
    Ms. Doan. Yes. They have to be held to the same standards 
and, in fact, the same background checks, and the process is 
the same. I mean, obviously they are paid differently. They are 
paid by the vendor or the contractor who they are hired from. I 
guess the Federal employees. The construction workers, the 
construction workers are actually a little bit different than, 
say, contractors who are working doing administrative support 
or analytical support. It skews the numbers a little bit.
    Mr. Serrano. Okay. Because it seems strange that you would 
have four times the amount of your employees that are 
contractors. I know there are some folks in government who 
would like to see it that way, contracting out.
    Ms. Doan. But I do think it depends whether you are in 
building, you have a lot more folks working for you.
    Mr. Serrano. Sure.
    Ms. Doan. Obviously, if we were just looking at 
administrative function, that would be a different number. And 
that is why I say I could follow up with you later on.
    Mr. Serrano. Please. I would appreciate that. And I would 
also appreciate if you could find the one e-mail I know you got 
saying you have an objection to GobiernoUSA.gov.
    Ms. Doan. Okay. Did you send it?
    Mr. Serrano. No, I did not send it, but you had to have 
one. I mean, I get dozens.
    Ms. Doan. We will look. We will actually look, although I 
will tell you you cannot imagine how enormously praised and 
popular that Web site----
    Mr. Serrano. You are missing my point. There are still a 
group of people in this country who think that having 
government Web sites in Spanish is improper, and I am just 
curious as to why no one is condemning you for it. I should not 
have mentioned it out loud. There will be a GOPAC article 
tomorrow. Lou Dobbs will get you tonight.
    Ms. Doan. One thing I can guarantee you, though, is like 
you say, because it will be on something tonight, and there 
will probably be scads of e-mails tomorrow, I am sure I can 
probably send thousands of them.
    Mr. Serrano. It is okay. I would rather we do not have any.

                  COURT INVOLVEMENT IN CONTRACT AWARD

    In early March, a Federal judge ordered GSA to stop work on 
the award of a $50 billion contract for governmentwide 
information technology. The judge cited GSA failed to 
consistently apply award criteria when awarding the contract. 
What is GSA's position on the issue, and how will the court 
order affect the award of the contract? How does this delay 
impact GSA's customers? And what is the budgetary impact on 
those agencies?
    Ms. Doan. It obviously affects our customers, but I think 
we have a mitigating strategy. This was a little bit of a 
slightly unusual approach in that normally protests go to GAO 
and are resolved there. The GAO actually found that GSA had 
behaved properly. The protesters took it outside of GAO into 
the civil courts. That changed how we had to handle the 
resolution of this matter. The civil courts found against GSA's 
selection process, and what we have tried to do is come up with 
a resolution of this that is fair to all of the vendors who 
submitted bids, and at the same time is viewed as being 
compliant by the U.S. Courts.
    So it is a slightly different way that the protester 
handled it, and in that case we decided what we would do is 
review and take a look at, in light of what the judge 
recommended, all 62 of the applicants. We will be using his 
guidance, apply that over the analysis of the bid of all 62 
vendors, and remake the awards. This is a way that we can 
expedite it, expedite the award process, but at the same time 
be fair.
    The good thing is that while there is impact, 
unfortunately, to the businesses who were waiting eagerly for 
the award, we do have contract vehicles in place to assist our 
government customers. And what I am simply trying to do is make 
sure that we are compliant, that we are fair, but we are doing 
it as quickly as possible, because we want to make those 
innovative goods and services available to the government.
    Mr. Serrano. When you say 62 vendors, this was not one 
vendor that was----
    Ms. Doan. I am sorry, 62 vendors submitted bids. There were 
awards I believe, to 29 of the vendors.
    Mr. Serrano. Right.
    Ms. Doan. There were eight additional vendors who then 
filed protests with GAO, and who then ultimately----
    Mr. Serrano. Who did not get the contract, that is.
    Ms. Doan. Right. And then GAO said GSA behaved okay. And 
then they took that and they went to the civil courts, the same 
eight vendors.
    Mr. Serrano. And the courts said that you hadn't behaved 
okay?
    Ms. Doan. The courts said they were not comfortable with 
our evaluation process, because they thought there was a level 
of precision that was identified and which might be hard to 
justify.
    Mr. Serrano. So now you are opening up the bidding again to 
all 62 vendors?
    Ms. Doan. Yes, the 62 originally submitted. There is no 
additional cost to them outside of time. The bids will stand as 
is, so that it is the same level playing field. The only 
difference is taking the judge's guidance. We will now overlay 
that over the evaluation process.
    Mr. Serrano. When do you expect or feel that the decision 
will be made on awarding?
    Ms. Doan. I have asked them to do it as quickly as 
possible, but it also will be a few months. We will be happy to 
come and brief you on that because I know it is really 
important and affects many vendors.
    Mr. Serrano. And one last point on that. Is the court out 
of it now, or does the judge still stay involved?
    Ms. Doan. No. This is what makes it so challenging. When 
you take a protest into the civil courts, the statute of 
limitations is like actually no statute of limitations. So that 
is why it is so important what you do is compliant and that 
meets the approval of the courts. So we had to take our 
decision, go back to the judge, and run it past the judge and 
get his approval. And then we actually had to go to the 
Department of Justice and get them to approve also.
    Mr. Serrano. But as this process continues, are the courts 
still involved?
    Ms. Doan. No, hopefully that is it.
    Mr. Serrano. Okay. So now you are on your own to do it 
based on the decision and the agreement, if you will.
    Ms. Doan. That is what I believe, and unless someone taps 
me on the shoulder and tells me otherwise.
    Mr. Serrano. No, no one is getting up. No one has gotten up 
with any paper.
    Ms. Doan. Okay.

                        BUILDING VERSUS LEASING

    Mr. Serrano. In January of 2008, the GAO reported that in 
2008 GSA will have more leased space than government-owned 
space, and that it is more expensive in the long run to lease 
space rather than build. Do you believe scoring rules for 
operating versus capital leases force GSA into using long-term 
operation leases instead of new construction to meet Federal 
space requirements? And if you understand that question--this 
is one of those--I am looking at my staff. I usually review the 
questions. I work with them on questions.
    Ms. Doan. I am grateful for that question.
    Mr. Serrano. But I do not understand that question, and I 
will be the first one to admit it.
    Ms. Doan. I will tell you I am not the world's expert on 
scoring, and he is actually sitting right here, Tony Costa. But 
I will tell you that what you said is absolutely true is that 
it is the scoring.
    Mr. Serrano. I did? I do not know what I said.
    Ms. Doan. The challenges of scoring and trying to balance 
the scoring is exactly why oftentimes folks go into the leasing 
rather than engaging in the public-private partnerships or the 
design build or things that would actually save the government 
money in the long run. And while I do not have a lot of control 
over that because that is obviously in the hands--a lot of that 
is in the hands of Congress, I do believe that some of the 
things that GSA has tried to do, which is bring more oversight 
into the leasing process, we have pulled back on many of the 
lease delegations that had been provided to all of the 
departments, and we are trying to have our experts weigh in far 
more heavily to determine, because what we want to do is get 
people out of the leased space and into our Federal building 
spaces. It really is the best thing for the taxpayer and helps 
with the Federal Building Fund. But the scoring is really the 
big elephant in the room.
    Mr. Serrano. I guess, and I know this has to do with what 
money is available, and we are not committing ourselves to 
moneys we do not have, but as we look at this economy, 
certainly building helps the economy more than leasing.
    Also on a totally different but perhaps somewhat related 
subject, one of my gripes in New York City is that with such a 
large student population, the New York City Department of 
Education is always looking for available space to turn into 
schools. And, just as an example, it is not related at all, it 
is so sad that these children are put into not nice-looking 
buildings that were never meant to be schools, and they are 
turned into schools, when in other communities you get a 
football field in the back, and you get a track, and you get 
this beautiful building that you have to believe the teachers 
feel better teaching in and the children have to feel better.
    And so I am not crazy about leasing just for the sake of 
saving some dollars. The question is, does it really save 
dollars in the long run to build or to lease, aside from what 
it does for the economy?
    Ms. Doan. I believe one of the most important things we 
could do for this country, and I have actually been going 
around the country and talking about it, is GSA has the ability 
to ignite a building boom in this country. The work that we do 
at our land border ports of entry is just the very beginning 
step in that building boom, because when we do that, we go into 
districts all along the northern and the southern border. I am 
happy to say we do a lot of work in New York.
    Mr. Serrano. You say you do not?
    Ms. Doan. We do a lot of work in New York. We have several 
absolutely critical and huge ports of entry in New York State. 
But what that does is that helps the economy, because building 
is local, and the local citizens are the workers who are 
participating in those construction projects. So every dollar 
that we spend in building is actually a dollar that is used 
three times over, because, yes, it is Federal funding that 
builds it, but then it is the communities that benefit from it. 
It is the businesses who ultimately pay taxes. It is the 
workers who receive that funding, and then they go pay taxes. 
It all goes into our education system so we could build those 
really great schools that are exciting.
    But I think what GSA is trying to do with the building boom 
at the borders is at least a first step to show that we have an 
ability to make a difference. They did want me to mention for 
schools, and especially maybe in New York, that we actually 
have a Computers for Learning program that would be something 
that I think New York City in particular could benefit from, 
which is the disposed computers, you know, computers that we 
dispose of in the Federal Government. And as you know, we are 
on a 2-year cycle, sometimes 3-year cycle, so these are 
actually really great systems that could go into the school 
system.
    Mr. Serrano. We will be glad to talk to you about that.
    Ms. Doan. And the other thing I have to--because it is once 
again unfortunate Congresswoman Kilpatrick left before I could 
pitch her one more time on St. Elizabeths--but when we start 
talking about the difference between leased space and building, 
you know, of course, that right now the Department of Homeland 
Security has like 60 different leases, 40 different locations. 
And when we have the chance to build, it is good for the 
government, and it is actually good for our Nation.
    Mr. Serrano. As you know, St. Elizabeths was just the 
victim--not just, it was the sad victim of some very serious 
fiscal constraints at the end.
    Ms. Doan. Yes.

                        FUNDING FOR CONSTRUCTION

    Mr. Serrano. Which brings me to the followup on this. Is 
GSA always dependent on the appropriations process, or are you 
looking for ways, innovative new ways, to provide for 
construction? And what would you need in terms of changes in 
law or in the way Congress allows you to function?
    Ms. Doan. Obviously, the Federal Building Fund and the 
appropriations we receive from you guys is simply not 
sufficient, although when we are trying to be fiscally 
conservative, we do what we can with what we receive, and we 
are very grateful for what we get, so please understand that.
    On the other hand, right now our GS Enhancement Act that we 
have put forth the legislation, being able to receive 
conditional gifts would be a huge development for GSA because 
that would allow us to really do some truly innovative things 
and enormous goodwill in the private sector for the Federal 
Government. And I believe, you know, communities recognize the 
need. And there are many businesses as well as city and local 
governments that are also willing to contribute to address 
these needs if we were allowed to receive those funds.

                    FEDERAL JUDICIARY RENTAL DISPUTE

    Mr. Serrano. Let me bring up an issue that I would put 
under the heading of a family fight. This subcommittee also 
oversees the Federal judiciary, and Federal judiciary is one of 
your largest rental clients and also an agency for which this 
subcommittee appropriates funds. Judiciary spends a great deal 
of time and energy on cost-containment strategies, one of which 
is a rental verification process. The judiciary has found that 
it has been overcharged in recent years due to the GSA's 
incorrect records of the square footage used by the judiciary.
    Can you explain why it is so difficult to maintain accurate 
records of the space utilized in Federal buildings and 
courthouses? This Chairman and Ranking Member do not desire to 
have one member of the family get done in by another member of 
the family.
    Ms. Doan. First, I would like to say that was then, this is 
now. Our relationship with the courts truly has improved over 
the last 22 months. And frankly, it is because I, the 
Commissioner of the Public Buildings Service David Winstead, 
and the entire Public Buildings Service set of employees, we 
have made a concerted effort to make sure that we are working 
with this customer.
    There was a problem with the rents. There is no doubt about 
it. But when we actually got together with the Administrator of 
the Courts and looked at the rents, we actually found it was 
located not across the United States and all the courts, as was 
originally thought, but actually centrally located in one 
region, and I think two, but maybe it was three, specific 
courthouses that had that issue. We have addressed that issue 
with them. Of course, it goes a long way if you rebate the 
money that was overcharged, and that helped with that 
relationship enormously.
    But the other thing I am happy to report is that we have 
actually cut the rent for the courts in this upcoming year, and 
I think we are seeing the reflourishing of that relationship as 
a result of the reduced rent.
    The other thing that we did was provide more transparency 
into the invoices that are presented to the courts. And when we 
itemized it, they were startled, frankly, to see that their 
increased demand for security actually translated to an 
increased cost. They had not realized that the cost of security 
escalated so dramatically, because, you know, obviously they 
had several very serious situations where judges' lives had, 
you know, been put in jeopardy, and they required additional 
security at all the courthouses. And the problem is that also 
costs, and that got rolled into their rent, but unfortunately 
we had not done a good job of explaining that to them. And when 
we were able to actually present them with the data and show 
them the breakout of where the increases came from, that also 
helped restore our relationship.
    And I think we have a lesson that we learned at GSA from 
that, which is we have to be better at communicating with our 
customers when changes happen and notify them in advance rather 
than retroactively.
    Mr. Serrano. Thank you, Ms. Doan.
    Mr. Regula.

                        PRESIDENTIAL TRANSITION

    Mr. Regula. Just a couple questions. You have an $8 million 
figure for the Presidential transition. What is your role in 
the transition that would require 8 million?
    Ms. Doan. In the Presidential transition we help prepare 
for the incoming Presidential team and whoever he or she may 
be, and their people. And then we also prepare the exiting, the 
current President and his team. And they exit. And so the 
funding is divided between those two particular endeavors, and 
that is everything from they need space, obviously, because 
they are going to need--in the transition process the new team 
is going to have to work very closely with the exiting team so 
that we have a smooth transition for our country. Obviously, 
there is security. There is the--you know, the computers, the 
technology, everything that goes into that. And actually, what 
we have requested is only a very small part. We actually take a 
large part of that out of hide. And if you look at the second 
row, they are probably frowning and grimacing even as we speak, 
because our Federal Acquisition Service along with GSA's Chief 
Information Officer provides all the technology.
    Mr. Serrano. They have done that throughout the hearing. I 
do not think that is directed at us.
    Ms. Doan. They provide the technology, the communications, 
the phones, everything. We take that out of hide through the 
Federal Acquisition Service. So the 8.5- or whatever we are 
asking, that is actually only part of the price for the Public 
Buildings Service. Because in D.C. at least, we do not have a 
lot of available space. And just to be frank, over the last two 
decades, the space requirements have gone up dramatically. So I 
believe this year they need a little over 100,000 square feet. 
This is not a small amount to be looking for for having to pay 
market prices. So it is actually very costly. But we are 
actually eating a lot of the Presidential transition costs that 
you guys never see.

                     COST-EFFECTIVE AGENCY HOUSING

    Mr. Regula. Which do you find the more efficient way to 
provide housing for agencies, where you go in and build to 
lease versus actually owning the building and constructing and 
owning it as a GSA property? Which do you think is the more 
cost-effective way to deliver that service?
    Ms. Doan. I think it varies depending upon the location. 
Obviously, we are biased in favor of GSA-built buildings that 
are in our portfolio from day one. But I think it would be 
naive to think that we could satisfy all of the government's 
needs by pursuing only that one strategy.
    And I would like to think that what we are trying to do at 
the Public Buildings Service is have an entire portfolio, a 
quiver where we have many arrows in that quiver, different ways 
that we approach the needs. So depending upon where the 
location of the building is sometimes, you know, design build 
is a better option, but always it should revert to the 
portfolio of the Federal Government.
    Mr. Regula. One advantage, of course, of build to lease is 
that property is on the local tax roll, which then, if I 
understand it correctly, would pay taxes to the schools or 
whatever might be the case in the local government. Is that 
correct?
    Ms. Doan. I think there is always a tension between when a 
Federal building comes in, we do not pay taxes, and obviously 
other entities would. But I think if you look at the broader 
picture for the entire Federal Government, when we have that 
building, and those rents go directly into our Federal Building 
Fund, we are then able to send them back out again in other new 
projects that benefit the entire country.

                     GSA PROVIDED FACILITY SERVICES

    Mr. Regula. Last question. When an agency, let's just take 
Social Security, and you are providing a facility, I am talking 
about a private facility, can they negotiate with you about the 
condition of the building and the kind of services you would 
provide in the building?
    Ms. Doan. They can, and they do. And the one thing that I 
have been working with all of our team on, and when I say team, 
I mean all 11,773 people at GSA, we have a new One GSA 
approach, which is to try to provide that very best value. 
Rather than just going in and only talking about the actual 
lease, it is much simpler for us to go in and say, oh, by the 
way, we can put your conduit in, we can do your networking, we 
can do your drops; do you need a phone system, do you need IT, 
carpeting, furniture. GSA provides all of that. And if we have 
our Federal Acquisition Service and our Public Buildings 
Service working as one GSA going in to the customer, that is 
absolutely the best value for the government customer and the 
best value for the American taxpayer.
    Mr. Regula. Thank you, Mr. Chairman.
    Mr. Serrano. Thank you.

                          DISTRICT OF COLUMBIA

    Let me just interject something here. Mr. Regula and I are 
big fans of the District of Columbia, and this committee 
oversees the District of Columbia. In fact, I stated one of my 
roles is to undo that part of my job. I do not need to be the 
Governor of D.C., or the Mayor of D.C. They have a Mayor, and 
we are big fans of the Mayor, and we want to see him succeed 
and the people succeed. So we are asking every Federal agency 
that has anything to do with the Presidential transition to try 
as hard as possible to make sure it does not cost D.C. any 
money. They are a host city and they have not always been 
treated well by the Federal Government, and all these things 
that will be taking place. So for your role, the part GSA will 
play in that Presidential transition, it would make this 
committee very happy if it does not cost D.C. any money.
    Ms. Doan. We try to work very closely with D.C. I think we 
have a very positive and productive relationship. And we work 
with them regularly and consistently and very collegially. I 
think it is a very good relationship.
    Mr. Serrano. I appreciate that.
    Mr. Schiff.

                         LOS ANGELES COURTHOUSE

    Mr. Schiff. Thank you, Mr. Chairman.
    Madam Administrator, I want to talk with you about the 
Central District Courthouse in Los Angeles. I understand you 
recently initiated discussions with the Administrative Office 
of Judges in the Central District about a potentially new 
construction proposal for the courthouse that would build a 
stand-alone courthouse with only 20 courtrooms and 20 chambers, 
and expand and renovate the existing Roybal Federal Building 
for an estimated cost of $700 million.
    I have not looked through a detailed report of the 
proposal, but I think there are serious questions about the 
cost assumptions in the proposal and the construction schedule. 
And it looks like there is at least as good a chance that the 
new proposal would cost more than the existing proposal that 
has been out there since May of 2007 to build a 36-courtroom, 
45-chamber building so that we can consolidate all the courts 
in one building.
    I spent 6 years working in that building. I know it well, 
at least one of the two Federal courthouses. It is in dramatic 
need of consolidation. And the scenario that I understand now 
is under consideration is very different than the one that has 
been under consideration for years. And I am concerned that it 
will not meet the courts' long-term space needs, it will not 
solve the operational inefficiencies that we already have of 
multiple facilities.
    As I understand it, the new proposal is universally opposed 
by the judges in the Central District and does not take into 
account the cost of relocating, building out lease space for 
the Federal agencies that are currently involved that would be 
evicted from the building. It does not consider the difficulty 
of bidding two construction jobs of this size at the same time 
in the L.A. construction market, which is a very hot and 
expensive market right now.
    But my most significant concern is that you could have 
basically a worse situation than we have now. You could have 
the judges and courthouse operations spread among three 
buildings if you are not careful. And the whole idea was to 
consolidate for security reasons and efficiency reasons the 
courts in a single building.
    And so I would like to know what feedback you have gotten 
from Los Angeles, whether you have considered the costs of 
relocating these Federal agencies and multiple construction 
projects at the same time. And, you know, I would like to see 
if you could provide us for the record the cost estimates, the 
fact sheets and the prospectus documents that could be used by 
Congress to compare what we have been operating on, a 36-
courtroom, 45-chamber proposal, to what I guess is being 
floated now.
    Ms. Doan. We are happy to provide that information.
    Ms. Doan. And as you said, there are many developments, 
some of which just happened a day or two ago. But I will share 
with you where I believe we are at right now.
    I do know that there have been extensive discussions. I 
have been on the job for 22 months, and I can say for the 
entire 22 months on the job as Administrator, I have been 
having discussions with Chief Judge Morrow, and she has come to 
D.C. many times. We have been out to L.A. working with the U.S. 
courts. The judges, you are absolutely right, in L.A. sent a 
very strong letter, I believe we got it either yesterday or the 
day before yesterday, opposing a letter that I had sent them 
the week before indicating that the courts, the AOC, the 
Administrative Office of Courts, and GSA have worked together 
very carefully to consider what would be in the best interests 
of the judges and their requirements, the U.S. courts, the 
financial considerations that have to be taken into account, as 
well as the timeline that we were trying to look at. And they 
worked together with us to come up with a proposal so that they 
believe--and I am now talking about the Administrator of the 
Courts--they believe is in the best interests of the judiciary, 
and that is that we renovate the Roybal existing courthouse and 
bring it up, take into account what the judges say, and at the 
same time build a second, smaller courthouse on the site that 
the new one----
    Mr. Schiff. You say they have taken into consideration what 
the judges say. The judges say this is a terrible idea.
    Ms. Doan. No, no, I am saying taking into consideration the 
judges' demands for space and the space requirements. And so 
what has been proposed is actually the combination of the two 
facilities actually gives them, I believe, 70,000 more square 
feet of space than what they originally required. But most 
importantly, right now we have a requirement for over $1.5 
billion in order to complete a brand new facility. Right now 
only a portion of that has been appropriated, and therefore, 
under the rules we cannot begin any kind of construction, 
development, or whatever. With the way that it is right now, 
with the funding that has already been appropriated and with an 
approved plan from the U.S. courts, what we could then do is we 
can start work immediately on making a difference for the L.A. 
judges. And frankly, I think this is a situation----

               JUDGES' OPINION OF NEW COURTHOUSE PROPOSAL

    Mr. Schiff. If I could interject, this is not an approved 
plan by the U.S. judges.
    Ms. Doan. By the Administrator of----
    Mr. Schiff. The judges of Los Angeles think this is a 
terrible idea. And, I mean, we are in a situation where for 
years the highest courthouse construction priority in the 
country has been Los Angeles. The need has been there, the 
security needs have been there, the inefficiencies have been 
there; but because there has been delay occasioned upon delay, 
and construction costs have gone up, that project has laid 
fallow while others have gone ahead. And the judges have made 
every effort to reduce the number of courtrooms, to share 
chambers, to reduce--you know, take whatever they can out of 
the cost of the building to bring the cost down. And after 
doing all that and still, you know, waiting for action here, 
they are now being greeted with a wholly new idea that 
basically makes the problem that they have now worse in the 
sense of they should be housed in a single building. They 
should not be spread out among two or three buildings.
    And so I think it is a tremendous disservice to the public 
that has to utilize the courthouses and the jurors, and I 
cannot imagine the nightmare of trying to organize jury pools 
in three different buildings or two different buildings.
    So, you know, what I would like to see is I would like to 
see the facts, because I do not think they are going to be 
borne out. I do not think you can build a whole new building 
and do the massive renovation of an existing building at a cost 
that is going to be cheaper than building one whole new 
building and relocating everyone into that building. That is a 
smaller amount of space, where you can utilize the other space 
for other agencies. I am not sure that all pencils out.
    And what I am afraid of with this new idea being floated is 
it is going to mean yet another delay with dealing with this 
problem, rather than sticking with the concept that had been 
agreed on and focused on for years and reducing the cost of 
that by bringing the number of courtrooms down. We are going to 
now look at something else that is only going to cause more 
dissension, more delay, more costs as the delays go on. That is 
the concern I have.
    So I would like to see the breakdown of what you think the 
new building costs and why you think somehow that you can do 
this cheaper. And take into consideration all of the peripheral 
costs of relocating the agencies that are there, the increased 
inefficiencies you are going to have of the courthouse being in 
two locations, maybe three, in terms of the administrative 
functions of the court. So I would like to get those cost 
figures.
    Ms. Doan. We will be happy to provide that. And in fact, I 
will ask our Commissioner to see if he can get Jim Duff, who is 
the Administrator of the U.S. Courts, to accompany us when we 
come up to brief you on that. That way you can hear from the 
courts' perspective as well as GSA.
    Mr. Schiff. Okay. I would probably want to have the judges 
there, too.
    Ms. Doan. That probably would be wise. Judge Morrow comes 
here pretty frequently.
    Mr. Schiff. Okay. Thank you, Mr. Chairman.
    Mr. Serrano. Thank you. I understand you have some 
questions for the record.
    Mr. Regula. Yes.
    Mr. Serrano. And I have some questions for the record.
    Mr. Serrano. And with that I would like to thank you for 
your testimony here today before us. I hope we stay in touch on 
the other issues and please keep the committee informed.
    On a personal level, if you could supply my office, not the 
committee, with a listing of the properties that you have in my 
congressional district, either leased or owned in the County of 
the Bronx. So it's the 16th district in the County of the 
Bronx.
    Ms. Doan. I would be happy to do so.
    Mr. Serrano. Thank you so much. Thank you for being here 
today.
    The committee hearing is adjourned.

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    
                                          Wednesday, April 9, 2008.

                   FEDERAL COMMUNICATIONS COMMISSION

                                WITNESS

KEVIN MARTIN, CHAIRMAN, FEDERAL COMMUNICATIONS COMMISSION

                  Chairman Serrano's Opening Statement

    Mr. Serrano. The subcommittee will come to order. Good 
morning to all.
    Kevin Martin, we welcome you to this hearing on behalf of 
the committee; and we bring you special greetings from Howard 
Stern. I thought you would appreciate that. [Laughter.]
    Welcome to this hearing of the Financial Services and 
General Government Subcommittee. Today, the subcommittee will 
take testimony from the Chairman of the Federal Communications 
Commission, the Honorable Kevin Martin. Kevin Martin has been a 
member of the Commission since 2001 and has been chairman since 
2005.
    Chairman Martin, we welcome you to this hearing once again.
    The purpose of this hearing is to review the FCC's budget 
request. The Commission requests a budget for fiscal year 2009 
of $338.9 million, which is a $25.9 million or 8.3 percent 
increase over the current year. We look forward to discussing 
this budget request with you.
    However, as was the case with past FCC hearings, we expect 
this hearing to cover a range of issues, including some policy 
matters that are now or have recently been before the 
Commission. There is always a great deal of interest in what 
the Commission does because your decisions touch nearly all of 
us in our daily lives, especially the chairman, like me, who 
owns three different satellite radios; and we will talk about 
that later.
    You have authority over radio, television, telephone, 
satellite and cable services. You regulate one of our most 
precious assets, the public airwaves. You are required to 
ensure that all Americans have available telecommunication 
services at reasonable charges without discrimination on the 
basis of race, color, religion, national origin or sex.
    The importance and breadth of the FCC's authority places it 
squarely in the middle of some of the most important and 
controversial issues facing our Nation. Some of these issues 
include media ownership rules, cable regulation, net neutrality 
and an issue that is of great concern to me, the transition to 
digital television scheduled for February of 2009.
    The FCC's budget request for 2009 includes $20 million, 
which is the largest single increase, to expand DTV transition 
education. There is no question in my mind that more must be 
done to inform and prepare consumers for this transition.
    A recent survey estimated that more than 30 million 
households are currently unprepared for the transition because 
their televisions receive only analog signals. The survey also 
found that African Americans and Hispanics make up a 
disproportionate share of these households. I am concerned 
about how these families will successfully manage the 
transition.
    And I must say, Chairman Martin, just as an aside, I don't 
know for sure but I know there is an effort being made on 
Spanish television to inform folks that this change will come. 
I don't think I have seen the same kind of output--and maybe it 
is not needed or maybe the networks feel it is not needed--in 
the English language media. In Spanish, I have seen Univision 
and Telemundo do a pretty good job of letting people know that 
something dramatic is coming.
    With regard to media ownership, in December, the FCC 
approved on a 3-2 vote a media ownership rule change that would 
allow newspaper and broadcast company consolidations in the 20 
largest media markets. This action by the Commission troubled 
many in Congress and in the public. There is concern that the 
new rules will impede diversity and that it is an ill-advised 
step towards consolidating the voices of media among the larger 
and wealthier outlets. While this is not a budget issue, you 
can be certain that this is a topic of interest among some 
members of this subcommittee, I would say probably all Members, 
one way or another.
    We look forward to your testimony, Chairman Martin. And I 
know you have a lot on your plate, and we will certainly 
perhaps add more to it as we finish this hearing today, but 
before we begin your testimony, I would like to hear from a man 
who invented cable television in Ohio. In fact, he brought it 
to Ohio before it came to the Bronx.
    Mr. Regula. That is true.
    Mr. Serrano. Very few people know this but, as you know, 
just to remind these folks who feel that these hearings are too 
boring, some people have claimed that cable television, amongst 
two or three reasons, was invented to bring New York City 
stations out West and to the South. Because of that, New York 
City thought it had great stations; and we got cable television 
in the Bronx in the last decade, really. I mean, it is hard to 
believe. I don't know why I am whining. But, anyway, Mr. 
Regula.
    Mr. Regula. Well, with a little bit of luck, you may get it 
in Puerto Rico.
    Mr. Serrano. We get it in Puerto Rico. It is satellite 
radio that I am working on.

                     Mr. Regula's Opening Statement

    Mr. Regula. Well, okay. I think the point you make there, 
these are services that touch almost every American citizen and 
business every day. I think the whole age of communications is 
mind-boggling; and what lies ahead, I have no idea. But I think 
there is a lot more that will be fascinating for other 
generations.
    You have the challenge of balancing between providing 
enough regulation and oversight to ensure that the American 
people have communication services, while not slowing 
technological progress or impinging on individual rights. And I 
think that is always a challenge in a democracy, to balance 
these things out.
    And you have a lot of watchdogs that are looking over your 
shoulder because of the challenges you have. You have the 
business world; you have the techies, the technology and the 
consumer groups, that are all watching every move you make; and 
so that is a real challenge. And we look forward to hearing 
your testimony today.
    The change from analog to digital will be, for some, rather 
traumatic, I think. So we can buy a converter box with 
vouchers. I understand that, but how does that mean they are 
going to get it hooked up? Because not everybody will be able 
to hook up the box once they get it. And I suppose there will 
be an industry that will grow up that--with an ad in the paper 
will come out and hook up your box so that you can get digital, 
if that be the case.
    But, anyway, we look forward to hearing your testimony and 
what you see is the challenges ahead in your industry.
    Thank you, Mr. Chairman.
    Mr. Serrano. Thank you.
    If I may say, Chairman Martin, that there are many times 
when agency heads come before a committee, when the press 
wonders how much of what we are dealing with at a particular 
hearing we participate in ourselves. I can assure you from my 
conversations that Members of Congress carry at the minimum, 
most of us, one cell phone, if not two, one personal and one 
congressional or otherwise. That so many of us have satellite 
radio at home, portable or in the dashboard of the car, that we 
play around with the DVR at home to try to figure out how to 
record that show while we are here in Washington or vice versa.
    So we are not totally unaware of what is going on. What we 
are in need of is knowing how all this fits into the lives of 
all Americans and, in fact, is it available to all Americans.
    And we welcome you today. We remind you that your testimony 
should be held to 5 minutes. Your full statement will go in the 
record so that we can grill you for the next 7 hours.

                      Chairman Martin's Testimony

    Mr. Martin. Well, thank you; and good morning to you, 
Chairman Serrano and Ranking Member Regula and all the members 
of the committee.
    I appreciate the opportunity to discuss the FCC's fiscal 
year 2009 budget request and, of course, the broader issues as 
well, which I am certain we will spend some time on this 
morning.
    I am pleased to work with the subcommittee on our fiscal 
year 2009 appropriations. The appropriations process is 
certainly an exercise in fiscal responsibility. It enhances our 
internal systems of financial checks and balances----
    Mr. Serrano. Is your mic on?
    Mr. Martin. Hello. Can you hear? Is this better?
    Mr. Serrano. Yeah.
    Mr. Martin. I am pleased to work with the subcommittee on 
the fiscal year 2009 appropriations process, and the 
appropriations process is an exercise in fiscal responsibility. 
It enhances our internal system of financial checks and 
balances by bringing into focus for the Commission priorities 
of the subcommittee. I welcome your oversight and input and 
look forward to working with you to ensure the Commission is 
financially able to perform its mission.
    Since I have assumed the chairmanship, the Commission has 
been working to strengthen the budget-related functions. I am 
pleased to report these efforts have paid off. For example, for 
the last 2 years, the Commission's independent auditor has 
provided an unqualified opinion and found no material 
weaknesses in the Commission's financial operations. The 
Commission has never received such high marks from its outside 
auditor for 2 years in a row.
    The Commission is requesting spending authority of 
$338,874,783 for fiscal year 2009. As in prior years, the 
Commission proposes to receive a direct appropriations for $1 
million and to raise the remainder through regulatory fees.
    To continue to operate at our current level, the Commission 
requires $311 million, which would represent a decrease of .3 
percent below the level set for fiscal year 2008. Of the total 
requested for the next fiscal year, $7.7 million is designated 
for these nondiscretionary operating increases to maintain 
fiscal year 2008 service levels. This includes employee 
salaries for all projected full-time equivalents, inflationary 
increases for office space rentals, supplies, printing, postage 
and contractual services. Of the additional money, $6.6 million 
is designated for employee salaries and $1.2 million is 
designated for other nondiscretionary inflationary increases.
    The Commission is also requesting an additional $26 million 
to implement five specific initiatives.
    First, $20 million will continue and expand an outreach 
campaign to educate consumers about the upcoming transition to 
digital television. For the Commission's fiscal year 2008 
appropriations, Congress authorized $2.5 million for consumer 
education about the DTV transition. The additional money would 
allow the Commission to continue and expand a wide range of 
outreach projects to help educate consumers about the DTV 
transition.
    Second, the Commission is requesting $1,050,000 to fund a 
public safety clearinghouse program that would significantly 
expand our coordination and outreach efforts targeted to the 
public safety community. The Commission would also use these 
funds to establish a public safety fellowship program to 
attract experts in the public safety community to work for the 
Commission for a temporary period. This would help the 
Commission strengthen its ties to the public safety community.
    Third, the Commission is requesting $1.9 million for the 
Inspector General to increase its efforts to fight waste, fraud 
and abuse in the Universal Service Fund and other Commission 
programs. These moneys would allow the Inspector General to 
further increase oversight of the $7 billion Universal Service 
Fund as well as other Commission programs and activities.
    Fourth, the Commission is requesting an additional $200,000 
for travel expenses to cover official travel. Starting this 
fiscal year, Commission employees are prohibited by law from 
accepting payment for travel from entities that are subject to 
Commission regulation. These funds would cover official travel 
that was formerly authorized to be paid for by non-Federal 
sources.
    And, finally, the Commission is requesting $3.7 million for 
three modernization efforts. The Commission proposes to use 
$900,000 to complete the lifecycle replacement for vehicles the 
Commission uses to support police, fire departments and other 
public safety organizations. This would allow us to purchase 10 
special vehicles that are used to investigate and resolve 
harmful interference to the communications system of public 
safety and other organizations. The Commission also proposes to 
use $1.5 million to consolidate the information technology 
systems used to process license applications. In addition, the 
Commission proposes $1.375 million to complete the replacement 
of the Commission's antiquated accounting system.
    We are also requesting legislative authority to permit the 
transfer of up to $25 million from the Universal Service Fund 
in fiscal year 2009 for the purpose of monitoring the Universal 
Service Fund, again, to prevent and remedy waste, fraud and 
abuse and to conduct audits and investigations by the 
Commission's Office of Inspector General. This subcommittee 
granted a similar request for the current fiscal year. These 
moneys would be used to build upon the oversight work done to 
date, to continue strengthening the controls intended to 
safeguard the Universal Service Fund and to maintain a staff of 
19 limited term employees in the Inspector General's Office 
dedicated to these matters. These moneys would also permit the 
Commission's Office of Inspector General to obtain contract 
support to perform audits of the Universal Service Fund 
beneficiaries and its contributors.
    One of the Commission's important functions is using 
auctions to assign special licenses. On March 18, 2008, the 
Commission announced the close of our 700 megahertz auction, 
which raised a record $19.6 billion in revenue and helped 
advance new open platform policies. The Commission has 
additional auctions projected to take place within the next 
year.
    The Commission is permitted by law to use a portion of the 
revenues raised through spectrum auctions to help run that 
program. During the past five funded cycles, the final 
appropriations bills set a cap of $85 million on auction 
expenses. We believe we can continue to run the auctions 
program at this level of funding for fiscal year 2009.
    I am continuing to work with my colleagues on the 
Commission and with Members of Congress to develop plans for 
promoting broadband services, protecting consumers, ensuring 
the viability of the Universal Service Fund, enhancing public 
safety, and promoting the efficient use of spectrum.
    Thank you again for the opportunity to work with you on our 
budget request for this year. I respectfully request the 
subcommittee grant the Commission its full funding request for 
fiscal year 2009, and I am pleased to answer any questions 
about our budget or any of the other policies during our 
discussion this morning. Thank you.
    Mr. Serrano. Thank you so much. Thank you.
    [The information follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    
                       FUNDING FOR DTV EDUCATION

    Mr. Serrano. The FCC's 2009 budget request includes $20 
million for digital television education and outreach. The 2008 
request was only $1.5 million, and Congress increased that to 
$2.5 million. I commend you for seeking more resources for DTV. 
However, the 2009 appropriations bill probably won't be enacted 
for quite a while this year, if at all. There are even rumors 
about a possible--if we get stuck, a possible resolution just 
to keep the government going, and then the next administration 
will deal with the appropriations issue.
    So since the DTV transition is planned for 2009, February 
of 2009, has your request for additional funds come too late? 
When do you need the funding in order for it to be helpful in 
your DTV outreach efforts? And could you provide a spending 
plan for the $20 million that shows how the funds are expected 
to be allocated among various activities?
    Mr. Martin. Well, obviously, with the transition occurring 
in 2009, it is critical that we get the remaining money that 
would be utilized for the education efforts as soon as 
possible. To the extent that the Commission will operate under 
a continuing resolution, I think there would be a few options 
for us to try to seek additional funds for next year. The 
continuing resolution can include additional revenues for a 
specific purpose if Congress so wanted, so deemed it, so they 
could do that in the continuing resolution context.
    The Commission has also in the past gone back to this 
subcommittee and asked for permission to be able to use--to be 
able to be authorized to use unspent revenue from previous 
years. We have already begun working with OMB to be able to go 
back and utilize some of the unspent revenues that the 
Commission has still in its resources and be able to be 
authorized to use those for educational purposes. It wouldn't 
be the full $20 million, but we can go back and ask for some 
additional resources.
    So I think we have got two other options to the extent that 
we don't operate under a continuing resolution. Of course, the 
Commission could end up providing as detailed a plan as you 
would find helpful on what we would end up utilizing those 
additional moneys for.
    As you have indicated, we have just received $2.5 million 
from the committee in December. We immediately began the 
contracting process. We have hired Ketchum as a public 
relations firm to help us begin a more widespread public 
relations and public information campaign, which includes both 
satellite media tours so that we can get on local news and 
local television news stations around the country. We have done 
one satellite media tour. They have helped us with beginning 
the additional distribution of materials at grassroots 
communities; and we are working with other organizations, began 
the production of billboards and posters that will be able to 
be displayed as we are approaching the transition. So we can 
provide significantly more detailed information as you would 
need to see what we would do with the additional resources.

                  INDUSTRY ASSISTANCE IN DTV EDUCATION

    Mr. Serrano. I am still concerned, however. And you seem to 
paint a picture that says everything will be okay, but time is 
running short here, and there is still not the knowledge 
necessary out there in the community. Have you found the 
industry to be responsive in helping out? I mean, it is in 
their best interest.
    Mr. Martin. Oh, sure. I think it is important to understand 
that what the Commission is trying to do is ask for additional 
resources that could be supplemented to target very particular 
communities that we think could be at risk for not making the 
transition successfully.
    But the industries are taking significant steps. So you 
have broadcasters that have committed to about a $700 million 
campaign that they will be undertaking that started in February 
through the following February with increasing amounts of 
information that is going to be provided in terms of the PSAs 
and screen crawls and information.
    Mr. Serrano. You said $700 million?
    Mr. Martin. Yes. The cable industry has committed to 
providing another $200 million in public information campaigns. 
The consumer electronics industry is similar and participating 
in an industry-wide effort to increase consumer awareness. So 
what we are asking for is a small supplement, compared to what 
the industries are ending up doing.
    And, as you said, there are different industries that have 
already taken an active role in it. The Spanish broadcasters 
have been very active already, for example, in beginning to run 
public service announcements. We have been coordinating with 
them and with the Hispanic Chamber of Commerce, for example, to 
do town hall meetings in the largest towns that have very large 
Hispanic populations. So we will be able to hit about 80 
percent of the Spanish-speaking homes in those towns, in those 
town hall meetings.
    So the industries are becoming very active. So this is only 
to supplement that, but I do think that it is a critical and 
important entity.
    And I have worked with all the commissioners in coming up 
with this request. All the commissioners on the Commission have 
said, how much did you all think would be necessary for us to 
try to supplement our efforts; and the request that we put 
forth was what had been recommended and was the most money that 
we could possibly need over the next year.

          EDUCATING MINORITY COMMUNITIES ON THE DTV TRANSITION

    Mr. Serrano. Let me ask you, based on that, what specific 
effort--since you did touch on it, what specific efforts would 
you promote to let minority communities know of this change 
that is coming, in view of the fact that the most recent 
surveys indicate that they are the last to know what is going 
on?
    Mr. Martin. Well, with respect to the minority communities, 
it is not only important to make sure we are getting the 
message out, but they are much more likely to rely on over-the-
air broadcasting. Spanish-speaking homes are twice as likely to 
rely upon over-the-air broadcasting, as opposed to subscribing 
to cable or satellite. So it is critical that we are reaching 
out to them.
    As I have said, we have already begun making sure that all 
of the information is being distributed and in multiple 
languages. We have been working on public service announcements 
with the Spanish broadcasters. We are going to be doing town 
halls with them and with the Hispanic Chamber of Commerce, for 
example, trying to target Spanish-speaking homes, as they are 
disproportionately likely to rely on over-the-air broadcasting.
    Those are just some of the initial efforts.
    Mr. Serrano. Well, can you please keep the committee 
informed of what you are doing in that area? This committee 
would be very much interested in how we are moving along.

                     MEDIA OWNERSHIP CONSOLIDATION

    Let me ask you one more question here. In December, 2007, 
the FCC voted to relax media consolidation rules to allow 
newspaper and broadcast company consolidation of the 20 largest 
media markets. My concern with this action is that we should be 
encouraging more diversity, independence and local perspectives 
in the media, rather than setting up greater consolidation and 
ownership by media giants.
    I would also note that there were bipartisan calls in 
Congress for slowing down the FCC's consideration of this 
issue. But you have decided to proceed with the vote in 
December anyway. How do you respond to concerns in Congress and 
elsewhere regarding media ownership consolidation? And what is 
the FCC going to do to encourage greater diversity in media 
ownership, including ownership by minorities and women?
    Mr. Martin. Well, let me respond in two ways, first in 
explaining why I thought it was important for us to proceed 
with the vote at the end of last year, and then also respond to 
the concerns about increasing minority ownership in the 
broadcast area.
    First, I think that you have to put into context that this 
decision that the Commission issued in December of last year 
actually was quite different from the decision the Commission 
had issued in 2003, which infinitely increased the media 
ownership rules. In 2003, we increased most of the media 
ownership rules, allowing for increased consolidation in radio, 
television, television stations around the country in terms of 
the national cap. This decision, in contrast--that decision was 
ultimately overturned by the Third Circuit, sent back to the 
Commission with one exception; and that exception was that the 
Third Circuit upheld the Commission's decision in 2003 to 
remove the ban on newspapers being able to own broadcast 
properties.
    That decision had been sent back to us in 2003 and had been 
pending for us to issue a new decision. There were, as you 
said, significant concerns that were raised by Congress. 
Congress actually overturned the Commission's decision in 2003 
to raise the national ownership cap directly through the 
appropriations process. And this time the Commission, as I 
said, only raised one issue, only altered one rule and that was 
the ability of newspapers to own broadcast properties; and we 
did so in a very limited way.
    The newspaper industry has been under significant financial 
strain as a result of the advertising dollars that are 
increasingly flowing to the new media platforms. You have seen 
about 300 newspapers go out of business since the Commission's 
original rule was put in place. Newspapers in some of the 
largest markets in the country were having significant 
financial difficulty. The San Francisco Chronicle, for example, 
was reported last year as losing $1 million a day.
    The newspaper industry is suffering significant problems, 
and one of the things that they thought could help their 
industry would be the ability to take the cost that they were 
spending on news gathering and help recoup those costs through 
the additional distribution of that news through other outlets, 
not only on the Internet but also through broadcast.
    Because of the concern that people raised about that, that 
it would lead to increased consolidation, we limited our relief 
to the top 20 markets in the country in which we determined 
there are a significant number of media outlets that would 
already be available; and we said that newspapers would not be 
able to purchase one of the top four television stations in 
that market. So they were going to have to purchase one of the 
weaker or smaller television stations in those markets if they 
wanted to purchase a television station. So they were going to 
be limited to one broadcast property, they would not be able to 
purchase from the top four television stations in that market, 
and they would only be able to do that as long as there were 
eight remaining large voices in that market.
    So I think that we put in place both adequate controls to 
make sure that we had a diversity of opinion in those markets 
but, at the same time, try to take into account that both the 
courts and the facts indicated that the newspaper rule that had 
been put in place in the 1970s had to be modified in some way 
to take into account the changes in the media marketplace 
today.
    Mr. Serrano. Well, let me just close by saying to you that 
we could discuss this all day. There are really two views on 
this. One is that we have to do something about the fact that 
the newspapers are folding up, so many of them. But, on the 
other hand, one would argue that it is the control by media 
giants that is forcing newspapers out of business, too. So, you 
know, it is a matter of opinion as to which one is causing 
which. So the more power you give to the giants, the more you 
might see local newspapers close down, local radio stations 
close down, local everything close down because they just can't 
compete.
    I will recognize Mr. Regula; and then, because we have such 
a good turnout of members, we will adhere to the 5-minute rule. 
But not for Mr. Regula, of course.

                            D BLOCK AUCTION

    Mr. Regula. Well, just a few things. I have some questions 
on the spectrum auction. What went wrong with the auction of 
the D Block? And what does FCC do now?
    Mr. Martin. Well, the Commission had tried to put in place 
a plan on the D Block----
    Mr. Regula. Yeah, I understand that.
    Mr. Martin [continuing]. That would have allowed for 
whoever won that to work with public safety to try to solve 
interoperability problems, public safety challenges.
    I think that, obviously, there wasn't enough certainty in 
that process of what those obligations were going to be or 
those obligations were too great for a private entity to be 
willing to purchase that spectrum and develop a partnership 
with public safety. So I think the Commission at this point has 
to go back and revisit those obligations, making sure that they 
are as clear as they can be about what the requirements will be 
on the person who wins and revisit whether they were too 
burdensome in terms of the amount of build-out that was 
required, the time frames for that build-out and the kind of 
services that they were going to be required to provide to 
public safety in order to establish that kind of a partnership.
    I think that what is important there were lots of aspects 
of our auction rules that were controversial. That was one--the 
Commission was, you know, uniform on. It was 5-0 in support of 
trying to do something to try to solve the public safety's 
interoperability problems.
    Obviously, the D Block didn't end up accomplishing that 
goal; and we have to try to figure out a way to revisit it to 
still try to accomplish that goal.

                       FIRST RESPONDERS' SPECTRUM

    Mr. Regula. Well, how would the sale of the spectrum help 
first responders' ability to communicate? And, as I understand 
it, the portion that was set aside for first responders had no 
takers. So we haven't solved the problem.
    Mr. Martin. That is right. We haven't solved the problem.
    The first responders were given 10 megahertz of spectrum to 
try to solve--by Congress and by the Commission--to help try to 
solve their interoperability problems, and what we were doing 
was auctioning off the piece of spectrum that was right beside 
it to a commercial provider with the hope of being able to form 
a joint partnership. What we heard from public safety is that 
one of the challenges for them in solving their 
interoperability problem was not only having access to spectrum 
but the fact they didn't have any resources to try to build out 
a nationwide network. So our hope was that whoever purchased 
the commercial spectrum right beside the public safety spectrum 
could form a joint partnership with them and allow public 
safety to utilize that network that they were building out. 
But, obviously, no one wanted to purchase that spectrum with 
that obligation, with the obligations we have formulated.
    Mr. Regula. Do you have a plan to somehow ensure that the 
first responders ultimately will have a piece of the spectrum?
    Mr. Martin. Oh, I think that what we need to do is go back 
and--absent some other kinds of legislative change from 
Congress that would give them more direct resources, we would 
have to go back, I believe, and try to reformulate the current 
kind of joint proposal with the commercial sector and the 
public sector and then utilize that joint venture again. But we 
have to reduce, obviously, the uncertainty and the obligations 
to try to see if we can attract someone to take on that 
obligation.

                          DEMAND FOR SPECTRUM

    Mr. Regula. As I understand that, the $19.6 billion raised 
was substantially higher than the $10 billion congressional 
estimate. To what do you attribute this demand? And what 
happens to the $19.6 billion?
    Mr. Martin. The $19.6 billion all goes into the Federal 
Treasury. So all of it is directly deposited into the Treasury. 
So it is to the benefit, you know, of the taxpayers and of the 
country.
    And I think the demand can be attributed to several 
factors. I think, first, the Commission, it talks about the 
importance of this piece of spectrum. This is the spectrum that 
the broadcasters are giving back as a result of transitioning 
to digital next year, and the characteristics of the spectrum 
allow it to carry a lot of information and that information to 
travel more easily through walls.
    Mr. Regula. The digital requires less spectrum, is that 
what you are saying?
    Mr. Martin. When they are able to switch over from analog 
to digital, the broadcasters can do it in less spectrum overall 
because of some of the technical aspects of digital. So we took 
that extra spectrum we got back and auctioned it off for other 
wireless commercial services, wireless broadband services 
predominantly. So the demand for it was great because of these 
technical characteristics; and, also, I believe that the demand 
was great because of some of the other changes we made in 
setting up the auction.
    One of the most important changes we made was adjusting the 
power limits to make sure that all of it could be utilized and 
provide broadband services. We put in place a condition that a 
piece of the spectrum had to be open to any kind of device or 
any kind of application to try to further incentivize the 
innovations that were occurring on the edge of the network.
    And, finally, for the first time at a significant auction 
the Commission actually required there to be blind bidding so 
that you didn't know as you were going through the bidding 
process who the other parties were that were bidding. There 
were some allegations that companies, when they saw that they 
were up against one of the biggest or largest wireless 
companies in the country, Verizon wireless or AT&T wireless, 
that they would just stop bidding. So we implemented a 
mechanism of blind bidding so that when we were auctioning off 
each geographic area you didn't know who the other person was 
bidding against you, and we think that that also contributed to 
raising significantly more revenue.

                   DISTRIBUTION OF AUCTIONED SPECTRUM

    Mr. Regula. Did the independent providers get a piece of 
this? Or did it pretty much go to the big ones?
    Mr. Martin. Well, the largest providers certainly purchased 
some of the largest cities. But of all of the licenses that we 
auctioned off, there were about 99 other carriers or other 
participants in the auction who won about 70 percent of the 
licenses; and someone else other than one of the four big 
wireless companies today won licenses in every market in the 
country. So other people did get pieces of it. Indeed, about 55 
percent of the people who won spectrum at the auction qualified 
as small business entities or designated entities under our 
rules, where they actually got a bidding credit for being a 
small business entity.

                         PUBLIC SAFETY NETWORK

    Mr. Regula. One last question. And, obviously, the first 
responders are a very important element of public safety; and I 
assume you are working on some way to ensure that this happens, 
is that correct?
    Mr. Martin. That is right. We are.
    You know, this was a critical part of the 9/11 Commission's 
report that said we need to solve this interoperability 
challenge. This is the only tool the Commission has to try to 
solve it. We can't provide direct support. We can't take, for 
example, any of that $19 billion. We are required by law to 
provide it into the Treasury. We can't take it and say we are 
going to help public safety build out a network. So, as a 
result, our only option is to try to solve it through this 
joint public-private partnership. So, absent some other effort 
by Congress, I think this is the only idea that we have within 
our authority to solve this problem.
    Mr. Regula. Thank you, Mr. Chairman.
    Mr. Serrano. Thank you.

              PIRACY AND CHILD PORNOGRAPHY ON THE INTERNET

    Ms. Wasserman Schultz. Thank you, Mr. Chairman.
    Chairman Martin, we all care about the Internet; and I want 
to focus on peer-to-peer file sharing and piracy and child 
pornography for a second. I am one who took a position in the 
109th in favor of network neutrality, because at that time I 
really believed there was not enough competition to warrant 
letting Internet providers cordon off bandwidth to that 
significant degree or spectrum for premium access. And to me 
the principles of network neutrality make sense when we ensure 
that Internet service providers don't strike up deals that 
favor certain companies over others or prohibit consumers' 
ability to access lawful content.
    But the idea of network neutrality should never force ISPs 
to actively ignore what is unlawful or speech that they know is 
unprotected, and what I mean by that is incidents of piracy and 
child pornography. The piracy challenge, obviously, you are 
familiar with; and it is a significant one. But child 
pornography is not as widely known.
    You might not know this, but there are literally more than 
500,000 individuals in the United States who are trading and 
trafficking in images on the Internet in child pornography, and 
I mean that is images of young children being raped. That is 
not free speech or something that is legal. They are crime 
scene photos. There are people trafficking those images all 
over the country in the shadows with peer-to-peer file sharing 
programs like BitTorrent. And law enforcement knows who these 
individuals are, but, for lack of funding, they are not able to 
go and get them.
    I sponsored legislation that passed the House already which 
you may be familiar with which we are hoping to have move soon 
in the Senate, but we can't begin to contain this problem until 
we use every resource that we have at our disposal. And I was 
really glad to read in your statement that there was an 
agreement between Comcast and BitTorrent and your comments that 
network managers have the important ability to block the 
distribution of illegal content, including pirated movies and 
music and child pornography.
    It is difficult to craft rules managing computer networks 
that have become indispensable to our lives, but whatever 
management practices that we have, have to be limited and 
practicable and implementable but at the same time be effective 
in blocking unlawful content like pirated music, movies and 
child pornography, and that is not an easy balance.
    What I want to ask you is what ideas do you have for giving 
network managers the ability to block the distribution of 
illegal content and how do we fashion principles that will 
continue Internet innovation but that also will not prohibit 
corporations from addressing the dangerous threats of online 
product piracy and child pornography?
    Mr. Martin. Well, first of all, I am somewhat familiar with 
some of your other efforts of trying to address things like 
child pornography; and I certainly commend them. And I 
completely agree that all of the network neutrality principles 
that the Commission has adopted only go towards lawful content. 
There is no protection for the distribution of any kind of 
unlawful content whatsoever when you are talking about either 
child pornography or even content that doesn't have appropriate 
copyright terms for it. So it is only lawful content that is 
protected.
    So, in the context of lawful content, some carriers have 
announced, for example, that they have been looking at and 
exploring options for putting on the kind of filters that would 
try to distinguish between lawful and unlawful content. I think 
AT&T had made some announcements about that earlier in the year 
where they were looking at whether filters like that could be 
put in place.
    But any kind of network management issues that go towards 
distinguishing between lawful and unlawful content don't 
violate any of the Commission's principles and don't raise any 
issues.

                       FILTERING ILLEGAL CONTENT

    Ms. Wasserman Schultz. Are you using the bully pulpit of 
your position to encourage the development of filtering 
software and making sure that you raise the level of priority 
on that?
    Mr. Martin. Oh, I think that--yes. And I don't think it is 
any problem whatsoever for network operators to engage in those 
kinds of practices. However, but I do think it is more of a 
challenge if they start trying to address particular 
applications; and if they just start saying that they are going 
to discriminate against a particular application, I think that 
raises different issues. And it goes more towards the concerns 
that were embodied in our network neutrality principles and 
that were embodied in the network neutrality legislation that 
you referenced also in your comments.
    Ms. Wasserman Schultz. If you could address my second 
question, how do you strike a balance between not stifling 
Internet innovation but not prohibiting corporations from 
making sure that they can stop online piracy and child 
pornography?
    Mr. Martin. I think, first, we strike the right balance by 
making clear that there is no problem in whatever actions they 
want to take in stopping child pornography and other forms of 
illegal content. But I think when we are looking at that, 
obviously, their efforts have to have a fit or they can't be 
overinclusive and underinclusive. In other words, they can't 
just say they will try to stop all content because they are 
trying to stop the illegal content.

                      CLARIFYING PROTECTED CONTENT

    Ms. Wasserman Schultz. Do you expect that you would craft 
language that would clarify as we move forward what could be 
protected and what the companies could do?
    Mr. Martin. Sure. I think in our network neutrality 
principles, we have already said all of this only applies to 
lawful content and any request by law enforcement to stop any 
kind of content needs to be respected. So I think we have 
already said that, but we will continue to reiterate that at 
every chance whenever we are dealing with this issue.
    Ms. Wasserman Schultz. Mr. Chairman, before my time 
expires, I would just encourage the Chairman of the FCC to, 
like I said, use the bully pulpit that you have to ensure that 
we can continue to push these providers to ensure that we have 
the ability to block piracy and illegal content and child 
pornography.
    Mr. Martin. Oh, sure.
    Ms. Wasserman Schultz. Thank you.
    Mr. Serrano. Thank you.
    And now a future Spanish language broadcaster, Mr. Kirk.

                             E-RATE PROGRAM

    Mr. Kirk. I am looking forward to my job at Telemundo.
    Mr. Chairman, first of all, I want to just thank you for 
the quick deployment of the Do Not Call rule. I think you have 
restored peace to the American household, and I really want to 
thank you for that.
    I was struck by the indictment of a school official in my 
district for fraud committed against the E-rate program; and I 
then began to look into this program and found that the GAO 
reported that the FCC's establishment of E-rate with an 
organizational structure unusual to the Federal Government and 
never conducting a comprehensive assessment to determine its 
requirements, policies or practices, that the corporation that 
administers it has struggled to determine fiscal accountability 
requirements under the program.
    The Inspector General says, obviously, while all U.S. 
programs have the potential for mismanagement, E-rate, due to 
its materiality and initial assessment for potential of waste, 
fraud and abuse, has been singled out for particular attention. 
GAO says FCC's oversight mechanisms contain weaknesses that 
limit the management of the program or the ability to 
understand any fraud, waste and abuse within it.
    Of course, this is all funded by a tax on telephones; and 
so all of this fraud makes our phone bills go up. The OIG in 
its look at USF programs cites erroneous payments: Contributor 
payments erroneously made, $385 million; erroneous payments to 
schools and libraries, $210 million; erroneous payments for 
high cost, $618 million; erroneous payments for rural service, 
$4.4 billion. You know, hundreds of millions of dollars the OIG 
has said have been made through erroneous payments.
    Now I know, you know, you have principal enforcement 
authority with the Enforcement Bureau under section 254. But I 
would note apparently now the furious action by the Department 
of Justice that has an antitrust division and task force 
already nailing people connected to this program for fines 
totaling over 40 million bucks.
    Now you have got an increase before the subcommittee that 
you are requesting a $1.9 million increase and a transfer of 25 
million bucks. But I would say if this large amount of Federal 
funds is incorrectly designed, no amount of oversight funded by 
this committee can prevent that record of mismanagement.
    I understand that we are going through looking at the 
procurement process under E-rate. But under USAC's recompete, 
there is no proposal to increase or modernize the fraud, waste 
and abuse provisions of the contract. So, given all those 
problems, can you talk about what is going on with E-rate?
    Mr. Martin. As you indicated, the GAO has found that the 
way the Commission had set up the Universal Service Program and 
the E-rate program back in the late 1990s was unique in that we 
were requiring the collection of revenue----
    Mr. Kirk. I think the technical term would be ``funky.''
    Mr. Martin [continuing]. But the collection of revenues and 
that was being distributed not by the FCC itself but by a 
separate corporation that had been set up. I would have to get 
you exact details, but there were both congressional issues 
related to it--Senator Stevens I think had requested the GAO 
audit originally in the late 1990s. There were lawsuits that 
were brought against the E-rate program originally, that it was 
an unlawful tax. So there were lots of issues that arose in the 
late '90s about that program and the way that it was originally 
set up and structured and the legality of it, and the program 
changed in certain ways both to respond to court cases that had 
been brought and congressional concerns.
    The program has been structurally set up in basically the 
same way since that issue settled down in the late '90s and in 
2000. What has increased is the concern by the Department of 
Justice and by others that that structure and the fact that the 
E-rate program is a grant award program, as opposed to a 
reimbursement for cost by carriers program, has led to 
increases in fraud in that program; and that was what led the 
Inspector General several years ago to request a significant 
increase both in his budget and what the committee ultimately 
appropriated was taking money from the E-rate and was allowing 
the Inspector General to use it for its waste, fraud and abuse 
investigations.
    I think that we obviously support the Inspector General's 
request and think that that has had somewhat of an important 
difference in both him identifying waste, fraud and abuse and 
him working with the Department of Justice going forward.
    Mr. Kirk. If the program is fundamentally flawed and you 
have got dozens and dozens of criminal indictments for people 
who have illegally removed money from the program, can we 
appropriate our way out of this through IGs? Or don't we need a 
basic restructuring of the accountability?
    Mr. Martin. I think that there have been those in Congress 
who have argued for a basic restructuring of the Universal 
Service Program, particularly the E-rate for years; and I----
    Mr. Kirk. I guess I am not looking--because I know how 
difficult a legal legislative change would be in an election 
year. When we look at the re-procurement under USAC and 
oversight of fraud, waste and abuse, that is now directly 
within your jurisdiction. We don't need legislation to do that.
    Mr. Martin. I don't think, besides what we have done 
through the Inspector General's office, we probably have the 
authority to make some kind of changes.
    The one change that I would say and I have advocated for a 
long time that the Commission has tried to make is to change 
the program from a grant program to one that distributes money 
based upon a formula response like we do lunch money to schools 
and that we base that distribution instead of upon grants that 
people are applying for money and say this is what they will do 
with it, which I think leads to waste, fraud and abuse, and 
rather change the structure of the program so it distributes 
that money based upon a formula of how many poor children and 
how rural your area is. And I think that would allow schools 
more flexibility and, at the same time, get away from the 
grants which I think have led to those challenges.
    Mr. Kirk. Thank you, Mr. Chairman.
    Mr. Serrano. Ms. Kilpatrick.

                    EXPANDING DTV EDUCATION PROGRAMS

    Ms. Kilpatrick. Thank you, Mr. Chairman.
    I like the E-rate program. I think it has helped education 
institutions all over America, certainly in Michigan. Not 
without problems, and I think we correct those as we go, and I 
am happy that the Auditor General is taking a look at it and is 
doing what needs to happen.
    I notice your budget is $25 million more than it was last 
year with fewer employees. So my first question is, where is 
the $25 million going to be distributed? Is there one, several 
places or what is----
    Mr. Martin. The bulk of that increase is actually going to 
be for an expansion of our DTV education program. So $20 of the 
$25 million is actually going to be focused exclusively on 
trying to provide additional resources to educate consumers 
throughout the country as we are approaching the 2009 
transition.
    Ms. Kilpatrick. Which was where I was going next, to DTV, 
February, 2009.
    Mr. Martin. So the bulk of it is going towards that.
    Ms. Kilpatrick. Okay. And how will that be disseminated? 
How does that work?
    Obviously, education. It is my understanding that cable TVs 
will continue to operate. Analog, which a lot of people still 
have. So what kinds of things? And how can we plug in to help 
get that message out?
    Mr. Martin. I think that there are several different things 
that we have begun trying to work on to try to educate 
consumers, and I think these kind of funds could help 
supplement dramatically. So Congress and through this committee 
we were appropriated $2.5 million last year to begin the 
education campaign, and that allowed us to get a contract with 
Ketchum, a PR firm to begin that education process.
    Ms. Kilpatrick. Was that bid? Was that contract bid?
    Mr. Martin. That was put out for bid. Absolutely, put out 
to bid through the normal contracting process. The only thing 
we did, the only change in it at all, was it was a shorter time 
frame than sometimes contracts are put out but only because we 
had such an urgency to try to get that money put into place to 
be able to utilize to start educating our consumers as we are 
fast approaching that deadline. That is going to be utilized 
both for media tours, for increasing education and awareness by 
getting public service announcements and other kinds of media 
done at the local level.
    We have already had one media tour, and we are working on 
doing public service announcements that then will be placed and 
also through more grassroots kind of education efforts through 
billboards and particularly in communities that have high over-
the-air television populations, that have high numbers of 
consumers that have over-the-air television, as opposed to 
subscribing to cable and satellite. Through working, for 
example, with the distribution through companies that put the 
flyers in advertising at grocery stores, on the back of grocery 
store carts, working with the Postal Service. We are going to 
be putting out thousands of posters starting this coming summer 
in every post office throughout the country.
    We are going to be working to get posters and information 
that is going to be delivered to over 25 States throughout the 
country to every division of their Department of Motor 
Vehicles. Every time someone goes in to get a license renewed 
or to renew their, you know, license plate or their license 
tag, we would have information that we would provide to them.
    Ms. Kilpatrick. Okay. Thank you.
    I think that is an excellent way to start. I really want 
you to consider helping to set up in our offices. I am sure all 
435, probably all 535, would like to be of help as you 
disseminate some of that if we can partner. It not only gets 
the information mobilized, but it also increases better 
relationships with us and the FCC. I hope we will do that 
together.
    Mr. Martin. Absolutely. We will work to make sure we work 
with yours and all of the offices.

                             INTERNET BLOGS

    Ms. Kilpatrick. Finally blogs on the Internet. The reality 
is, it is what it is. And I just don't see much--or maybe you 
can, maybe it is free speech, say anything if its right or 
wrong or whatever. What is your take on the blog generally, the 
Internet in particular? Actually, it could be another excellent 
education tool.
    My 6-year-old grandson is a whiz. He can do all the stuff. 
But I am concerned that it doesn't have much regulation, kind 
of like my colleague on this side. How do we keep it growing 
and growing and be a positive tool? And what might be the FCC's 
role in seeing that it doesn't get out of hand, used 
negatively?
    Mr. Martin. Well, I think that obviously, as I was 
discussing earlier, making sure that we clarify that any kind 
of illegal content is--it doesn't have any kind of protection 
in terms of limitations on what the operators can end up doing 
to manage their networks I think is important. But in terms of 
if it is legal content but there are blogs that people have 
information out there. There are lots of blogs that criticize 
me for everything the Commission does.

                            REGULATING BLOGS

    Ms. Kilpatrick. Join the club. We are part of that.
    Mr. Martin. Those are difficult. But, at the same time, I 
think we have to put that in the context of, unlike the mass 
media, which has certain kinds of rules and limits as to how 
you can put information out, like what you can say on broadcast 
TV or broadcast radio----
    Ms. Kilpatrick. Okay. And that came as a result of its 
being formulated. Now that we have another entity, how can you 
do likewise with this? Or can you?
    Mr. Martin. I think it is difficult, and I think that this 
medium presents other kinds of challenges. Unlike the mass 
media, where there was one person who was producing information 
and then trying to distribute it to everyone, this information 
is stuff that is frequently--you are pulling down--people are 
searching it out and deciding they want it and pulling it down. 
So that creates different first amendment standards than it 
does when someone is pushing content to you versus when it is 
something that you have chosen to go do a search for and find. 
So that raises more difficulties when the government talks 
about trying to have any kind of standard of what is 
appropriate and what is inappropriate, the terms of content. 
Not when it is illegal but in terms of its content.
    I think that what I would say is that you do see 
increasingly developing the Internet on its own ways in which 
the Internet and technology is trying to find ways to solve the 
problem, if what you are talking about is reliable information. 
So that things like Wikipedia, which is the encyclopedia 
online, is something that the users themselves can update and 
change to the extent that they believe that it is something 
that is inappropriate--or it is not inappropriate, it is 
incorrect.
    Ms. Kilpatrick. Or unreliable.
    Mr. Martin. So what you are seeing is a different kind of 
approach that is developing with these new technologies to try 
to solve the reliability problems where things that are being 
put up are able to be altered. So what you rely upon are users 
in a different way being their own monitor and actually making 
sure that the information is reliable, but it is a very 
different medium, and it presents different challenges.
    Ms. Kilpatrick. And almost impossible to regulate.
    Thank you, Mr. Chairman.
    Mr. Serrano. See, I was just going to do this.
    Ms. Kilpatrick. I saw the motion.
    Mr. Serrano. Mr. Alexander.
    Mr. Alexander. Thank you, Mr. Chairman.

                 INFORMING PEOPLE OF THE DTV TRANSITION

    Mr. Martin, Ms. Kilpatrick asked what I know about the 
digital transition. For those of us that represent large rural 
areas where people don't have access to Internet, so they 
certainly wouldn't benefit by going on a Web site, what can we, 
as Members of Congress, do to get that message out there?
    Mr. Martin. Well, certainly I think it is important that 
the Commission try to work closely with you all to help get the 
message out; and we will help to provide any kind of 
information to actually go into people's districts and make 
sure that we are participating in getting information out to 
community centers and town hall meetings. We would be happy to 
work with any Member who wants to.
    The Commission has already tried to start doing that on its 
own. Our field offices have gone through almost 45 different 
States and have distributed information, for example, to every 
senior center and community center there. So we have visited 
over 4,000 senior centers and community centers throughout the 
country where we have provided information; and we could be 
providing more information, putting up more posters to the 
extent that we are able to get some additional funds. And that 
is the kind of thing that we could be doing; and to the extent 
that we can work with you to make sure we have hit the most 
important parts of your district, I think that is one thing 
that we would be happy to end up working on.
    We have also tried to figure out ways to work with local 
grassroots organizations that focus and/or companies that focus 
and target on rural areas. So, for example, we have been trying 
to work with the people who receive universal service funding 
to make sure that they are putting flyers or billing inserts in 
their bills to make sure that they are telling people that this 
transition is coming. Obviously, that is money that frequently 
focuses on people that live in rural areas.
    We have also partnered with the Department of Agriculture 
and 4-H to try to emphasize, and we have actually worked with 
them so that we have made one of the 4-H programs for young 
kids one of their public service requirements. They can fulfill 
their service requirements by participating in the local DTV 
education efforts. And we have also been working with them to 
try and make sure we are distributing information at all the 
local county and State fairs throughout the country this year, 
which often targets rural populations. Those are some of the 
efforts we are trying to focus on in rural communities in 
particular.

                             FCC PRIORITIES

    Mr. Alexander. Senator Stevens said yesterday that this 
should be a top priority. But I am assuming from your testimony 
and the amount of money that you are putting into this that it 
perhaps is.
    Mr. Martin. Absolutely. And in response to Senator Stevens' 
questions yesterday, I said it was.
    Obviously, it can't be our exclusive. There are some other 
critical issues. For example, solving the public safety 
interoperability issue. I would have to say it is at least as 
equal priority for us this year.
    I think that there are other priorities, and public safety 
is always one that I put at the very top of our list. But 
certainly the digital transition over this past year will be at 
the very top.

                     IN-FLIGHT USAGE OF CELL PHONES

    Mr. Alexander. Okay. Dealing with another line of 
communication, I saw a news item the other day perhaps that the 
airline industry is going to offer to its passengers in the 
near future the ability to use your cell phones while in 
flight. Do you know anything about----
    Mr. Martin. The Commission had opened--there are two sets 
of rules that prohibit consumers from using cell phones on 
flights. Both the FCC and FAA have rules on that. The 
Commission opened a proceeding several years ago asking, should 
we eliminate our restriction? And we decided not to. We left it 
in place. Our restriction is concerned with interference, that 
it could create actually also on the ground to existing 
wireless providers on the ground as planes were above.
    I think the article you might have seen in the paper talked 
about the changes that European regulators were making to allow 
people to make use of cell phones on flights. At this point, 
the Commission doesn't have an open proceeding on it; and, more 
importantly, the FAA I think indicated that they have no plans 
to change their role here in the United States. So I don't 
anticipate that changing anytime here in the near future.
    Mr. Alexander. Okay. Thank you.
    Mr. Serrano. Thank you.
    Mr. Hinchey, early January of 1975, we got sworn in 
together to the State assembly; and here we are 35 years later, 
trying to get it right.
    Mr. Hinchey.

                    CONCENTRATION OF MEDIA OWNERSHIP

    Mr. Hinchey. You obviously have gotten it right, Mr. 
Chairman. We very much appreciate that.
    Chairman Martin, thanks very much for being here; and I 
want to express my appreciation to you. You do a very, very 
important job.
    One of the problems that I think we are having, though, is 
an example of a conflict with the basic principles of the 
Constitution of our country. The First Amendment makes it clear 
that openness and freedom of expression and the availability of 
various forms of information are critically important for the 
future of any democratic republic and certainly very critical 
to ours. Over the course of the last 20 years we have seen this 
diversity very much restricted, beginning in 1987; and, as a 
result of that, now we have a handful of major corporations 
that control more than two-thirds of all the media in the 
country. So you have about six people in effect who are making 
the decisions as to what kind of information goes out.
    That was a very, very big mistake; and it is something that 
the Federal Communications Commission should be focusing its 
attention on to alleviate, to open up, to make it less 
restrictive.
    But in November of last year, November 13, you posted a 
notice on your Web site that you were going to engage in 
increasing concentration of ownership, newspapers and broadcast 
stations; and I believe it was just over a month later that you 
actually put that process into play. There is a lot of that 
that I find troubling and very worrisome in the way that that 
has been handled.
    I think these rules that just passed recently were done so 
under a flawed process, and I think the consequences of that is 
likely to substantially undermine, and increasingly, the 
independence and diversity of journalism in our country. There 
is a whole host of things that I would like to talk to you 
about with regard to that.
    The conditions of news protection and editorial expression 
are something that has become melded in the context of most of 
the broadcasts in our country, particularly television, where 
you have people who are alleging to present the news but what 
they are doing is presenting editorials, presenting their 
viewpoints, their point of view. Will the FCC be prepared to 
reject the license renewal application if the conditions of 
news protection and editorial separation are not met? And, 
before you answer that, would you describe what those 
separation elements need to be?
    Mr. Martin. I think you might be referring to the 
separation elements--you are talking about in the waiver 
process in the rules that we adopted?
    Mr. Hinchey. Yes.

                             WAIVER PROCESS

    Mr. Martin. I think that what you have to put into context 
for me to answer that is the situation that you are describing. 
The Commission said that in markets that were smaller than the 
top 20 markets we would allow someone to apply for a waiver to 
still purchase a newspaper and a broadcast property if they 
could demonstrate that they were going to increase the amount 
of local news on those properties. So that to the extent that, 
for example, a broadcaster was not putting on any news at all 
anymore, that to the extent--and we added specific amounts of 
what they would have to do, the amount they would have to 
increase. And we said, to get credit for that amount of 
increase, you will have to demonstrate that you had a 
separation of the editorial function.
    And we actually looked towards Congress' previous act when 
they had passed the Newspaper Preservation Act in which they 
had said that there were certain structural limitations they 
put in place when they allowed two newspapers to merge that 
were trying to preserve editorial content separation, and so we 
said we would kind of mirror those standards, and we were 
looking at making sure that that editorial content was----
    Mr. Hinchey. Well, the expression of that idea in the 
context of that waiver gives you the idea that you have some 
intention to separate what is supposed to be news and what is 
supposed to be opinions.
    Mr. Martin. It was in the context of separation between the 
two entities to make sure that there were going to be two new--
if the idea was we would allow a waiver in those circumstances, 
because there would be a new increase or the new voice in the 
market, then that had to be a true new voice so they had to 
have a certain amount of minimum content.

                  SEPARATION OF THE EDITORIAL FUNCTION

    Mr. Hinchey. Do you think that the FCC should engage in any 
insight into the way in which broadcasters behave now with 
regard to the difference between broadcasting information and 
providing opinions on that information?
    Mr. Martin. I think that, outside of the particular waiver 
process you were--I was just describing just in general.
    Mr. Hinchey. Not in the context of the waiver process. In 
the context of the existing standard set of circumstances that 
exist out in the media right now, where you have so many 
broadcasts that allegedly are giving information, but, at the 
same time, they are really driving home their opinion of what 
the circumstances ought to be.
    Mr. Martin. I think that it becomes very particularly 
dangerous as it relates to the first amendment responsibilities 
the Commission has if we are going to start reviewing their 
news content and determine whether they are distributing news 
and information or distributing an editorial opinion. One of 
the areas the Commission has been most hesitant to get involved 
in, even with broadcasters who have more limited first 
amendment rights, is in their distribution of news.
    Mr. Hinchey. Have you ever said that to any particular 
broadcaster, that they should separate the broadcast 
information from opinion?
    Mr. Martin. I don't believe that the Commission has, no. I 
don't believe the Commission has a standard on that.
    Mr. Hinchey. I would be surprised if you had.
    So the whole question of this waiver process and the idea 
that you are now going to focus attention on the difference 
between providing factual information and providing some kind 
of bogus opinions and alleging that they are connected in some 
way doesn't seem to make any sense because there is nothing 
like that that you have ever done in the past, not just you but 
prior commissioners, going back now for more than 20 years.
    Mr. Martin. I think it only makes sense in the context of 
why we were granting the waiver. This process was actually 
something that had been advocated by some of the consumer 
groups in saying the only circumstance they would see in which 
they should allow cross ownership----
    Mr. Hinchey. I understand that. Consumer groups are trying 
to get their opinions paid attention to. And so, in response to 
that, you put this information in saying that you are going to 
do this examination. But there doesn't seem to be any 
confidence that should be applied to that statement, because 
nothing like that has been done, either under your chairmanship 
or under the chairmanship of anyone who proceeded you, 
basically, over the course of the last 22 years.
    Mr. Martin. Well, I think that is one of the reasons why it 
would only be in the waiver context where we would be looking 
at the exact facts of what someone was proposing and ended up 
doing.
    Mr. Hinchey. Time flies, Mr. Chairman.
    Mr. Serrano. Thirty-five years. It is incredible. Mr. 
Bonner. You thought we would never get to you, right?
    Mr. Bonner. Mr. Chairman, I am just amazed that your State 
doesn't have a minimum age to begin public service. You could 
not have been in public service 35 years.
    Mr. Serrano. If I had learned to speak English earlier, I 
could have been elected at 22. But it took a while.

                          DO NOT CALL PROGRAM

    Mr. Bonner. Chairman Martin, since Representative Kirk 
threw out a comment, a positive comment, about the FCC's role 
in the Do Not Call issue a few months ago, let me follow that 
up by asking, is there any practicality in extending the Do Not 
Call restrictions to benefit businesses and not only residents? 
I have had a number of constituents in my district who have 
expressed concern about the number of calls that their 
businesses receive, some of which they consider to be 
fraudulent solicitations. And is that something that y'all have 
considered?
    Mr. Martin. I don't think that the Commission has been 
actively considering that in the context of extending our Do 
Not Call system. I think more and more of it has been focused 
on the consumers. Obviously, that is something we will take 
back; and we will see how many complaints we are getting in 
that regard.
    Mr. Bonner. That would be great.

                             LOCALISM RULES

    I don't know if you have received it yet or not, but you 
will soon receive it if you have not, a letter signed by many 
Members of Congress circulated by our colleagues, 
Representative Mike Ross of Arkansas and Representative Marsha 
Blackburn of Tennessee, expressing some concerns that we have 
about the Commission's consideration of a radical, in our view, 
re-regulation of our Nation's broadcast system and impending 
localism proceeding.
    Let me just say at the outset, I have taught a journalism 
class, broadcast journalism class, in Springfield College in my 
hometown of Mobile, Alabama, on Mondays, spoke with 17 future 
journalists; and I am a great believer in the role and the 
sanctity, if you will, of local broadcasting. And I am 
concerned by what it appears to be the Commission's 
consideration of what I would deem potentially severe economic 
impact of some of the proposed localism rules, including, for 
example, reinstating the main studio rule that the FCC 
concluded was too restrictive more than two decades ago. Any 
initial thoughts on this?
    Mr. Martin. There were three main points that the 
Commission considered making changes to that I think that you 
are referring to that many of the broadcasters are concerned 
about. One of them was requirements about broadcasters having 
local studios, one making sure that broadcasters had someone 
who was available 24 hours a day potentially, and another--
well, I will let you create the others, but let me respond to 
those two, for example.
    Those two were concerns that had been raised at the 
Commission as it resulted in an increasing amount of local 
broadcasters who actually were putting on content that was just 
getting piped in from somewhere else and whether we should make 
changes as a result of that because it was no longer local 
content; and even though they had a DJ on the radio who was 
potentially talking about what occurred in the local community, 
he was actually someone who wasn't living in that local 
community, was actually living on the west coast somewhere with 
that information being piped in from a distance and that that 
wasn't reflective of the character of local broadcasters. And 
that was one of the reasons we asked about--was the main studio 
rule, for example, a way to try to address that concern that 
was being raised increasingly by the viewing public.
    Similarly, there were instances that happened, one in 
Minot, North Dakota, in which there were allegations that there 
was a train wreck, there were some chemical fumes that were 
released in the community. They were trying to tell citizens in 
the middle of the night not to leave their homes, and there was 
no one at the local broadcast station to put out the emergency 
alert. It has been back and forth. The broadcaster says it 
wasn't their fault. It was the local first responders. It was 
the local police department's fault for not triggering the 
right alarm that brought the--that they say it was the 
broadcaster's fault.
    Without getting into that, it certainly highlighted a 
concern to the extent that local broadcasters don't have 
anybody there. When the police went and knocked on the door and 
said, hey, we need to get the emergency alert out, there was no 
one there.
    Mr. Martin. And I understand that they are saying someone 
has to be there 24 hours a day to increase the cost; but at the 
same time, I think an important public interest obligation of 
broadcasters is that they are actually in a position that, 
under all circumstances, they can tell the people in that 
community that there is an emergency and they need to be 
prepared to respond to it. And I think that is probably not too 
much to ask of local broadcasters.
    Mr. Bonner. I would agree. It may not be too much to ask in 
terms of the public service they provide, but it is going to be 
a tremendous additional burden. Again, the only reference point 
I have is in my district, but the major affiliate stations in 
my district have had to shave off, everywhere they can, cost. 
And it seems like to me that we are now giving them a burden of 
an additional cost that may not, 365 days out of the year--I 
mean, I live on the gulf coast, so we know a little bit about 
hurricanes. And there are certainly times when it is incumbent 
upon the station to provide that 24-hour emergency technician, 
if you will, there.
    But in any event, I just wanted to raise that issue with 
you, because the broadcasters are not the only ones who are 
concerned about the additional burden it would have. And I 
think you will see that in that letter.

                   NEW RENEWAL PROCESSING GUIDELINES

    As a follow-up to that, the localism report, do you have 
any concerns about the first amendment issue with regard to 
this? When the Commission eliminated content-based renewal 
processing guidelines in the 1980s, it did so in part because 
of concerns that these guidelines raised serious first 
amendment issues.
    So my question would be, do you think that your proposed 
new processing guidelines, which appear, at least to me, to be 
more onerous in detail than those guidelines previously 
eliminated by the Commission, are appropriate under the first 
amendment?
    Mr. Martin. I do. I think there are only two related 
issues. The Commission has had, for a while, that broadcasters 
are required to fill out certain kinds of forms about the kind 
of content that they are putting on, responding to local 
community concerns. We did alter the form to make it more 
detailed. We didn't set any minimal amounts that broadcasters 
were required to put out on any different kinds of information, 
but we did alter the form to say we wanted them to provide more 
information about how much of what they were doing was local, 
local public affairs and local news, versus--and local-
originated content. But there weren't any minimums, so I don't 
think it violates the first amendment.
    The only minimum was we did ask, should there be some 
minimum requirement on broadcasters during their entire 8-year 
license term to do something local for your community? And I 
actually believe that that is incumbent upon the local 
broadcaster to say he is willing to do something local. But I 
think that that is the only one bit that I think implicates it.
    Mr. Serrano. Thank you.
    You must be the luckiest man in the world, Mr. Schiff, 
because you are next.
    Mr. Schiff. Mr. Chairman, if I could have just a minute, if 
you could go to one of my colleagues.

                             INTERNET RADIO

    Mr. Serrano. Right. Well, I wanted to ask the Chairman if I 
am violating any kind of rules. You know, I have one of those 
Internet radio stations, and if you call right now, I am not 
there. The music is just playing by itself, if you click on.
    Mr. Martin. I can send the enforcement bureau out to check 
it out. [Laughter.]
    No, but there aren't any requirements on the Internet 
radio. But, of course, all of these public interest obligations 
attach to the extent that their broadcasters have to use the 
public airways. So the idea of all of our public interest 
obligations is that the broadcasters are receiving a very 
valuable public resource, the airwaves, and they have actually 
received that for free. We just auctioned off some of the 
airwaves that were returned by the television broadcasters for 
about $20 billion. And that gives you a sense of how valuable 
these airwaves are that the broadcasters were able to get 
originally for free.
    So we don't have the same kind of public interest 
obligations attached to your radio station.
    Mr. Serrano. For the members of the press who are here who 
may now write that I own a radio station, what it is is you go 
online to some of these Web sites that play music and you pick 
a name for a station, you put in some personal info, then you 
pick songs from a library they have, and anybody who clicks in 
listens to the music. And I don't own a radio station.
    Are you ready, Mr. Schiff?
    Mr. Schiff. Yes.
    Mr. Serrano. Mr. Schiff.
    Mr. Schiff. Thank you, Mr. Chairman.
    Mr. Serrano. Now that I am out of jail.

                BLOCKING DISTRIBUTION OF ILLEGAL CONTENT

    Mr. Schiff. I wanted to focus on an issue that is very 
important to a great many of my constituents who work in the 
entertainment industry. In particular, I wanted to ask about 
the ISP management and responsibility in terms of unlawful 
content.
    FCC policy statement principles state that consumers need 
access to lawful content. In your statement, on the dialogue 
between Comcast and BitTorrent, you noted that the hearing at 
Stanford will explore more fully what constitutes reasonable 
network management practices, including the important ability 
for network managers to block the distribution of illegal 
content, including pirated movies and music, as well as child 
pornography.
    And I understand one of my colleagues asked a question on 
the child pornography issue, but I would like to focus on the 
pirated movie/music issue in particular.
    Do you believe that taking action to block the distribution 
of that kind of unlawful material is consistent with network 
management and the FCC's policy statement principles? And how 
do we encourage parties to work together to block that kind of 
illegal material?
    Mr. Martin. Sure. I think that, as I talked about when we 
were talking about other forms of illegal content, that the 
network operators don't violate any of the Commission's 
principles to the extent that they are limiting access to 
illegal content. Illegal content isn't content that is 
protected in any way by either our network and charter 
principles. So any kind of attempts by a network operator who 
wants to say that they are limiting illegal content doesn't 
invoke any of our principles. As you read, our first principle 
only protects legal content. So I don't think that that is 
something that raises a particular issue in front of the 
Commission.
    I don't think that that means they can stop an entire 
application or an entire user from using any kind of content or 
any kind of access, just because they have done something 
illegal. They have to focus their efforts on stopping the 
illegal content.
    As I also mentioned, I think you talked about the content 
creators, the studios in California. I think AT&T announced 
earlier this year they have been trying to work with them to 
engage in filters they wanted to put in place to try to screen 
out legal versus illegal content that was copywrited. And I 
don't think there have been any complaints that the Commission 
felt--I don't know if they have even implemented that, but I 
don't think there are any complaints at the Commission. That 
doesn't violate any of our principles, if an ISP wants to end 
up engaging that.
    Mr. Schiff. Do you have any thoughts about how the 
Commission can better encourage exactly that kind of conduct 
that will rigorously go after unlawful, pirated content while 
letting the legal content flourish?
    Mr. Martin. I think that focusing on those kinds of 
filters, I think, is much more appropriate than trying to shut 
down entire applications, you know, particularly because 
filters can try to screen out illegally or not appropriately 
copyrighted content, both video and music, for example.
    And I think that that would be an appropriate kind of a 
response, as opposed to just trying to shut down a particular 
application that they think might be being utilized for illegal 
content, or it might actually be utilized at times for illegal 
content and other times for legal content.
    Mr. Schiff. And when they receive reports of illegal 
content, they receive notice, are there any limitations in 
terms of FCC policy about how quickly they can operate to 
either take down that material or make it inaccessible over 
their network?
    Mr. Martin. Not in terms of any FCC limitations or making 
that illegal content inaccessible, no.
    Mr. Schiff. Thank you, Mr. Chairman.
    Mr. Serrano. Thank you.

                   SATELLITE RADIO IN THE TERRITORIES

    Chairman Martin, let me skip to my last question, so I make 
sure I get it in on the record.
    I have said to many folks who come before this committee 
that if there is a trend that you will see from the work we 
have done in the last year and a half, it is the issue of 
consumerism and, personally, the issue of involving the 
territories in everything we do in this Congress and providing 
the same services to the territories.
    So, with the looming possible merger of satellite radio 
companies Sirius and XM, I bring to you for the record and for 
the public what I have written to you about, the fact that the 
territories are not covered by satellite radio. The signal does 
not get there. We had been told that it was a matter of getting 
the signal there. And the answer is almost one that a teenager 
would give you: Duh, it is a satellite; it can reach anywhere 
if you direct it to go there.
    And so, as we look forward to this possible merger, which I 
support--I think it would be good, and I am personally a user 
of satellite radio--is there something the FCC can do to 
encourage, if you will--I don't know if you are allowed to 
mandate--but encourage satellite radio, as they merge, to make 
sure that they provide services to all folks who live under the 
American flag?
    Mr. Martin. When we are considering any particular 
transaction in front of the Commission, we are able to balance 
the potential benefits to the public versus those potential 
harms. And certainly the concerns that have been raised by 
people on the record and by people like yourself, that 
satellite radio is not being offered to everyone, particularly 
to residents in Puerto Rico, and their commitment, so to speak, 
if they were going to offer that kind of service, would be a 
benefit that we would consider when we were weighing the 
benefits and the harms.
    Mr. Serrano. How did that happen, for instance, that they 
set up shop without including everyone? It didn't come up? No 
one brought it up? No one thought of it?
    Mr. Martin. And I could get you some of the technical 
reasons why. But as I understand it, I think one of the two 
satellite radio providers' satellite, their look angle down on 
the U.S. and the territories doesn't actually completely cover 
Puerto Rico. So they would have some technical challenges in 
providing service there.
    There are some ways to go around that. There are 
limitations in all kinds of places in the United States, where 
they don't provide coverage and they supplement that by having 
terrestrial repeaters. They put an antenna up just like a 
terrestrial broadcaster does, and it repeats the signal.
    So I think that there are ways, if they wanted to, to be 
able to provide service even if there were limitations on their 
satellite being able to do it. But I think that is why they 
would say they didn't provide service originally.
    Mr. Serrano. And that is the key: if they wanted to. And I 
think it is part--and I am not attacking anyone--it is part of 
a pattern of behavior that usually you don't include the 
territories.
    I mean, in last year's appropriations bill, in this 
committee's bill, we were able to do something that people may 
feel was not important, but, to me, it was very important. To 
the people who live in certain areas it was important. That was 
to include the District of Columbia and the territories in the 
quarters program. And people are going to say, ``Oh, he is 
bringing up the quarters program.'' But think of it: The 50 
States were going to get a quarter, and people who are American 
citizens who live in the territories were not involved. Now 
there will be folks from the District of Columbia who will get 
a quarter in January of next year. And, in my case, it will 
help because somewhere in 2009 some child is going to go to a 
mother and say, ``Mom, why is Puerto Rico on a U.S. quarter?'' 
and mom will either say, ``ask your father,'' or ``we are going 
to go to a library and find out.'' And, if nothing else, that 
will begin an educational process as to the fact that we have 
Americans who live outside the 50 States.
    So part of what you are saying is they probably didn't pay 
attention to it. I am hoping--and this committee will certainly 
force the issue--I am hoping that when they sit down with you, 
should that merger come to be, even if it doesn't come to be, 
for them to get their license renewed, they should include all 
Americans, that you forcefully say to them, ``Hey, don't upset 
the Chairman.''

                    TELEPHONE SERVICE IN PUERTO RICO

    Mr. Martin. We have included similar kinds of conditions. 
You know, when the Puerto Rican telephone company, their 
license was being transferred recently, about a year ago, we 
actually included very specific build-out provisions to make 
sure that they were increasing the build-out of both voice 
services and broadband services to the citizens of Puerto Rico, 
because Puerto Rico had lagged significantly behind in 
broadband services.
    So putting those kind of conditions on a transaction is 
something we have taken into account in the past.
    Mr. Serrano. Incidentally, on that, I have a few 
constituents talking to me about something interesting that 
happened. Many folks who lived in New York, who lived in 
Florida, who lived in other places where a lot of Puerto Ricans 
lived, had purchased Verizon services for themselves and for 
their grandma or their mom in Puerto Rico, knowing they could 
do the Verizon-to-Verizon at no extra cost. Then Verizon sold 
it to somebody else, and they were all out of luck, when the 
reason they bought Verizon was for that reason.

       SUPREME COURT REVIEW OF THE BROADCAST OF INDECENT MATERIAL

    On first amendment issues, the Supreme Court recently 
announced that it will rule on the FCC's rules governing the 
broadcast of indecent material over the airways. As you know, I 
have been concerned that the FCC application of its ruling in 
this area has been uneven and difficult for broadcasters to 
follow. I believe that the uncertainty over these rules raises 
concerns over what broadcasters can and should do, including 
the degree to which broadcasters must exercise censorship in 
order to avoid costly fines. I hope that the Supreme Court 
ruling will at least bring clarity to the issue, but I fear 
that it won't and that the FCC's enforcement in this area will 
continue to be controversial.
    Now, as you recall and your predecessors recall, I spent a 
lot of time on another committee in what some people in the 
media call the defense of Howard Stern. And what it was was my 
belief that, as bad as some of the stuff I hear on the radio 
could be at times, it is not a decision for someone to make 
that they can't say it. Rather, we should have an even policy 
across the board, which we don't. And at that time I used to 
say that, to some people, Stern's locker-room humor may be 
offensive. To me, having a guy on TV every night blame 
immigrants for everything that goes wrong in this country is 
offensive, but he has a right to say it, and I want neither one 
to be taken out.
    So what do you anticipate will be the scope of the Supreme 
Court's review of this issue? Do you believe that a decision on 
this matter will be helpful in clarifying what is considered 
indecent broadcasting, or will broadcasters continue to face 
uncertainty?
    Mr. Martin. Well, I certainly hope from both the 
Commission's standpoint and the industry's standpoint that the 
court's ultimate decision will help provide additional clarity 
and certainty for what the rules are. But I think it is hard to 
predict what the court will end up doing with the decision.
    I can say that one of the reasons why we appealed the 
Second Circuit's decision and asked the Supreme Court to take 
the case was because the Commission has an obligation to 
enforce the law that Congress has passed that tells us that we 
are supposed to prohibit indecent material from being on the 
public airwaves, on broadcast TV and broadcast radio. And that 
is an obligation that we take seriously and we are required to 
enforce. And, in so doing, I think that the Second Circuit's 
decision, which said that we were not able to do that for the 
expletives but that we use the mask in those cases, put us in a 
position where we were required by the law to enforce it, but 
the Second Circuit was saying that we were not able to enforce 
it. And so I think we repealed the decision, again, seeking 
clarity for us and for the industry.

                BROADCAST REGULATION AND SATELLITE RADIO

    Mr. Serrano. On that point, I don't know if you were the 
one I asked this question of, but I assume you were, and I want 
to see if the answer is still the same. The question was about 
satellite radio and the fact that, because people sign up for 
it, they are kind of buying the service and the content, and 
that the same rules that you would apply on terrestrial radio, 
you would not apply on satellite radio because I am buying it, 
therefore I am accepting what comes over the airwaves.
    Is that still the way we see it?
    Mr. Martin. That is. The subscription nature of the 
service, I think, lends itself to a different kind of first 
amendment analysis when you are talking about that--versus the 
free over-the-air broadcast services.
    And I would only highlight that I think that some recent 
proposals that have been put forth by satellite radio that 
would allow consumers to actually have additional and greater 
control over what they are picking and choosing, the channels 
they are buying, actually even further make it different from a 
broadcast, because it even provides additional protection. 
Because not only are you able to provide the whole service, but 
you are able to pick--you are able to buy packages that allow 
you to pick and choose individual channels. So I think that 
will provide additional certainty for them.
    Mr. Serrano. Well, I agree with that analysis. And I think 
you did say the same thing last time, that there was a 
constitutional issue at that point. Thank you.
    Mr. Regula.

                           A LA CARTE PRICING

    Mr. Regula. Just a couple of things.
    Last year we talked about a la carte. I don't know whether 
you still have the same enthusiasm for that. I have detected 
among my constituents that are in the business that they are 
not as enthused about a la carte as you are.
    Are you still enthusiastic about it, or is it just a moot 
issue?
    Mr. Martin. No, listen, I think there are two different 
things I would say. Absolutely, I am still enthusiastic about 
it. I think that the problem that consumers face is that they 
have seen dramatically increased cable bills. In many areas of 
the country, cable rates have increased quite dramatically over 
the last 8 to 10 years. You have seen an almost doubling of 
those on average throughout the country. And at the same time, 
some cable operators are complaining that they have to include 
content that they think that their viewers don't even want.
    And I think one of the answers to that is to empower 
viewers to be able to pick and choose more of the channels that 
they want and more of the content that they want. And I think 
that resolves some of the concerns they might have about the 
kinds of content that is on there, and it helps them control 
their own prices.
    So I absolutely think it is still the right thing. 
Technology would allow for it today for anyone who is a digital 
cable subscriber. I think it would allow consumers to reduce 
their overall cable costs. It would respond to that 80, 85 
percent of people in recent surveys who say they are paying too 
much for cable services today. And it would allow it to do so 
in a way that is empowering consumers, as opposed to 
government-direct regulation.
    Mr. Regula. What control is there on rates? At least my 
experience here in Virginia is that, just, boom, boom.
    Mr. Martin. Absolutely. There is no control on rates. And 
that is--I think that one of the reasons that I am advocating 
that is it empowers consumers to be in control of their cable 
rates and be in the control of what they are having to purchase 
and buy, as opposed to the Government trying to put 
restrictions on cable rates, which is more of a price-control 
mechanism, which I think would be a bad thing for us to 
implement, especially when technology is providing an 
alternative which is more consumer-friendly and which will 
allow individuals to decide how much they want to end up paying 
for individual content.

                         UNIVERSAL SERVICE FUND

    Mr. Regula. The other question I have is on the Universal 
Service Fund. This goes to schools. Do people apply for grants, 
like a school library?
    Mr. Martin. They do. Today, the school and libraries 
program----
    Mr. Regula. They apply with the FCC to get a grant from the 
Universal Service Fund?
    Mr. Martin. That is right. And then they say, this is the 
kind of things we are going to provide for it; we are going to 
buy telecommunications service from this service provider; we 
are going to buy a server to serve our school or library. So 
they are actually applying for grants and then detailing what 
they would use that money for.
    Mr. Regula. There have been abuses of this program, what do 
you attribute that to? Is that because there is an intermediary 
between the school and you that is somehow cashing in on the 
USF?
    Mr. Martin. I think that it is whenever there are grant 
programs, there is the potential for people to be--with any 
Federal Government grant program, there is a potential for it. 
As Congresswoman Kilpatrick mentioned earlier, the program has 
done a lot of good. It has done a lot for schools and libraries 
across the country. But we need to increase our efforts to try 
to solve the potential for fraud.
    One of the things you could do, as I said, is move it away 
more from a grant program to a formula distribution, like you 
do school lunch money, where you would say, this is your 
demographic for your students, it is this rural and has this 
many students who are below the poverty line, so we give you 
this much money to spend on technology grants.
    Mr. Regula. What do schools and libraries do, in your 
experience, with these funds? How does it enhance their service 
to the public?
    Mr. Martin. I think that what they do is try to integrate 
technology into the classrooms. When this program began, there 
were very few classrooms and fewer schools that were hooked up 
to the Internet, and certainly now you have 99 percent of 
schools and widespread connections to the classrooms. And I 
think that there are many schools that have then tried to take 
advantage of that technology to help educate their students, 
taking advantage of different learning opportunities.
    So I want to be clear, I think there are some great 
educational things that the schools have been able to do with 
that technology. The challenge is making sure we find ways to 
integrate that into their curriculum and that they can use it 
the most effectively and to make sure that, obviously, there 
isn't anybody who is applying for that money and not using it 
for that purpose.

                        PUBLIC SERVICE PROGRAMS

    Mr. Regula. Is your experience that the cable industry puts 
on public service programs that schools can access for the 
benefit of their students?
    Mr. Martin. I think that there have been some that have 
been put on by that. I think that there have been a couple 
different television programs that have been put forth in 
trying to utilize it for educational purposes. But a lot of 
this money is actually going more toward, in that sense, 
utilizing students' ability to connect things over the 
Internet. And while they can't get computers in the classroom, 
they can get the connections for that classroom to be able to 
utilize the Internet access.
    Mr. Regula. Thank you, Mr. Chairman.
    Mr. Serrano. Thank you.
    Now we go to the happiest man in all of Maryland. Why? 
Because the Orioles are in first place.
    Mr. Ruppersberger. Are we talking baseball?
    Mr. Serrano. We always talk baseball on this committee.
    Mr. Ruppersberger. Well, as we're headed, the Yankees and 
the Red Sox.

                        SENIOR LIVING FACILITIES

    First thing, just two basic questions. And this really was 
based on a constituent call about someone who had a home, and 
it was designated commercial when it wasn't, and they were told 
that they wouldn't be able to get the waiver for the box. And 
then we looked into it further and found that when you have 
senior living--and in my district I have at least probably two, 
maybe three, senior living areas where we have 3,000 seniors 
living in a facility. What is the FCC position? What are we 
going to do about that?
    You have someone buying a condo a lot of seniors that are 
going to be very concerned if we don't deal with that issue.
    How are we dealing with it? What is the policy going to be?
    Mr. Martin. I think what you are referring to is NTIA, 
under Department of Commerce actually, is running the grant 
program for those boxes, and they had disallowed certain kinds 
of community living that I think you are raising was the 
problem.
    NTIA, I was testifying with them before the Senate. They 
actually announced that they were reconsidering that rule, to 
try to change it so that even those people with PO boxes who 
are living in those kind of community organizations could still 
qualify to get a converter box.
    But I can't give you any more of the details. I can make 
sure that the NTIA folks get in touch with you to explain----
    Mr. Ruppersberger. Will you make sure that happens and 
follow through with that? Because it is extremely important. 
And I think there is a major issue that we need to deal with, 
or we are going to have a lot of problems throughout the 
country on that issue.
    Mr. Martin. Sure.
    Mr. Ruppersberger. Okay.

              A LA CARTE PRICING AND DIVERSITY PROGRAMMING

    Just the a la carte--I know your position on a la carte. 
There is a lot of diversity in programming, a lot of programs 
probably wouldn't exist if they must compete with the major 
ESPNs or the network stations, the very popular stations, and 
especially for those of us who represent some areas where you 
have a population that does not have a lot of money. And it 
seems that the a la carte will really--I know the Chairman 
referred to ``what is a mother going to say'' or ``what is a 
father going to say'' or whatever. I am saying, if we just go a 
la carte, we will have a lot of people who won't have a 
diversity of stations, whether they are cooking stations, 
education channels, whatever.
    And that is the other side of your a la carte. And I am 
concerned that the education point of view, and even 
entertainment too, will be lost.
    Mr. Martin. I would say, I am actually concerned about the 
people who can't afford it, as well. That is the reason why I 
think that an a la carte mechanism would be helpful. Because, 
right now, what you are seeing is that those same people are 
faced with a choice of getting nothing or having to pay cable 
rates that have gone up 100 percent in the last 8 years. So we 
are seeing dramatic increases in people's expanded cable rates 
throughout the country, and it is for, oftentimes, programming 
that some of the cable operators--the Small Cable Association 
was in town yesterday, and they were highlighting this issue, 
for--sometimes it is for content that they don't even want.
    And I think that the concern I have is that those same 
consumers should be able to have more control over their bills, 
and that that is actually going to allow them to decrease their 
overall bills. That is the concern----
    Mr. Ruppersberger. The little stations will go away, or 
unless someone can afford to have them all come in. And that is 
part of why I think cable did very well in the beginning, 
because there was such diversity, so many choices that were 
there, from educational and entertainment media.
    Mr. Martin. Educational programs would all end up still 
being there. What you are talking about is, are there programs 
that they are----
    Mr. Ruppersberger. It is not just Hispanic. You have 
cooking, and you have a lot of things.
    Mr. Martin. The Hispanic issue, for example, is a good 
example----
    Mr. Ruppersberger. Or African American.
    Mr. Martin. And I think it actually cuts the way. You 
actually have Hispanic homes that are disproportionately 
relying on over-the-air broadcast because they don't feel like 
they get a good value for paying $80 for 120 channels, most of 
which are English-language. Instead, if we allowed them to pick 
and choose the Spanish-language programming, I think you would 
see an increase in the number of Spanish-speaking homes that 
would be willing to purchase cable. Because, right now, they 
are having to buy ESPN in English as a basic part of the 
package before they are allowed to buy ESPN in Spanish. And I 
don't understand why they should have to do that.
    Mr. Ruppersberger. And that is a good argument, too. There 
are arguments on both sides. I hope you understand there is 
another issue there.

                   A LA CARTE PRICING AND CABLE RATES

    Mr. Martin. Certainly, I think there are. But I think that 
the concern, the overwhelming concern that we have to put a 
focus on is the dramatic increase we have seen in cable rates 
over the last few years. And I think we have to find a way to 
resolve that, and I think that empowering consumers is the 
appropriate way.
    Mr. Ruppersberger. Because it will change, I think, the 
scope of where we are.
    Thank you, Mr. Chairman.
    Mr. Serrano. Thank you.
    That is an issue where you do have arguments on both sides. 
There are some folks, for instance, some members of the 
Congressional Hispanic Caucus who will say a la carte is no 
good, as you know, because then some of the programming that 
comes not from networks but smaller broadcasters in Spanish 
won't be included.
    On the other hand, you are right. I mean, I--and you should 
never use yourself as an example, but I am a consumer. I pay a 
lot of money to Comcast here in Virginia. Half of my channels 
come in that mosaic, what is that called, digitalized?
    Mr. Martin. The digital package, whatever they----
    Mr. Serrano. No, no, no, that they don't come in right. 
They come in all broken up. And try to get some service, it is 
ridiculous. Why do I think I will get 10 calls from Comcast 
this afternoon? And maybe that is an improper use of the chair, 
but I am sure I speak for a lot of other folks who are going 
through the same thing.
    But you are right. Some people think I am not telling the 
truth when I say that I find time to do other things that are 
outside of politics. And I know the arguments against a la 
carte. But I also would like to be able to choose one less 
channel of that kind and one more channel of this kind and to 
include the Mystery Channel, whatever. Those things don't 
happen all the time.
    So I think you might be going in the right direction. You 
just have to look out to make sure that, in the process, you 
don't leave out the ability for some smaller broadcasters to 
also have their wares available on the market.
    Mr. Martin. One thing that--and I have suggested this in 
the past--one thing we could end up doing is implementing a la 
carte for a certain price point. In other words, anybody who 
wants to charge consumers more than 50 cents a month. If you 
have 100 channels in a package and they all want to charge 50 
cents, that adds up pretty quick. But what if you just say--I 
think you could implement it on that kind of a mechanism, where 
you say anything over a certain price, then if you want to 
charge consumers that, that is fine, but consumers have to be 
able to opt out of that channel as well.
    The other thing that I think that addresses some of the 
concerns that are raised by smaller broadcasters or smaller 
channels that are getting on is I don't think it has to be that 
people pick and choose the channels up front. It could be that 
people can opt out of channels, and you should tell people how 
much they get back. Well, if someone is only charging 2 cents 
for a channel per month and you decide you are going to opt out 
of that channel, then many consumers won't bother to because it 
is not a significant amount. On the other hand, if you are 
starting to charge someone 75 cents, $1, several dollars in 
some cases by some channels, I think consumers have to be able 
to say that this is a purchase they won't end up making.
    Mr. Serrano. Right.

                LOW-INCOME ACCESS TO TELECOMMUNICATIONS

    Low-income access to telecommunications, this is the 
question we deal with all the time. I mean, every day we see 
how this country is getting more and more and more involved in 
the modern technology. Yet, at the same time, there is still a 
segment, a certain part of the community which is not involved 
at all.
    What is the FCC doing to foster access to and affordability 
of telecommunications and Internet services for low-income 
communities?
    And I know there are various programs that reach out to 
schools and libraries and so on. But, you know, if I could wave 
a wand and do something in this country, it would be to have 
senior citizens who are alone, who are living alone, who are 
lonely, able to use the Internet and realize that that will 
probably open up a whole new life for them. We don't pay enough 
attention to that, and we are all heading toward that age. We 
may not all be heading there with 15 people around us in a big 
family; it might be all by ourselves. We have to plan for those 
folks, too, as we do in other areas. But we seem not to have 
planned for them in this particular area.
    Mr. Martin. There are certain programs in the Universal 
Service Fund. Most of the time we talk about the program for 
schools and libraries in the rural areas that receive the bulk 
of the money, but we do have a certain fund set aside or a 
certain portion of the funding set aside for what we call our 
Lifeline and Linkup program which directly provides support for 
people to be connected who are low-income. So we have a 
separate program that supports that. But that is only for our 
voice side. It doesn't address the Internet issues you have.
    I would say that the Commission did a year ago, in the 
context of some of the large telecommunications mergers that 
were in front of us, we did impose as a condition of public 
interest benefit that they provide a lower cost to DSL 
broadband connection offering, might be at a more limited 
speed, but that they did--I think they were supposed to provide 
it initially at a $10-a-month cost.
    So we have imposed certain kinds of conditions to try to 
provide a low-cost access entry point to broadband services try 
to address some of the concerns that people are raising.
    Mr. Serrano. Thank you.
    One last question, and then I will turn it over to the rest 
of the committee. I will submit all the rest of my questions 
for the record, Mr. Regula.
    When it reaches that point where negotiations get--they are 
going on now, but for this merger between Sirius and XM, one of 
the issues that I am concerned about is on-air personalities, 
where these folks are coming from, how diverse is their 
employee pool, and how diverse are their employees right now.

                     DIVERSE COMMUNITY PROGRAMMING

    Again, these are issues that, at times, no one can force 
anyone to be aware of or to deal with. But more and more, I am 
hearing folks on air that I know are not recruited within the 
50 States or the territories, especially in the case of Spanish 
programming. And there are plenty of folks who can handle some 
of those jobs around here. Just as well as the programming at 
times could be a little more directed to certain communities, 
although they have done a pretty good job of that; there is 
more that can be done.
    Are these the kind of things that also can be part of the 
conversations for the approval?
    Mr. Martin. Those would certainly be the kind of concerns 
that people are raising in conversations that we would have 
about making sure that, if they were going to be allowed to end 
up moving forward, that they would be making sure they were 
serving that diverse community and providing new ways of 
serving that diverse community.
    And, certainly, their willingness to put the Serrano radio 
station on nationally would go a long way toward achieving that 
goal. [Laughter.]
    Mr. Serrano. Okay, fine. That is great. That is wonderful.
    I am just worried about one has the baseball package and 
the other has the football package. They shouldn't drop one and 
keep the other. They should do both at two different times of 
the year. But I do have a legitimate question.
    Mr. Martin. I know. I think that is a good start, Mr. 
Chairman. But certainly what they are going to be doing to 
serve the diversity of listeners out there is an important part 
of the equation.

               SATELLITE RADIO MERGER AFFECT ON EQUIPMENT

    Mr. Serrano. I do have one last concern on this, and this 
is the one that I will be bugging you about a long time.
    Take my situation. I have a portable in my Bronx car, I 
have an in-dash here in my Washington car, and I have another 
portable in the house. The merger should not mean that I have 
to go buy new equipment. The merger should mean that there is a 
merger and everything comes in through one signal.
    Mr. Martin. I agree.
    Mr. Serrano. And it should not be--and I personally will be 
very upset if this means that folks now have to go buy new 
equipment.
    Mr. Martin. Obviously, we would be very concerned if--and I 
think that would be something we would obviously look at and 
make sure and condition it if there was going to be some way 
that it was going to adversely impact the consumers who have 
already purchased and who already own those radios.
    Mr. Serrano. Thank you.
    Ms. Wasserman Schultz.
    Ms. Wasserman Schultz. Thank you, Mr. Chairman. I will note 
for the record that the Florida Marlins are also in first 
place. Moving on.
    Mr. Serrano. Are they staying in Florida, or are they 
moving to Puerto Rico?
    Ms. Wasserman Schultz. They are staying in Florida. No, no, 
not Puerto Rico. We have such a significant population in 
Florida that that won't be necessary. We can keep them here and 
keep the fans.

                    BATTERY OPERATED CONVERTER BOXES

    Mr. Chairman, I have a DTV-related question, a couple, that 
are unique to my State. Florida suffers from devastating 
natural disasters, and we often, from between June and 
November, have a situation where the lifeline for my 
constituents is their battery-operated analog television. And 
my understanding is that there will not be an analog-to-digital 
converter box produced to accommodate battery-operated analog 
televisions. And that is a really serious concern.
    Is that accurate? And, I mean, how are we going to deal 
with that? Because the TV stations that provide the vital 
information that Floridians need and that people in the region 
need for natural disaster information, they still operate, 
unless their tower crashes, which normally doesn't happen. So 
how are we going to deal with that issue?
    Mr. Martin. I think the issue is a significant problem, 
because the portable televisions, some of them will be able to 
be connected to the digital-to-analog converter, but the 
digital-to-analog converter still has to be plugged in to get 
power. So if it is a battery-operated TV, it won't do any good.
    Ms. Wasserman Schultz. But they could make a battery-
operated converter.
    Mr. Martin. They would have to end up making a battery-
operated converter box. At this point, I don't think that 
there--I know that we have been looking out for it. As I 
understand it, there are portable digital televisions that will 
have the capability of receiving the new digital signals that 
are available, but I don't think that there is yet a converter 
that is separately battery-operated. And I know that we have 
been trying to look out for the issue, because I know that this 
is something that has been raised.
    Ms. Wasserman Schultz. You have lower-income people and 
senior citizens in particular. I mean, we have one of the 
largest senior citizen populations in the country, well, the 
largest in the country in our State, and I have one of the 
largest in my district. Requiring them to go out and buy a new 
battery-operated digital TV----
    Mr. Martin. It is several hundred dollars. It is going to 
be very, very pricey.
    Ms. Wasserman Schultz. Is there any way that the Commission 
can address this so that there is a converter developed so that 
that doesn't happen? It is a really serious problem.
    Mr. Martin. Sure. I know that we can certainly try to work 
with the manufacturers to see if we can find someone who would 
be willing to end up producing one, a converter box. We can't 
require them. The converter box program is actually--the design 
of the converter box is actually what was done by the 
Department of Commerce. It is under their jurisdiction of what 
is required and what is not to be required in the converter 
box.
    So we can't require that. What we can do is try to 
encourage them. And I will be happy to try to work with them 
and let you know what their responses are.
    Ms. Wasserman Schultz. If you could, because you know what 
is going to happen. I mean, next June when those hurricanes, 
and God forbid we get hit by some more, but we will inevitably, 
and we will have thousands of our constituents who are going to 
be literally in the dark without a lifeline if we don't address 
that, that really large gap.

                     ADDRESSING TRANSITION PROBLEMS

    And the other issue, one of my colleagues mentioned the 
NTIA-approved converter box. If someone brings it home, 
connects it to their analog set and connects the box to 
whatever antenna they are currently using today, and they 
aren't able to get all the digital signals from their local 
broadcast stations, there are going to be a bunch of different 
possible causes for that.
    How are they going to figure that out? How do they know 
what the problem is, how they can solve it? Is there going to 
be a toll-free phone number that people can call to get help 
with that? Will you have enough staff on hand to respond to 
questions?
    Mr. Martin. There is a toll-free number that the Commission 
has, and then we have information available.
    Ms. Wasserman Schultz. Will it have a live person?
    Mr. Martin. There is right now but not 24 hours a day, 7 
days a week. One of the things we are asking for with the 
additional funding is to be able to staff that, starting next 
fall through the transition, with someone 24 hours, 7 days a 
week for it.
    But you are right, I think that there will be a challenge. 
The Commission estimates that there will be a small number of 
people who will need to go out and get a new antenna as well, 
which is what I think you are referring to. There is a Web site 
that the consumer electronics industry has put forth that 
allows you to type in your address and identifies whether or 
not they estimate you would need a new antenna and what kind of 
new antenna would ensure you would be able to get all the local 
broadcast signals.
    Ms. Wasserman Schultz. See, these are the kinds of 
technical transitional issues that, I mean, we could sit here 
all day and probably come up with a very long list. I am 
hopeful that you are going to develop a lot of aggressive focus 
and staff resources.
    Particularly, I have to tell you I am concerned about the 
distribution of your FTEs and resources and staff time to the a 
la carte issue versus how much time and resources and effort 
you are focusing on the transition and dealing with issues like 
this.
    Mr. Martin. I think one thing should be clarified, and I 
testified to this last year as well. I actually don't think the 
Commission has any authority to require a la carte on the 
retail side. I think it is a good idea. I think consumers want 
it. I think consumers are concerned about their cable bills. 
But it is not anything that we have a proposal in front of the 
commissioners that is proposed, and I have actually testified 
we don't have the authority to require.
    So I don't think you need to be worried about that, that 
particular aspect of it. But I certainly think we need to be 
making sure that we have all the resources dedicated to try. 
This is one of our top priorities over the next year.

                DTV TRANSITION AND PORTABLE TELEVISIONS

    Ms. Wasserman Schultz. So, if you could work with myself 
and my Florida colleagues and the colleagues in the region of 
the hurricane-prone zones to try to address the battery-
operated converter issue, I would really appreciate it.
    Mr. Martin. Sure.
    Ms. Wasserman Schultz. Thank you, Mr. Chairman.
    Mr. Serrano. Now, Ms. Wasserman Schultz, I was going to 
make a sarcastic comment, and then I realized that my sarcastic 
comment actually leads to a real question, which was, were you 
talking about low-income people or people who have a TV set on 
their yacht, on their boat. Right?
    But then I would ask that question, too. What happens to 
people who have TV sets somewhere like on a boat or motor 
homes? How are they affected by this?
    Mr. Martin. All of the televisions are affected in the same 
way, because the broadcasters are actually shutting off their 
analog signals. So all of them are affected. They all either 
need to get a converter box or buy a new television.
    Mr. Serrano. Let the folks in the country clubs there know 
that I spoke on their behalf. [Laughter.]
    Ms. Wasserman Schultz. As a representative of the yachting 
capital of the world, we thank you very much.
    Mr. Serrano. The guy from the South Bronx. Only in America.
    Mr. Hinchey.

                       MEDIA OWNERSHIP RULEMAKING

    Mr. Hinchey. Thank you, Mr. Chairman.
    Just briefly to return to the ownership rulemaking that 
started in November. I think it is obviously very important for 
the Federal Communications Commission to set an example with 
regard to openness and communication, fairness, transparency. 
But when that process began, it began with a simple press 
release that was put on their Web site and, if I remember 
correctly, an op-ed piece in the New York Times. That was it. 
There wasn't any other way of communicating that these changes 
were under consideration.
    Is that normal? Is that the way things normally work at the 
FCC?
    Mr. Martin. Well, that is not how we began the process to 
alert people that these changes were under consideration. We 
actually began the process a year and a half before that vote, 
when we issued the notice of proposed rulemaking saying that 
the courts had sent that issue back to the Commission and that 
we needed to revise our rules.
    And we received thousands and thousands of comments. We had 
six public hearings around the country where we received 
hundreds of people coming to comment in front of us. And we had 
studies that were conducted; we had peer reviews of those 
studies that were conducted. All of that was put out for public 
comment, as well.
    As a part of that process, people wanted to make sure that 
the Commission took the extra step. Whenever we have been 
debating an issue or debating a rulemaking, eventually the 
Commission has to decide on the final order, and then that 
order is put forth by the Chairman. The Chairman proposes an 
order, and all the other commissioners vote on it.
    What there was was a request made of me to make sure that I 
was public about what I was proposing to the other 
commissioners to do, as a result of the rulemaking process we 
were engaging in that satisfied all the APA requirements. And 
to make sure that we were more open and transparent on issues 
than anything else, I put out a press release and said, ``Here 
is what I am proposing the Commission adopt as the final 
rules.''
    And that was something that is not the normal process that 
is normally engaged in, and that was because we don't usually 
put out a press release that says this is the item I have 
circulated to the other commissioners to vote. That is actually 
something that is not actually put out for the public until 
after they voted on it.
    So I was actually putting out my proposal to everyone to 
vote, and I did that in an effort to do exactly as you said, to 
try to be more transparent than normal. And that was why I put 
that out, so when I circulated it to the other commissioners, I 
also put it out in the press. And to make sure it was as open 
as possible, I did; I wrote an op-ed in the New York Times and 
said, this is what I think the Commission should do going 
forward.
    Mr. Hinchey. So you think it was pretty much out in the 
open?
    Mr. Martin. Yes. I think so. Yes.
    Mr. Hinchey. Was there any impact on the outcome that came 
about as a result of those hearings and the statements that 
were made by people at those hearings?
    Mr. Martin. Oh, absolutely. When we started this process, 
we were considering whether we should revise all of the media 
ownership rules. The broadcast industry wanted us to allow 
people to be able to purchase additional radio stations in 
every market; they wanted to be able to buy two or three TV 
stations in each market.
    There was an overwhelming concern that was expressed at a 
lot of the hearings that the concentration that has occurred in 
the media landscape, particularly since 1996 when Congress 
passed an act that changed those media ownership rules. And I 
think that the Commission, as a result of that, did respond.
    And that is one of the reasons why we didn't change any of 
those other rules. Those rules are all still the ones that were 
in place just as they were in the late 1990s. We didn't change 
any of them. The one rule that we did end up changing was, as I 
said, the newspaper broadcast rule.
    But I think that the hearings certainly had an impact.
    Mr. Hinchey. Was there a vote by the Commission on the 
outcome of that rule?
    Mr. Martin. Yes, sir, there was.
    Mr. Hinchey. There was a vote in the Commission?
    Mr. Martin. Yes.
    Mr. Hinchey. When was that vote?
    Mr. Martin. In December.
    Mr. Hinchey. The full Commission voted in December?
    Mr. Martin. Yes.

             PUBLIC COMMENT PERIOD ON MEDIA OWNERSHIP RULES

    Mr. Hinchey. Just one last question. The Senate Commerce 
Committee just reported out a bill that mandates that the 
public should have 90 days to evaluate and comment on any media 
ownership rules. How do you feel about that?
    Mr. Martin. Well, I think that obviously the Commission, 
first of all, is going to follow whatever instructions we are 
given by Congress. All of our media ownership rulemaking is in 
the context of a law that requires us, every 4 years, to review 
our media ownership rules. So obviously we are going to follow 
it.
    But I don't have any problems with that. We have put out 
our rulemaking for comment for more than 90 days. We started 
this process, as I said, the summer before that. And what I 
think the challenge is, frequently, it can end up that we can 
never get to a final order, because every time we approach that 
decision we have to restart the whole comment process. So, in 
general, we put out a notice of proposed rulemaking, asking 
what we should do, saying this is the issue that is in front of 
us, these are our options, ask for people to comment on it. And 
then we put an order out where we say, this is what we 
determined the right answer is.
    But, obviously, we will follow whatever process and 
direction Congress provides.
    Mr. Hinchey. Okay. Thanks very much.
    Mr. Serrano. Thank you, Mr. Hinchey.
    Chairman Martin, we have kept you now here as long as 
General Petraeus has been kept, except that I think you have 
issues we are actually going to win. But that is just my 
personal comment.
    We thank you for coming before us. We thank you for your 
testimony. The committee and I personally will stay in close 
touch with you, because we have issues coming up that are 
extremely, extremely important, and we want the proper outcomes 
within what is possible.
    So, once again, we thank you for your service, and we thank 
you for coming here before us today.
    Mr. Martin. Thank you.
    Mr. Serrano. The hearing is adjourned.

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                                          Thursday, April 10, 2008.

                     SMALL BUSINESS ADMINISTRATION

                                WITNESS

STEVE PRESTON, ADMINISTRATOR

                  Chairman Serrano's Opening Statement

    Mr. Serrano. The subcommittee will come to order. We 
welcome you to this hearing of the Financial Services and 
General Government Subcommittee.
    Today, the subcommittee will hear from the Administrator of 
the Small Business Administration, the Honorable Steven 
Preston. Mr. Preston has been very kind to wait. This is the 
only hearing that hasn't started right at 10:00 this year.
    Mr. Regula. It is my fault.
    Mr. Serrano. No. You had visitors, and I understand.
    Mr. Regula. I had constituents, and they are number one. 
Sorry.
    Mr. Preston. The way it should be.
    Mr. Serrano. I want you to note that, as part of his 
legacy, the gentleman is not running for reelection and yet he 
still takes time for his constituents. Some would say, what can 
they do to me? There is still a governorship there in the 
future.
    Mr. Regula. It is just the right thing to do.
    Mr. Serrano. That is right.
    Mr. Preston is the 22nd administrator of the SBA and has 
been in his position since July of 2006.
    Administrator Preston, we welcome you to this hearing; and 
we are pleased to have you.
    Mr. Preston. Thank you.
    Mr. Serrano. Small businesses play a crucial role in the 
national economy. Firms employing fewer than 500 employees 
comprise about 99.7 percent of all businesses in the Nation and 
employ roughly half of all private sector employees. Small 
businesses are crucial to new job creation. Sixty to eighty 
percent of all new jobs created over the past 10 years have 
been created by small businesses.
    The SBA promotes small business development and 
entrepreneurship through lending guarantees, training, and 
counseling programs, government contracting programs, and 
advocacy. The agency also helps business and homeowners 
affected by disasters through its Disaster Loans Program.
    The agency's budget request for fiscal year 2009 is $658 
million. This includes an operating budget of $382 million, 
which is a $22 million, or 6 percent, increase over the current 
year. I know ensuring that the agency has sufficient operating 
funds is a priority for you. The subcommittee looks forward to 
working with you this year to make sure your agency has 
sufficient operating funds.
    Unfortunately, the budget request is not so generous to 
certain small business assistance programs administered by the 
SBA. There are a number of budget cuts and eliminations that 
concern me. For example, small business development centers 
would be cut by $10 million from the current level. This 
reduction is troubling not only because SBDCs need more funding 
for their core activities but also because recently enacted 
legislation establishes new SBDC grant programs that will need 
funding.
    I am also concerned about some of the budget's proposals 
for programs that help the smallest entrepreneurs as well as 
programs that aid socially and economically disadvantaged 
owners of small businesses. Technical assistance under the 
micro loan program would be eliminated, and the budget would 
also eliminate the subsidy appropriations for micro loans.
    Additionally, funding for the Program for Investment and 
Micro Entrepreneurs, or PRIME, would be eliminated. This 
program provides grants to help with training and technical 
assistance for disadvantaged businesses, particularly those in 
very low-income areas. I am troubled that programs to help low-
income populations are targeted for cuts.
    The SBA has an important mission, and this subcommittee 
wants to help you accomplish this mission. I look forward to 
working with you this year as our appropriations bill moves 
forward.
    And I want to reiterate that. It is in our best interests, 
all of us, that small businesses continue to grow. So any 
changes we want to make in the budget, any nudging that we make 
for the agency to move in certain directions is never intended 
to create a problem or confrontation but simply to help that 
community and to bring more people into the fold.
    With that in mind, I would like to present to you now the 
gentleman who still loves his constituents more than ever 
before, Mr. Regula.

                     Mr. Regula's Opening Statement

    Mr. Regula. Thank you, Mr. Chairman. And, for everybody 
here, the constituents are why we are here.
    Mr. Serrano. That is right.
    Mr. Regula. And we are here, and that is why we have a 
Small Business Administration, because that is part of our 
governing process. And I might say that every big business 
starts as a small business.
    I have got a classic in my district. I have the Smuckers 
people that do the jams and jellies, and the original 
grandfather of the two young men that run it now started out 
making apple butter in the backyard and selling it to his 
neighbors. Today, they employ thousands of people. They have 
facilities all over the United States and some overseas, and 
they are a major, major company. That is a classic example.
    And every big business has to start from a small business 
and somebody with an idea. The biggest one in my district is 
the Timken Company with 23,000 employees. An early Timken 
person said, there must be better wheels to move on a wagon; 
and he had the idea of roller bearings. That was his idea; and 
it has grown into, obviously, a big business.
    So what I am trying to say is what you do in this 
administration and helping small business is the key to jobs 
and to economic development in the future. And, today, that is 
a big topic on everybody's mind, is the economy and jobs and so 
on. But small business entrepreneurs are the place where all 
these things get started.
    So I am pleased to see that last year SBA assisted 88,000 
businesses with 7a loans. You were involved in Katrina and 
helping people who had a lot of bad luck and are getting loans 
to get started again. So we welcome you. And the Chairman has 
done a good job of outlining your challenges, and I won't 
reiterate them, but we look forward to your testimony.
    And I am interested in the definition of a small business. 
Is it employees or is it gross product? How do you define a 
small business?
    Mr. Serrano. I was going to ask the same question. But I 
have another question as a big Smuckers fan. What is the 
difference between jam and jelly? I know one spreads better on 
bread.
    Mr. Regula. Strawberry jelly would be clear, would be 
jelly. Strawberry jam would have little pieces of berry in it.
    Mr. Serrano. I thought those were preserves.
    Mr. Regula. Jams are preserves.
    Mr. Serrano. I am from the city. What do I know? I am 
trying to get some help here.
    Mr. Regula. I am going to send you over a package.
    Mr. Serrano. Well, that was my next point. Under the House 
Ethics Rules, anything that you grow in your backyard within 
the law is allowed to be shared with Members.
    Mr. Cramer. I don't understand the difference, either, so I 
might need a sample.
    Mr. Serrano. I am the guy who dares ask these questions. 
And these are all country boys here.
    Mr. Preston. As evidenced by last year's hearing on the 
facial hair discussions.
    Mr. Regula. I suppose he wants his jam, too. It is good. I 
have to say, they put out the best product.
    Mr. Serrano. I love it.
    Mr. Regula. And I have been in their plant in Orrville, 
Ohio, and you could eat off the floor there. They are so 
careful in their standards. In this day and age, we worry a 
little bit about sometimes products are not up to snuff. But 
they really run a good operation.
    Mr. Serrano. I tell you, there is a place for the two of us 
on Broadway. I am between two country boys who can't tell me 
the difference between jam and jelly. I love it.
    Administrator Preston, now that we have bored you with our 
town and country humor, we do welcome you. We appreciate the 
work that you do and the service that you give our country. And 
please keep your testimony down to 5 minutes so we can beat you 
up after that. But your full statement will go in the record.

                   Administrator Preston's Testimony

    Mr. Preston. All right. Thank you very much, Mr. Chairman, 
Ranking Member Regula, and members of the committee. I am 
pleased that I both know the Smuckers Company and the 
difference between jam and jelly. So I feel like I am starting 
out ahead of the game here, which is great.
    I think you highlighted a number of factors in our budget 
already, Mr. Chairman. There are a couple things I think I 
would like to highlight.
    We are coming off a year in 2007 where we have seen a lot 
of progress at the agency. In our lending programs we have seen 
record volumes, and we have made tremendous reforms there in 
working with the banking sector, which is very important to us 
right now, given what is happening in the credit industry. We 
have made a lot of progress in approving the quality of 
information in small business contracting and helping 
businesses advance there. We have fully reengineered our 
disaster operations. In fact, I have been around the country to 
see the evidence of that; and it is having an effect on the 
speed with which we are getting out loans. We are proud of the 
amount of help we are giving people through good customer 
service and getting them through that process. And we also 
supported over one million small businesses who used our 
resource partners this past year to get technical assistance.
    As you mentioned, this year we are requesting $657 million 
in new budget authority. That is a 15.5 percent increase off of 
the 2008 enacted level. That really breaks down to a few 
pieces. As you mentioned, Mr. Chairman, it is about a 6 percent 
increase in our fundamental core operating budget; and that is 
really the money we use to run the agency.
    We are also requesting $160 million for disaster program 
administration and $14 million for disaster program subsidy. 
That is in addition to about $150 million in subsidy that 
carries over from 2007 to 2008, which would be added into our 
ability to fund that program.
    The noncredit programs are in line with our prior request, 
but they are below the 2008 enacted level, and we submitted our 
2009 budget in line with our 2008 requests. When the 
appropriation was completed, those programs were actually 
increased. So we are in a situation where the funding level for 
2008 is actually higher than what we have requested in 2009.
    And the other thing I would just mention is we are asking 
for an authorization in our guaranteed business loan programs 
which shows about a 37 percent increase. That doesn't require 
an appropriation because those are zero subsidy programs, but I 
think it is important to note we have asked you for that 
growth.
    The other thing I feel compelled to mention--you and I have 
talked about this, but it is such an important topic. I have 
been down to Colombia twice. I was in Florida last week doing a 
trade symposium with 400 small businesses on exporting. Most of 
them were exporters to Latin America. Exports to Colombia are 
about 35 percent from small businesses. And I know that, right 
now, that particular agreement is caught up into a broad 
debate; and it is something that is very much in front of you.
    We are all very hopeful that this agreement will be able to 
be considered on the merits of the agreement and hopefully be 
advanced, because we do think it is a very important market for 
small businesses. It will level the playing field for them in 
terms of tariffs. But, also, like many agreements, so many 
countries where we don't have FTA's, it is very hard for small 
businesses because the regulations are hard to understand, 
there is a lack of transparency, and a lot of paperwork. Our 
goods get to the borders. They don't know what to expect when 
they get to the border. If they get in the country, they don't 
have proper intellectual property protections.
    And I think what I have consistently heard from small 
businesses is, aside from tariffs, it is all these nontariff 
issues that make it so hard for them to move ahead in export 
markets. During a time when so many of them are challenged for 
finding markets for their products right now, this is an 
important way for them to be able to address the challenges in 
our economy and continue to add the two-thirds of the new jobs 
that you all mentioned. And so I just urge you all to do 
whatever you can to help let that agreement come to a balance 
so that we can address it on its own merits.
    But, other than that, I would love to open it up right now 
and answer any questions you might have.
    Mr. Serrano. Thank you.
    [The information follows:]

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                        COLOMBIA TRADE AGREEMENT

    Mr. Serrano. Fortunately, or unfortunately, you brought up 
the Colombia Trade Agreement. So let me just very briefly tell 
you what may be one of the problems. And there should not be--
it is the rhetoric being used.
    For instance, I am a big supporter of having a better 
relationship with Venezuela; and to have my President say that 
if you don't approve the Colombia Trade Agreement, you are 
aiding Venezuela in its desire to be a terrorist state of some 
kind, that is totally improper. That is not true, it is 
misleading, and that is not the way to get that trade agreement 
through.
    There are other issues, obviously, environmental and labor 
unions, the fact that Colombia is a great ally and because it 
is a great ally we don't ask any questions about people missing 
in Colombia, people being killed on a regular basis in Colombia 
and all these other issues.
    So those are many of the issues to come. But I know you 
consult with the administration and vice versa. I would hope 
you just tell them that to make it a national security issue 
was a terrible mistake, because it is a trade issue, and we 
trade with people who disagree with us. We trade with China, 
and China is a totally different system. And no matter how much 
we are concerned about Tibet, we are not going to get rid of 
our trade with China. We can all bet on that. And we deal with 
the Syrians, and we can talk for days about them. We now think 
that other countries are great countries. It is just the 
approach.
    One last point on that when you advise the administration--
and I am not being sarcastic. I know they talk to all of you 
folks. The President says the people in Latin America are 
watching and what we do on Colombia will let them know how much 
we care about them. In Spanish or in English, I can say this. 
They have been watching for the last 100 years, especially the 
last 40, but we have been totally indifferent about them. This 
trade doesn't make or break how they feel about us. It is the 
last 40 years of indifference. I appreciated your comment on 
Colombia. I understand that that is, in many ways, the party 
line. And I want you to, for the time you are here at the SBA, 
if another President decides that they want you in the 
administration, or in any capacity, that you just take a little 
message that one deal doesn't make a new relationship with 
Latin America. It is that they feel neglected.
    We have been paying a lot of attention to the Middle East, 
rightfully so, to the Far East; and we spend a lot of time 
worrying about the Russians and the Soviets and so on. But 
Latin America has been forgotten. So now when they get leaders 
we don't like, we wonder why. None of those leaders in Latin 
America are an accident. Whether you like them or not, they are 
all the result of 200 years of suffering. That is why Bolivia 
elected its first indigenous person. And instead of embracing 
him, we are worried that he may take over the gas production 
and do something as revolutionary as saying maybe some of that 
money should stay in my country and not leave the country.

                        NEW SMALL BUSINESS LAWS

    Legislation that has been recently enacted affecting the 
7(a) loan program and the small business development center 
program, such as in the areas of veteran-owned small businesses 
and small business energy efficiency. These new laws as well as 
other proposals that are being considered by Congress will 
place increased funding requirements on these programs. Does 
the President's budget request reflect the increased cost 
associated with newly enacted laws? Can Congress expect a 
budget amendment from the administration that allocates funding 
to implement these laws?
    Mr. Preston. I think the President's budget and certainly 
our submission of the budget preceded the energy bill and then 
the veterans' bill passing; and, obviously, those two bills 
both had additional funding requirements both for technical 
assistance and for 7(a) loan subsidy payments. So this budget 
does not reflect that.
    In the course of this year, obviously, as we work with this 
budget, we are going to have to talk with you all and work with 
our colleagues in the administration, to determine how to 
address those issues. But that funding is not in the budget 
request right now. I know that we have been working with your 
staff to give them a sense of the cost but we have estimates 
and we can provide those to you so that we understand, if we do 
go forward, what would be required in terms of the costs.
    Mr. Serrano. So the possibility exists of coming to us for 
additional funding?
    Mr. Preston. I think the possibility exists. I think, in 
the case of the technical assistance requirements, there is 
probably a lot of latitude to scope it, especially since it is 
structured sort of as a pilot.
    On the subsidies side, I think it is going to require us to 
be much more open-ended. Because, effectively, if you say we 
are going to give you a break if you are a veteran or we are 
going to give you a break if you are doing energy loans, it is 
going to be dependent upon the volume that comes in the door. 
So we have to scope that volume.
    On the technical assistance side, I think it is a little 
bit easier to say we are going to get X amount of money that is 
going to be available for these programs and then design the 
program around the funding level.
    Mr. Serrano. How close are you on an estimate of what you 
may need?
    Mr. Preston. I think we are pretty close. I think on the 
veterans' side, we would expect something in the $10 million to 
$15 million range per year; and that depends upon volume.
    Mr. Serrano. $10 million to $15 million?
    Mr. Preston. Sort of in that range. It would be much 
smaller on the energy side. But that is very difficult for us 
to gauge, because we don't track what loans are for energy 
efficiency now.
    We do track veterans loans. So we know how many are going 
to veterans now; and we assume, if we gave them a break that 
would grow because more people would be interested. A lot of 
our loans we don't necessarily think people are actually 
identifying themselves as veterans, even if they are. So that 
is a little bit easier for us to do. I don't think, personally, 
that the energy loan costs would be as great as the veterans, 
because veterans receive almost $1 billion in loans through our 
programs today.
    I think on the technical assistance side it is more up to 
us as the Federal Government in conjunction with the industry 
to say, how big should this be? Do we want to allocate $5 
million for these special veterans and energy programs? Do we 
want it to be 10? Do we want it to be 3? And what we can do 
with you all is to say, look, if we size it at 5, for example, 
we think it can reach this many centers and this many people. 
And that is kind of how I think we should engage it with you 
all.

                    HURRICANE KATRINA DISASTER LOANS

    Mr. Serrano. Disaster loans. Two and a half years after 
Katrina, can you describe at what point in the recovery phase 
SBA now finds itself? Are loans still being made? Are most 
loans entering into the repayment phase? Is this the time when 
we will begin to see defaults on loans and reports of abuses of 
the program coming up?
    And last year in our hearing you said that the default rate 
estimate for loans was modeled after Hurricane Andrew, that you 
expected Katrina to be better due to the unprecedented level of 
Federal aid into the area. Do you still believe that to be the 
case?
    I know I gave you a few questions there at once.
    Mr. Preston. We are well past the point where we are 
approving loans in Katrina and really pretty much well past the 
point where we are actually disbursing loans. But we will give 
you the exact numbers for the record.
    [The information follows:]

    Question. Are Katrina Loans still being made?
    Answer. No. However, SBA will continue to consider new loan 
requests if the late filing results from substantial causes essentially 
beyond the applicants control. Disbursement of loans is 97 percent 
complete. The few loans still only partially disbursed are waiting for 
permits, contractors or other outside factors.
    Question. Are loans entering the repayment phase?
    Answer. Of the nearly 120,000 net approvals, all but approximately 
3,700 loans are fully disbursed and are in the full repayment phase of 
their loan. Furthermore, most of the 3,700 partially disbursed loans 
also have entered a repayment phase.
    Question. Have we begun seeing any defaults?
    Answer. Yes, of the 119,802 Katrina disaster loans that have been 
approved, 4,960 loans have gone into default and have been sent to the 
Treasury Department for collection pursuant to the Debt Collection 
Improvement Act of 1996.

    Mr. Preston. But just off the top of my head, we have over 
$6 billion that we have disbursed in the Gulf. There are 
probably a few hundred million in available disbursements. And 
what I mean by that is people that have a loan commitment from 
us who are in the process of rebuilding their home but they 
just haven't asked us for all the money yet because they might 
be partially through the rebuilding or--and this is a unique 
situation in Katrina--people who even 2 and a half years after 
the storm still don't know what they are going to do. And there 
are those people where we have said, look, we will continue to 
let you have this commitment even though you haven't asked for 
the funds yet if you show us a reason for that.
    So we still show committed funds that are undisbursed, but 
it is very much in the hands of the borrower to get that money. 
But, by and large, the money is out the door. It is in people's 
hands. It has either gone to rebuilding homes and businesses or 
is in that process today.
    I don't recall exactly what I said last year, but Hurricane 
Andrew and any number of other disasters would have been 
instructive in our estimating repayments. We wouldn't have just 
looked at Andrew. We would have looked at a much broader 
experience. It is a little early for us to look at delinquency 
trends. Part of the reason for that is, even though the storm 
is 2 and a half years ago, a lot of people didn't get their 
money until recently. So they are just now going into the 
process, many of them, where they are actually servicing the 
loan. So there is a big lag effect.
    So it is premature for us to get a sense for if there would 
be significantly different delinquencies in this disaster 
relative to the other disasters and what that means for our 
subsidy estimates. But we would be happy to keep you all 
apprised of that along the way.
    Mr. Serrano. Please do.
    I know this is maybe a difficult question. What was the 
biggest complaint that you heard or that SBA got?
    Mr. Preston. There were----
    Mr. Serrano. If you had to look at it and say, next time, 
heaven forbid this happens, here's what we need to do 
different, what was your biggest complaint?
    Mr. Preston. Number one, it took way too long to get 
responses. So if I submitted my loan applications, it took a 
very, very long time to hear from you.
    And then we heard some secondary issues like, we have sent 
in our documentation and you have lost it. We have to send it 
in again. We call your call center. We have called two times. 
They have given us different answers in terms of the status of 
the loans.
    So there was a lot of confusion out there. And if we have 
time and you would like to, I can take you through what we have 
done to address all those issues. But I can speak with full 
confidence that we have entirely redesigned how we make 
disaster loans and how we support people through that process, 
very much instructed by what we learned in Katrina.
    So I think we have a better disaster operation than we have 
ever had, and I think we are much more capable of not only 
effectively handling what we see today but a much larger 
disaster.
    Mr. Serrano. Well, I appreciate the fact that, unlike other 
folks who come before us, when I ask you what are people 
complaining about you didn't say ``well, we are the greatest, 
nobody complains about us.''
    So you don't have to take us through it, but I would 
appreciate it if you could supply the committee what steps have 
been taken to remedy that.
    Mr. Preston. Sure.
    [The information follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Serrano. We are running against the clock here, no 
fault of anyone here, because we have votes coming up soon. So 
I will hold the rest of my questions for now and turn to Mr. 
Regula.

                    DEMAND FOR SMALL BUSINESS LOANS

    Mr. Regula. Thank you, Mr. Chairman. I will submit most of 
mine for the record.
    We are allegedly in a bit of recession. Has demand gone up 
for small business loans?
    Mr. Preston. No. Demand has gone down. And we have talked 
with literally hundreds of bankers, and I personally have 
spoken with dozens of them personally.
    We are seeing a couple things, sir. I think we all know 
that there was a pretty significant appetite for risk in the 
lending community. We saw it on the mortgage side. We saw it on 
the business side. So we are seeing banks pull back some on the 
much riskier loans that they were doing. But almost all the 
banks we are talking to are telling us that they are seeing 
less demand for credit.
    If you look at surveys of small businesses out there, what 
you see is small businesses saying they are less likely to 
expand right now, they are less likely to hire, they are less 
likely to invest than they were a year or two ago; and those 
are the things that typically drive the need for capital.
    I think the other thing that is happening is we are seeing 
less acquisitions of businesses, and that also is a driver of 
capital need. So that is what we have been seeing.
    There is also among some institutions a tightening of 
credit standards.

                            RATE OF DEFAULTS

    Mr. Regula. What is your rate of default? How does it 
compare to conventional financial institutions?
    Mr. Preston. I would have to get you that.
    [The information follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    
    Mr. Preston. Our rate of defaults, there are a lot of 
different ways to cut this, but, effectively, if you look at 
the life of a loan, the amount of money we lose on a typical 
guarantee would be in the 3 to 3.5 percent range. And that is 
what our fees cover. We are a zero subsidy program. We have 
seen delinquencies trending up.
    Mr. Regula. That is not too far off of conventional 
financing.
    Mr. Preston. My staff is instructing me we are about twice 
the industry average, which makes sense.
    Mr. Regula. You get the tough ones.
    Mr. Preston. We get the tough ones, and that is what our 
fees cover.
    Mr. Regula. And that is as it should be, in a sense, 
because it gives people who might not otherwise get the credit 
they need to start a business. It could grow. And you do take a 
higher degree of risk.
    Mr. Preston. If you look at our loans and you look at sort 
of the credit quality of the private sector, we kind of pick up 
the lower end and go a little bit beyond that. And then they 
also often use us for deals where there might not be quite as 
much equity or they might need to go out to 10 years rather 
than 5. So we help them reach a little bit further.

                           VETERANS' PROGRAMS

    Mr. Regula. Do you have veterans' preferences? In other 
words, do veterans get a break on loan applications for small 
business?
    Mr. Preston. We have a couple of veterans' programs.
    In our bank lending programs, they do not get a fee 
preference. But Mr. Serrano was asking about a recent piece of 
legislation that would provide them with a fee preference. 
Right now, it is an unfunded thing. We do have a program that 
provides a heavily subsidized low interest loan to small 
businesses that have been impacted by reservists getting called 
up for Active Duty, and they can get a 4 percent loan from us. 
They are effectively looking at that as being--it is a disaster 
loan, is what it is considered. And so if you own a business 
and you are a reservist or you are a significant member of the 
business and you get called up and you have an impact from 
that, you can come directly to us.

                           EMPLOYEE RETENTION

    Mr. Regula. I understand that 34 percent of your staff will 
be eligible to retire in fiscal 2009. That is going to be a big 
hit for qualified people. Are you working to attract people? 
Because staff makes all the difference in the world.
    Mr. Preston. You are absolutely right. What I would tell 
you is 34 percent aren't going to retire. A lot of our people 
stay well past their eligibility. But, absolutely. We are, in 
the last year and a half, actually, the last year, we have 
dramatically stepped up our training efforts to bring people up 
to a higher competency level. We have rolled out an entire 
process where we are putting people on career development 
plans, and we know where those people are. So we know where the 
potential impact is. It is absolutely an issue that we 
understand, that we are trying to address.
    The flip side of that is many of the challenges we have had 
with our employee base is a lot of them have felt that the 
promotion opportunities haven't been there because a lot have 
been at their jobs for a long time. So we are looking forward 
to making this a promotion opportunity for people if that top 
layer begins to retire.
    Mr. Regula. Thank you, Mr. Chairman.
    In the interest of time, I will submit the rest of mine for 
the record.
    Mr. Serrano. Thank you.
    Mr. Cramer.
    Mr. Cramer. Thank you, Mr. Chairman and Ranking Member. I 
want to jump in, too, because time is short here.
    I appreciated your response to the disaster loan response 
system after Katrina. So I, too, would be looking forward to 
any information that you can supply us with.
    You made reference to a redesigned process. I assume by 
that you mean because of the experiences you had with that 
process----
    Mr. Preston. Yes.
    Mr. Cramer [continuing]. You have redesigned it since that 
time.
    Mr. Preston. That is correct.
    Mr. Cramer. But I also would like know what your problems 
were during that process and who got money and what the process 
was like there.
    Mr. Preston. Okay.

                SMALL BUSINESS INNOVATION RESEARCH FUND

    Mr. Cramer. But I want to shift to the Small Business 
Innovation Research Fund. In my district, when I have my 
targeted meetings with my small business community, SBIR comes 
up regularly. In North Alabama, we have a lot of folks that 
live off of aerospace and defense contracts. We have a lot of 
innovative engineers and scientists in our area that are doing 
very valuable things and use that program. But you had a cap 
for the program, phase one and phase two, phase one at $100,000 
and phase two a cap of $750,000. I would like to know, how long 
have those caps been in place?
    Mr. Preston. I don't recall. It is a long time, and we are 
working right now on increasing them.
    Mr. Cramer. Good. I would encourage you to do that, because 
I don't think that has been adjusted for some time.
    And what other programs, or is there the opportunity to be 
more innovative with the SBIR funding so that you could 
encourage small businesses in innovative research like that? Or 
do you have other programs I am maybe not aware of?
    Mr. Preston. The SBIR program effectively requires anybody 
with a large research budget to designate 2\1/2\ percent to 
small businesses. So it is a great opportunity for us to 
support small innovators. And there are great innovators. We do 
have programs that help them with training, with technical 
assistance.
    I think it is also important to note that even though that 
program effectively designates 2\1/2\ percent of the Federal 
budget to go to small businesses, many more small businesses 
avail themselves of research grants. I can get the exact 
number, but I believe it is roughly 7 percent of the research 
budget. So there is a lot more funding going to those companies 
than just comes through SBIR.
    Mr. Cramer. Thank you.
    Mr. Serrano. Mr. Bonner.

                     DISASTER LOAN PROGRAM REDESIGN

    Mr. Bonner. Thank you, Mr. Chairman.
    Mr. Administrator, 14 feet of water in downtown Mobile, my 
hometown, communities like Coden and towns like Dauphin Island 
and Bayou La Batre that truly felt they had seen and 
experienced a tsunami. So when we talk about Katrina, even 
though New Orleans and the Mississippi Coast received the brunt 
of the storm, we certainly had our share of it in coastal 
Alabama as well.
    Shortly after the storm, I think it is safe to say, the SBA 
program that you inherited when you came on the job was pretty 
much in a disaster. However, within months of your leadership, 
you helped to turn the program around.
    Mr. Preston. Thank you.
    Mr. Bonner. And at least from our experience I want to say 
thank you for doing that.
    Mr. Preston. Thank you very much.
    Mr. Bonner. You touched briefly on the issue in your 
testimony. Can you tell us a little bit more about how you 
accomplished some of your goals of revamping the program and 
specifically how SBA is now better prepared to deal with this 
in the case of a future catastrophe? And could you also tell us 
a little bit about your $160 million request for the 
administration of a disaster program that would improve the 
abilities to submit electronic loan applications, which was 
mentioned in your written testimony?
    Mr. Preston. Real quickly, one of the important things is 
for people at the front end to have their applications 
expedited quickly for quick decisionmaking. Right now, people 
are sending in a packet of information. The electronic loan 
request would allow people to submit that through a Web site.
    Not only is it easier for the borrower, it is a lot easier 
for paper flow. Things don't get lost. You don't have people 
doing reentry errors. And we don't think of those as being 
impediments, but when you have a large disaster and you have 
mistakes, these are huge time savers and ultimately result in 
huge benefits to the borrower.
    Let me just give you a couple of concepts around what we 
did, and I will try to keep it brief. A couple of things. We 
had a process where effectively a loan would go down the 
production line, and it would go from an input clerk to a loan 
officer to several people doing different things. And if there 
were errors or problems along the way, ultimately, those 
wouldn't always get caught until the back end, and then they 
would have to go into a queue to get fixed and modified. Our 
attorneys and our legal people and our financial people didn't 
always coordinate as well as they needed to. And the other 
thing we found is, because we had recently consolidated four 
centers, people weren't always working off the same rule books.
    So we made all of our policies consistent. We blew up the 
production line. We put people in what we call integrated 
teams. So they have got lawyers, finance people, clerks, case 
managers all working together on one team. So when your loan 
comes to me, if I am a loan officer, I turn to my lawyer over 
here, I turn to my other experts over here, we get all the 
problems taken care of quickly. We can make a decision on the 
spot.
    The other thing we did is, if you were a borrower, you 
didn't have a human being to help you through the process. You 
called a call center and you sent documents back and forth. We 
now assign people a human being who calls you up and says, I am 
here to help you. Tell me what you need. Let me talk through 
your paperwork with you. And it allows our front-end people to 
be an advocate for the borrower. They know if they have a 
closing coming up, so they will do everything to resolve their 
closing.
    It also allows our front-end people to hear about the 
problems we are having and then tell the rest of the 
organization, which we gather data. We gather data now on every 
single customer, and we can turn that into fixing the process.
    And let me give you one example, and I can apply and do 
some of this in writing.
    But we called 100,000 people to ask them why they hadn't 
gotten their SBA loan, in their mind. Were they waiting for us 
or were we waiting for them? We found people couldn't get their 
title documents. Everything was backed up in New Orleans. We 
sent 15 people to the Parish Clerk's Office in Orleans Parish 
to help them get through their workload to help borrowers when 
they came in the door to get their paperwork so we could get 
our work done. It wasn't our problem, but we wanted to help 
them through that process.
    We would have never had that if we hadn't started getting 
data from customers out of the system, calling them up, and 
learning from them how we needed to help them better.
    So one of the things I am proudest of is we have turned our 
people from paper processors to advocates for people who are 
disaster victims. And not only in helping them get what they 
needed done but helping us understand how to serve them better.
    Mr. Bonner. Again, it is that type of proactive leadership. 
You came on the job I think a year after Katrina, basically, 
but you turned it around.
    Mr. Preston. Thank you. I appreciate that.
    Mr. Bonner. And if I could get a quick second question in.

                           FOREIGN INVESTMENT

    Representing a port city in a State that the Port of Mobile 
is now the tenth largest port in America--and I don't want to 
go back to the trade agreement that you and the chairman have 
already mentioned specifically, but just in general we talk 
about outsourcing jobs, about insourcing jobs. How important, 
in your judgment, is the insourcing of jobs, especially as it 
relates to small businesses and opportunities for small 
businesses?
    My understanding is that there are about 5 million direct 
U.S. jobs that are a result of foreign investment in this 
country and probably another 5 million indirect. Can you see a 
benefit to small business, Main Street America, to this because 
of the foreign investment?
    Mr. Preston. I absolutely can, and I think there are two 
ways. First of all, I think a lot of times we look at either 
small business exports or small business direct contracts, but 
we often forget that, when there is foreign investment, the 
amount of follow-on in ancillary business that flows from big 
business to all sorts of surrounding small businesses, 
logistics, components manufacturers, other service providers. 
We don't have an insulated economy. We have a very much 
integrated economy that goes up and down sort of the business 
sides.
    The other thing is often when we open up foreign markets, 
and this may be a little bit beyond your question, the little 
guys are the ones that have the harder time exporting because 
they can't put people in the country that they are exporting to 
necessarily. They don't always have the funds to figure out the 
regulations. All of the administrative barriers, is what makes 
it very tough for them. And simplifying the trade pathway for 
them is a big factor in opening up the floodgates, and I hear 
this time and again. I heard it from an exporter on Monday when 
I was in Miami. He went through chapter and verse what he had 
to deal with in going to a particular country, and he said it 
is just not worth it in certain countries because I just can't 
handle all the stuff.
    It is not just the tariffs. It is all the other stuff. And 
that is why I think this often isn't couched as a small 
business issue, but I think it very much is.
    Mr. Bonner. Thank you, Mr. Chairman.
    Mr. Serrano. Mr. Goode.

                                HUBZONES

    Mr. Goode. I want to say thank you for your personnel in 
the Richmond office. Ron Bew has worked very well with my 
office on a number of things.
    Mr. Preston. Good. Thank you.
    Mr. Goode. They have held some forums to assist veterans, 
minorities, and others as to what the SBA has to offer. So I 
just want to say thank you for that, and then I wanted to ask 
you a little bit about hub zones.
    The largest city in my district is Danville, which is 
slightly under 50,000 now. Adjacent to it is the largest county 
in Virginia, which is rural, which is Pennsylvania; and it gets 
knocked out of being a HUBZone because it is adjacent to 
Danville. I have introduced a bill that would cover 
Pennsylvania County and a number of other jurisdictions around 
the country that are situated like that, and I am just 
wondering if you all have a position on that or are you 
neutral?
    Mr. Preston. I apologize. I am not briefed on your bill. I 
will tell you that, in many cases, because of a mix in a county 
between sort of what is rural and what is not considered rural, 
we do get into some challenges in getting certain areas 
designated as a HUBZone when they might otherwise qualify. So I 
would love to take a look at what you are proposing and work 
with your staff.
    Mr. Goode. I will tell you the number of it is 383.
    Mr. Preston. Okay. Thank you. We will be in contact with 
your staff.
    Mr. Goode. And that is a situation with Pennsylvania and 
the area close to Danville, is urban. But, like I say, it is 
the largest county in Virginia, and the rest of it is really 
rural, and if they could get hub zone status, it would help us 
keep the few businesses we have got in that rural part and 
might let us get a few more.
    Mr. Preston. Thank you.
    Mr. Goode. Thank you. That is all, Mr. Chairman.

                             PRIME PROGRAM

    Mr. Serrano. Thank you.
    The PRIME program is once again proposed by the President 
for elimination. As you know, elimination of the program 
troubles this committee, especially this chairman, greatly, 
because it targets low-income and very low-income business 
people with much-needed training and technical assistance. Now 
it would seem that if the economy is hurting more and more, and 
you have been very open here in telling us that some people are 
not investing, they are nervous, that this would be the time of 
an even greater need for a program like this one. Why does the 
administration dislike this program so much? Why do they think 
it should not exist?
    Mr. Preston. Mr. Chairman, I think it is more an issue of, 
in a time of tight budgets, we are trying to consolidate our 
technical assistance, spending in a handful of large programs 
and leverage them as effectively as possible.
    When you look at the micro loan program or you look at the 
technical assistance there or you look at the prime funding, I 
think we are taking the position in both cases that we would 
like those people to seek their technical assistance from 
places where we are getting a lot more leverage. And these are 
networks where we provide seed funding--I shouldn't say 
``seed''--foundational funding to where they expand their 
funding through other sources, State and other sources, rather 
than having a broader network of small programs.
    Mr. Serrano. So your comment would lead us to believe, or 
that you believe, the administration believes, that these are 
similar programs. Yet it has a constituency--I don't think just 
a constituency that says don't cut anything but, rather, people 
that feel that this program has a specific mission.
    Is it the belief of folks in the agency that whatever 
support is being given by the PRIME program could fit into 
other programs? Is that what the suggestion has been?
    Mr. Preston. I think the answer is yes. And if you look at 
our spectrum of programs out there, they do cover a lot of 
different types of businesses. Many of them are businesses that 
are home-based businesses, people that are going from very low-
income levels to something that can sustain them a little more 
effectively, all the way to businesses that are high tech and 
have a great growth opportunity to them.

                          MICRO LOAN PROGRAMS

    Mr. Serrano. Now maybe I am missing something here, and I 
am not trying to be funny. But, for instance, my next question 
had to do with the micro loan technical assistance program, 
where also the administration wants to eliminate it. So, on one 
hand, you are telling me that we have programs that this can 
fit into. Yet we continue to try to eliminate some of those 
other programs that perhaps it could fit into. How do we 
explain that?
    Mr. Preston. Well, the three big programs we have are the 
Small Business Development Centers, Women's Business Centers, 
and SCORE. And that is where we support over one million 
entrepreneurs a year. The micro loan program, for example, I 
think we had a little over, I think it was, 2,200 new micro 
borrowers come into the program last year. So we have got 
somewhat over 2,000 going into a network that supports one 
million. So the scale of these other systems is very 
significant relative to the number of people that are being 
counseled in the smaller programs. I don't, off the top of my 
head, know what that number would be for PRIME.
    Mr. Serrano. Now, also on the micro loan issue, the 
President's 2009 budget also proposes zeroing out the Federal 
subsidy for the micro loan program. The budget suggests doing 
this by increasing the cost of the SBA loans to non-profit 
lending intermediaries. Won't this change make the program more 
costly, with the costs being passed on to small business 
borrowers?
    Mr. Preston. It will make the program more costly for the 
borrower, potentially. I think the difference is, because it is 
a heavily subsidized program, it is relatively limited. Every 
dollar that we put out there in a new business comes with an 88 
cent cost, 88 cents for technical assistance and for subsidy. 
Our view has been if we can make this a zero subsidy program we 
no longer limit our ability to put capital into the micro 
lending industry. We can go much bigger if we can make it a 
zero subsidy program. We can get a lot more dollars to micro 
borrowers.
    Now there is no doubt that the cost of those funds to the 
borrowers is going to be somewhat higher, but there would be a 
lot more funds available and at already what I think would be a 
low cost because it would be somewhat over a point over the 
Treasury rate.

                               SUBSIDIES

    Mr. Serrano. That seems to be the ongoing argument here. As 
you know, in the 7(a) program there is the same thing, where 
the administration or the agency seems to feel that, without 
the subsidy, you can actually do some other things. And yet 
subsidies are very popular with the Members of Congress, 
especially that subsidy. And that is one, as the ranking member 
can tell you, that if we don't provide it, I can guarantee you 
an amendment will put it in the bill on the House floor. That 
is not one where Mr. Regula and I can talk to folks and say 
don't do this.
    Mr. Preston. Sure.
    Mr. Serrano. If you were trying to analyze why this 
happens, if indeed the subsidies are not necessary in some 
cases or in many cases, why does it have such a constituency 
with Members of Congress from all over the Nation?
    Mr. Preston. You know----
    Mr. Serrano. And, again, it can't be simply don't cut a 
program, because there are many Members of Congress who are 
very much into the idea of cutting, yet they don't want to cut 
the subsidies.
    Mr. Preston. On the subsidies side, if we are talking about 
the micro loan program, there is no doubt that there is a 
network of micro lenders out there today that we currently fund 
that reach businesses and that will have to go through a time 
of difficult transition if we pull back their technical 
assistance funding and increase their cost of funds. I don't 
want to conjecture in terms of what they have to do, but--and 
especially if our funds are going to pay for operating costs.
    But to the extent that our funds go for technical 
assistance, they are going to have to begin referring those 
people to somewhere else, and I think they are also going to 
have to look for transactions that can support a somewhat 
higher cost to capital or reduce their spreads.
    On the 7(a) side, which is a zero subsidy program, 
historically when we have talked about providing a subsidy for 
this program, just to put it in simple terms, as I view it we 
are looking at reducing the cost effectively to the borrower by 
taking a point or a point and a half off the upfront cost. It 
is almost like mortgage points. So if you said, instead of 
paying 2 and a half points they are going to pay 1 and a half 
points, that is effectively how we would change the cost 
structure, by providing a subsidy.
    When we run the numbers on an average SBA loan that is less 
than $1 a day. It is not that big of a cost to the borrower. 
And you also have to ask yourself, if another point or point 
and a half is the difference between taking a loan and not 
taking a loan, you are either--I get concerned that if that is 
what it takes to be able to pay for a loan, you are dealing 
with a pretty marginal borrower.
    So I view that as less of inflicting a pain point on 
anyone. I do acknowledge the pain point on the micro loan 
program, because I think the people we fund are going to have 
to go through a challenging transition.
    Mr. Serrano. Thank you.
    Mr. Regula.

                         ENCOURAGING EXPORTING

    Mr. Regula. Just one question. We are facing as a nation a 
$711 billion trade deficit. Do you make any special effort to 
help companies that indicate they are in the field of 
exporting----
    Mr. Preston. Yes.
    Mr. Regula [continuing]. That would be helpful in reducing 
the trade deficit?
    Mr. Preston. Yes. And we are stepping it up. There are a 
number of things.
    First of all, our partners in the Small Business 
Development Center community and some of our other technical 
assistance partners provide support to businesses that are 
interested in exporting, kind of helping them think through how 
to do that.
    We work together with the Department of Commerce also in a 
number of places around the country called U.S. Export 
Assistance Centers, where people can come into those centers 
and get a lot of information about how to export to a 
particular country. And then, once those goods--if they want to 
have support in country, we coordinate with the Department of 
Commerce doing that as well.
    We provide working capital loans that allow people to, if 
they need to, if a small jam manufacturer needs to build its 
inventory to export, we will finance that. We will actually 
finance the actual export, and we will coordinate with exit 
banks on their programs.
    The last thing I would mention is we are kicking off a 
series of trade symposia around the country to bring small 
business exporters and potential exporters together to help 
them learn how to do this more effectively. And I mentioned 
earlier we just had 400 people in the Miami area on Monday, and 
it was just a terrific success.
    So it is an important thing for our constituents, and we 
are working to expand our support for them.
    Mr. Serrano. Mr. Goode.
    Mr. Goode. I don't have any more questions. Thank you.
    Mr. Serrano. Mr. Preston, I want to pay you a compliment in 
public. When we thought we had votes at 10:30, we had decided 
to end the hearing at 10:30, rather than keeping you here, 
because your agency has a reputation and you personally of 
telling the committee what it needs to know when we are not 
doing it in public. Some folks have to be asked in public. It 
is the only way we might get part of what we need to know. So 
consider that a compliment.
    Mr. Preston. Thank you very much.
    Mr. Serrano. And we appreciate your service to our country. 
We appreciate the work you do. We appreciate your willingness 
to work with us even during difficult times. And this coming 
year, this budget session could be a difficult one. We won't 
hold you here any longer. Just please keep us informed on some 
of those issues we presented to you before.
    Mr. Preston. Thank you very much.
    Mr. Serrano. The hearing is adjourned.

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]


                           W I T N E S S E S

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                                                                   Page
Doan, Lurita.....................................................   255
Martin, Kevin....................................................   333
Moore, T. H......................................................     1
Morphy, Martha...................................................   107
Nord, N. A.......................................................     1
Preston, Steve...................................................   429
Springer, L. M...................................................   151
Thomas, Adrienne.................................................   107
Weinstein, Allen.................................................   107














                               I N D E X

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                   Consumer Product Safety Commission
                             March 11, 2008

                                                                   Page
Chairman Serrano's Opening Statement.............................     1
Mr. Regula's Opening Statement...................................     2
Chairman Nord's Testimony........................................     2
Commissioner Moore's Testimony...................................    12
Reauthorization Bill.............................................    19
Sale of Recalled Products........................................    19
Public Complaint Database........................................    20
U.S. Territories and the Pool and Spa Safety Bill................    21
Foreign Manufacturers............................................    21
Regulating Imports from China....................................    22
U.S. Manufactured Goods..........................................    22
Inspection of Imported Goods.....................................    23
Pool and Spa Safety Law Implementation...........................    24
China............................................................    26
CPSC Agency Size.................................................    28
Industries in Need of Regulation.................................    29
Emerging Hazards.................................................    30
Trade with China.................................................    30
Reauthorization Funding..........................................    31
Import Safety Initiative.........................................    32
Industry-Funded Travel...........................................    34
Purchasing Safe Toys.............................................    35
Role of Customs..................................................    36
Pool Drain Cover Mandate.........................................    37
Pool and Spa Safety Funding......................................    38
Warning Labels in Different Languages............................    39
Questions for the Record:
    Chairman Jose'1 E. Serrano...................................    43
    Ranking Member Regula........................................    82
    Mr. Ruppersberger............................................    86
    Mr. Visclosky................................................    88
    Chairman Jose'1 E. Serrano...................................    92
    Mr. Visclosky................................................   105

              National Archives and Records Administration
                             April 1, 2008

Chairman Serrano's Opening Statement.............................   107
Mr. Regula's Opening Statement...................................   108
Allen Weinstein's Testimony......................................   109
Historical Photos................................................   124
Restoring Hours at the Archives..................................   124
FOIA Mediation Office............................................   125
Missing White House Emails.......................................   126
International Archival Systems...................................   127
American History Education.......................................   127
Historical Information Prior to the Archives.....................   128
Archives as a Resource...........................................   128
Repairs and Restoration of Presidential Libraries................   129
Military Conflicts and Personal Histories........................   130
Presidential Library Attendance..................................   131
Funding of Presidential Library Foundations......................   132
Recognizing the Military Service of Hispanics....................   132
``National Treasure'' Film.......................................   132
Electronic Records Archives Program..............................   133
Records Processing Backlog.......................................   134
Publishing the Founding Fathers' Papers..........................   135
Preserving Records of Early Presidents...........................   136
Cultural Heritage Months.........................................   137
History of Individuals...........................................   138
Questions for the Record:
    Chairman Jose'1 E. Serrano...................................   141
    Ranking Member Regula........................................   147

                     Office of Personnel Management
                             April 2, 2008

Chairman Serrano's Opening Statement.............................   151
Mr. Regula's Opening Statement...................................   152
Director Springer's Testimony....................................   153
RetireEZ Program.................................................   161
Legacy System....................................................   161
Diversity in the Workforce.......................................   162
OPM Programs to Encourage Diversity..............................   163
Retirement Plan Investing........................................   164
Agency Recruitment...............................................   164
Training Programs................................................   165
Rehiring Retirees................................................   165
Electronic Recruitment Tools.....................................   166
Rollout of the Electronic Retirement System......................   166
Hiring Administrative Law Judges.................................   169
Security Clearances..............................................   171
Clearance Process................................................   172
Clearance Completion Times.......................................   173
Polygraph Tests..................................................   174
Recruitment in the Territories...................................   175
Funding Election Observers.......................................   176
Agency Recruiting Needs..........................................   177
Student Recruitment..............................................   177
Attracting and Retaining Staff...................................   178
Performance-Based Pay............................................   179
Social Security Administration Backlog...........................   179
Underperforming ALJs.............................................   180
Human Capital Report.............................................   181
Questions for the Record:
    Chairman Jose'1 E. Serrano...................................   183
    Ranking Member Regula........................................   215

                    General Services Administration
                             April 3, 2008

Chairman Serrano's Opening Statement.............................   255
Mr. Regula's Opening Statement...................................   256
Administrator Doan's Testimony...................................   256
Spanish-Language Services........................................   275
Building Project Prioritization..................................   275
Real Property Disposal Pilot Project.............................   276
Real Property Disposal Process...................................   277
Federal Contractor Database Proposal.............................   278
Building Green...................................................   278
Lease Rental Rates...............................................   279
Authority to Dispose of Property.................................   279
Anticipating Retirement Wave.....................................   280
Building Security................................................   281
Federal Building Fund............................................   281
Property Disposal and Homeless Shelters..........................   282
New Courthouse Construction in Mobile............................   283
Increased Construction Costs.....................................   284
GSA Contract Employees...........................................   285
Court Involvement in Contract Award..............................   286
Building Versus Leasing..........................................   287
Funding for Construction.........................................   289
Federal Judiciary Rental Dispute.................................   290
Presidential Transition..........................................   291
Cost-Effective Agency Housing....................................   291
GSA Provided Facility Services...................................   292
District of Columbia.............................................   292
Los Angeles Courthouse...........................................   293
Judges' Opinion of New Courthouse Proposal.......................   294
Questions for the Record:
    Chairman Jose'1 E. Serrano...................................   296
    Ranking Member Regula........................................   320
    Mr. Schiff...................................................   331

                   Federal Communications Commission
                             April 9, 2008

Chairman Serrano's Opening Statement.............................   333
Mr. Regula's Opening Statement...................................   334
Chairman Martin's Testimony......................................   335
Funding for DTV Education........................................   369
Industry Assistance in DTV Education.............................   370
Educating Minority Communities on the DTV Transition.............   370
Media Ownership Consolidation....................................   371
D Block Auction..................................................   372
First Responders' Spectrum.......................................   373
Demand for Spectrum..............................................   374
Distribution of Auctioned Spectrum...............................   374
Public Safety Network............................................   375
Piracy and Child Pornography on the Internet.....................   375
Filtering Illegal Content........................................   376
Clarifying Protected Content.....................................   377
E-Rate Program...................................................   377
Expanding DTV Education Programs.................................   379
Internet Blogs...................................................   380
Regulating Blogs.................................................   381
Informing People of the DTV Transition...........................   382
FCC Priorities...................................................   382
In-Flight Usage of Cell Phones...................................   383
Concentration of Media Ownership.................................   383
Waiver Process...................................................   384
Separation of the Editorial Function.............................   385
``Do Not Call'' Program..........................................   386
Localism Rules...................................................   386
New Renewal Processing Guidelines................................   387
Internet Radio...................................................   388
Blocking Distribution of Illegal Content.........................   389
Satellite Radio in the Territories...............................   390
Telephone Service in Puerto Rico.................................   391
Supreme Court Review of the Broadcast of Indecent Material.......   392
Broadcast Regulation and Satellite Radio.........................   392
A La Carte Pricing...............................................   393
Universal Service Fund...........................................   394
Public Service Programs..........................................   395
Senior Living Facilities.........................................   395
A La Carte Pricing and Diversity Programming.....................   396
A La Carte Pricing and Cable Rates...............................   397
Low-Income Access to Telecommunications..........................   398
Diverse Community Programming....................................   399
Satellite Radio Merger Effect on Equipment.......................   399
Battery Operated Converter Boxes.................................   400
Addressing Transition Problems...................................   401
DTV Transition and Portable Televisions..........................   402
Media Ownership Rulemaking.......................................   402
Public Comment Period on Media Ownership Rules...................   404
Questions for the Record:
    Chairman Jose'1 E. Serrano...................................   405
    Ranking Member Regula........................................   417
    Mr. Visclosky................................................   422
    Mr. Kirk.....................................................   428

                     Small Business Administration
                             April 10, 2008

Chairman Serrano's Opening Statement.............................   429
Mr. Regula's Opening Statement...................................   430
Administrator Preston's Testimony................................   431
Colombia Trade Agreement.........................................   445
New Small Business Laws..........................................   446
Hurricane Katrina Disaster Loans.................................   447
Demand for Small Business Loans..................................   451
Rate of Defaults.................................................   451
Veterans' Programs...............................................   453
Employee Retention...............................................   453
Small Business Innovation Research Fund..........................   454
Disaster Loan Program Redesign...................................   455
Foreign Investment...............................................   456
HUBZones.........................................................   457
PRIME Program....................................................   458
Micro Loan Programs..............................................   458
Subsidies........................................................   459
Encouraging Exporting............................................   460
Questions for the Record:
    Chairman Jose'1 E. Serrano...................................   462
    Ranking Member Regula........................................   488