[Senate Hearing 110-]
[From the U.S. Government Publishing Office]


 
  FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR FISCAL 
                               YEAR 2008

                              ----------                              


                       WEDNESDAY, APRIL 11, 2007

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 3:12 p.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Richard J. Durbin (chairman) 
presiding.
    Present: Senators Durbin, Nelson, Brownback, and Allard.

                    OFFICE OF MANAGEMENT AND BUDGET

STATEMENT OF ROBERT J. PORTMAN, DIRECTOR
ACCOMPANIED BY ROBERT SHEA, ASSOCIATE DIRECTOR FOR MANAGEMENT

                 STATEMENT OF SENATOR RICHARD J. DURBIN

    Senator Durbin. Welcome to this meeting of the Senate 
Appropriations Subcommittee on Financial Services and General 
Government. We continue our budget hearings today with the 
Office of Management and Budget (OMB).
    We welcome Director Rob Portman to the hearing along with 
his staff and associates.
    I welcome my colleague, Senator Nelson of Nebraska, who has 
joined me and others who may arrive.
    This budget request is for OMB, which serves as the 
President's eyes and ears on the budget. It's the executive 
branch agency responsible for putting together the President's 
budget, and all agency budget requests come through OMB.
    It operates no programs of its own, but has great influence 
over programs as to how they're funded. OMB is responsible for 
preparing the President's budget, examining agency programs, 
analyzing legislation, preparing the Government's Financial 
Management Status Report and 5-year plan, reviewing and 
coordinating agency plans to implement or revise Federal 
regulations and information collection requirements, and 
providing overall direction of Government-wide procurement and 
outsourcing.

                OFFICE OF MANAGEMENT AND BUDGET REQUEST

    The administration's fiscal year 2008 request is for $78.8 
million, an increase of $2.1 million, or 2.7 percent over 
fiscal year 2007 levels. No additional personnel are requested, 
but additional funds are needed to annualize the costs of 
Federal pay adjustment. The current number of personnel is 489, 
down from previous years.

                           PRESIDENT'S BUDGET

    With respect to the overall budget, the President's budget 
documents indicate that you plan to hold nonsecurity-related 
spending growth to 1 percent in fiscal year 2008. To do that, 
you're proposing terminations and reductions in discretionary 
programs totaling $12 billion.
    Since the President's budget came out before the fiscal 
year 2007 spending levels were finalized, we believe that you 
are essentially proposing level funding in fiscal year 2008 for 
nonsecurity-related spending.
    The budget assumes dramatic reductions in many programs. 
The Center on Budget and Policy Priorities estimates that your 
budget for 2012 implies a cut of nonsecurity funding of nearly 
8 percent in real terms below the 2007 level.
    So-called mandatory spending, or entitlements, represent 
about two-thirds of the budget. These programs don't require 
congressional action on an annual basis. We'll be interested in 
discussing with you what proposals are in the President's 
budget regarding entitlements.
    I look forward to discussing your budget proposal, 
exploring a few other areas, and I turn to Senator Nelson, if 
you'd like to make an opening statement.
    Senator Nelson. Thank you, I'll just turn to questions, Mr. 
Chairman.
    Senator Durbin. Thank you. Mr. Director, the floor is 
yours.

                 OPENING STATEMENT OF ROBERT J. PORTMAN

    Mr. Portman. Thank you, Mr. Chairman, very much, and I 
appreciate your taking the time to have me here with you today. 
Also, thank you, personally, for being willing to meet with me 
and talk about some of the issues that are of concern to you 
and the subcommittee. Mr. Brownback, the ranking member, also 
agreed to meet with me, which I appreciate.
    As you noted, OMB has submitted a disciplined fiscal year 
2008 budget request. When rent and other costs are included, 
the total budget--as you noted--amounts to about $79 million, 
which is a 2.7 percent increase, compared to 2007.
    As the subcommittee knows well, we've been operating under 
relatively tight budgets, annual increase of about 1.8 percent 
per year since 2001. Our budget, as you know, is almost 
entirely made up of salaries and expenses, so the only 
significant means to achieve savings is through reductions in 
staffing. And we've done that, to accommodate our funding 
levels, we've reduced OMB staff from 527 positions in fiscal 
year 2001 to 510 in 2004, and today, 489.
    The budget we proposed to you, as the chairman and I had a 
chance to discuss, does allow us to maintain our high-caliber 
workforce of 489 employees going forward, incidentally, over 90 
percent of whom are career civil servants, not political 
appointees.
    We believe OMB can continue to deliver high-quality 
performance, and fulfill our many core responsibilities at 
these staff levels, or full-time equivalents (FTE), of 489.
    The best known of our responsibilities is the preparation 
of the budget, but as the chairman has noted, we also have 
responsibility for a lot of other things, including oversight 
of the agencies regarding budgets, management, legislative 
proposals, regulatory reforms, procurement policies, and other 
issues. I believe our dedicated staff are performing their 
responsibilities in an outstanding manner, within the 
constraints of a tight budget.
    If I could, just briefly, draw your attention to the 
management side of our responsibilities, because I know the 
subcommittee has an interest here--we are focused in making 
Government more effective through five specific initiatives: 
strategic management of human capital, competitive sourcing, 
improved financial performance, enhanced and expanded 
electronic governance, or e-Gov, and finally, budget and 
performance integration.
    And that last one, integrating budget and performance, 
we've made some interesting progress recently to ensure greater 
Government accountability. Last year, we launched a website 
called ExpectMore.gov. It provides information on programs that 
have been assessed for effectiveness, using what we call the 
PART, the program assessment rating tool. With this website, 
Congress and the public now have an unprecedented view into 
which agencies and programs are working, which are not, what 
steps are being taken to improve them--it's part of an ongoing 
effort to provide greater transparency, hold ourselves 
accountable, and demand results.
    With the new and improved version of this website launched 
with the 2008 budget a couple of months ago, we now have 
program-level information on about 1,000 Federal programs, 
representing about 96 percent of Federal spending, $2.5 
trillion worth of spending.
    It's a really great resource. And, I encourage members and 
staff who haven't already checked it out to do so, 
ExpectMore.gov.
    Unfortunately, in recent years, Congress has included 
provisions in appropriations bills that slow our ability to 
make continued progress on the President's management agenda, 
particularly in the area of competitive sourcing, and in e-
Government. Next week, Mr. Chairman, we plan to submit to you 
and others who have an interest, a report that updates you on 
how competitive sourcing is working from our perspective, I'll 
give you a couple of highlights of the report.
    One, new efficiencies and performance improvements that 
have resulted from competitive sourcing are expected to produce 
more than $6 billion in savings over the next 5 to 10 years. 
Second, we have only competed activities considered commercial, 
and not inherently governmental, and incidentally, we've only 
competed about 3 percent of governmental activities. Third--and 
this surprises some folks who have not kept up to speed on how 
this works, Federal employees have fared well in these 
competitions. If you look at the 2003-2006 data, 83 percent of 
the work competed, Federal employees have received, they've won 
the competition. This last year, the number's even a little 
higher than that. So, for the most part, it's Federal employees 
who are winning these competitions, and again, we've only 
competed about 3 percent of governmental activities.
    With regard to the overall budget, the chairman talked 
about, the President's fiscal year 2008 budget shows how 
working together with Congress, we can continue to reduce the 
deficit, in fact, we reduce it every year in our budget, 
balancing the budget by 2012, while keeping taxes low, and 
meeting our Nation's top priorities. It builds on the progress 
we've made the last couple of years where, as you know, we've 
actually had a $165 billion reduction in the deficit--working 
with Congress on restraining spending, and continuing to have a 
strong economy.
    One part of the 2008 budget, I think is particularly 
interesting to this subcommittee is its jurisdiction, which is 
a very interesting jurisdiction as I've looked at it, is in the 
tax gap area. I know this is something the Finance Committee is 
also looking at, but, if you're interested, I would be pleased 
to talk to you more about enhanced compliance efforts, and 
legislative changes that we put in our budget this year to deal 
with the tax gap.
    A balanced budget by 2012 would be a major accomplishment, 
but it would be short-lived without addressing the long-term 
budgetary challenge. And, the chairman just mentioned it, and 
that's the unsustainable growth in entitlement programs. As 
appropriators, you are well aware that mandatory spending is 
overwhelming the rest of the budget. In the space of four 
decades, mandatory spending has grown from about 25 percent of 
our budget, to over one-half the budget. And again, the 
chairman used the figure of two-thirds, when you include 
interest on the debt, it's getting up toward that level, so 
it's the fastest growing part of our budget, and it's an area 
we need to focus on, as Republicans and Democrats.

                           PREPARED STATEMENT

    So, Mr. Chairman, thank you very much for having me before 
this important subcommittee. I believe OMB is staffed with some 
of the highest quality and most dedicated people I've ever 
worked with, and the most dedicated professionals in the 
Federal Government. As noted, we are recommending a disciplined 
budget for OMB that continues to provide the necessary 
resources to serve the President and meet our duties to 
Congress and to the American people. I look forward to working 
with members of the subcommittee as we move forward with the 
appropriations bill. Again, I thank the subcommittee for its 
time, and I look forward to your questions.
    [The statement follows:]

                Prepared Statement of Robert J. Portman

    Chairman Durbin, Ranking Member Brownback, and distinguished 
members of the Subcommittee, I am pleased to be here today regarding 
the President's fiscal year 2008 budget request for the Office of 
Management and Budget.

                              OMB'S BUDGET

    The Office of Management and Budget has submitted a disciplined 
fiscal year 2008 request for our agency. When rent and other costs are 
included, OMB's total budget request amounts to $78.8 million--a 2.7 
percent increase compared to the fiscal year 2007 continuing 
resolution.
    To achieve spending restraint, I have asked OMB to pursue cost 
savings wherever possible. As the subcommittee is aware OMB has been 
operating under very tight budgets. Over the past 6 years, our budget 
has increased by an average of 1.8 percent per year and over the past 
four years it has increased by an average of only 1.2 percent. Our 
budget is nearly entirely comprised of salaries and expenses and our 
only significant means to achieve savings is through reductions in 
staffing. To accommodate lower funding levels, we have reduced OMB 
staff from 527 positions in fiscal year 2001, to 510 positions in 2004, 
to 489 positions in 2007.
    The budget we have proposed for OMB will allow us to maintain a 
workforce of 489 positions, well below the levels we had in 2001. We 
believe OMB can continue to deliver high-quality performance and 
fulfill our many important responsibilities at these staff levels.
    The best known of OMB's responsibilities is the preparation of the 
President's annual budget. In addition, our responsibilities include 
oversight of the other agencies regarding budgetary matters, management 
issues, the Administration's legislative proposals, regulatory reforms, 
procurement policies and other important matters. We work to ensure 
that all the Administration's proposals in these areas are consistent 
with relevant statutes and Presidential objectives. I believe our 
dedicated staff are performing their responsibilities in an outstanding 
manner within the constraints of a tight budget.

                       MANAGEMENT/EXPECTMORE.GOV

    I want to briefly draw your attention to one of our important 
responsibilities, implementing an aggressive management agenda. This 
effort, led by the OMB deputy for management, Clay Johnson, is making 
the government more effective by focusing on five initiatives. Those 
initiatives, all launched in 2001, are (1) strategic management of 
human capital, (2) competitive sourcing, (3) improved financial 
performance, (4) expanded electronic government (e-gov), and (5) budget 
and performance integration.
    To ensure greater government accountability, last year we launched 
a new website: ExpectMore.gov. This site provides information on 
programs that have been assessed for effectiveness using the Program 
Assessment Rating Tool, commonly referred to as the PART. With this 
website, Congress and the public now have an unprecedented view into 
which programs work, which do not, and the steps being taken to improve 
them. It's another way we are providing greater transparency, holding 
ourselves accountable--and demanding results.
    With the new and improved version of this website launched with the 
2008 budget, we now have program-level information about the 
performance of nearly 1,000 Federal programs representing about 96 
percent of government and $2.5 trillion of federal spending. I urge 
Members and staff to check out ExpectMore.gov.
    Unfortunately in recent years, Congress has included provisions in 
appropriations bills that slow our ability to make continued progress 
on the President's Management Agenda, particularly in the area of the 
competitive sourcing and E-government. We would like to work with you 
to address your concerns and to avoid provisions that would restrict 
the progress of the management reforms.

                        FISCAL YEAR 2008 BUDGET

    I would also like to take a moment to review the President's entire 
fiscal year 2008 budget, which we submitted for your review five weeks 
ago. Our 2008 budget proposal shows how working together we can reduce 
the deficit every year and balance the budget by 2012, while keeping 
taxes low and meeting our nation's priorities. It builds on the 
progress we've made over the past two years, which has led to a $165 
billion reduction in the deficit.
    We have been able to make progress for two primary reasons: first, 
because we have been blessed with a strong economy that has generated 
record revenues and, second, because the Congress, working with the 
President, has done a better job of restraining spending, especially 
keeping non-security spending under inflation for the past three years. 
It is exactly these elements--a solid economy and restraint on 
spending--that can now lead to balance.
    The 2008 budget continues to support growth, innovation, and 
investment by making permanent the President's tax relief, which would 
otherwise expire in 2010. Since the tax relief took full effect in 
2003, we have seen strong and steady job growth--with the creation of 
more than 7.6 million new jobs. After 2003, Federal revenues also 
surged--hitting record levels over the past two years. With solid 
economic growth, our total receipts are now slightly above the 
historical average of 18.3 percent--as a share of the economy--and we 
project receipts remain at or above the historical average for the 
five-year period.
    The 2008 budget demonstrates we can achieve balance by 2012 without 
raising taxes. In addition, we plan to more effectively and efficiently 
collect the taxes owed through new initiatives to address the tax gap. 
First, we improve the effectiveness of the IRS' activities with a $410 
million package of new initiatives to enhance enforcement and taxpayer 
service and to improve the IRS' information systems. Second, we include 
in the budget 16 carefully targeted tax law changes that promote 
compliance while maintaining that important balance between the burden 
being imposed on taxpayers and our shared interest in collecting taxes 
owed. The budget also includes other investments in program integrity 
efforts to generate additional savings.
    While restraining spending overall, the President's budget also 
provides new resources for key priorities. It increases funding for our 
national security to combat terrorism and protect the homeland. It 
includes new policies to address issues of concern to America's 
families, including educating our children, access to affordable health 
care, and reducing energy costs. The 2008 budget also proposes to hold 
the rate of growth for non-security discretionary spending below the 
rate of inflation. We believe we can address our nation's top 
priorities at this level of funding.
    A balanced budget by 2012 will be a major accomplishment, but will 
be short-lived without addressing our long-term budgetary challenge: 
the unsustainable growth in Medicare, Medicaid, and Social Security. 
Mandatory spending is overwhelming the rest of the budget. In the space 
of four decades, mandatory spending has grown from 26 percent of our 
budget in 1962 to 53 percent of our budget in 2006. We must begin the 
reform of these programs now in order to protect those commitments. 
Addressing entitlement spending is the right thing to do because small 
changes now have a big impact later.

                               CONCLUSION

    Mr. Chairman, thank you for having me before this important 
subcommittee today. As noted, we are recommending a disciplined budget 
for OMB that still provides the necessary resources for this agency to 
serve the President and meet its duties to the Congress and the 
American people. I look forward to working with the members of this 
Subcommittee as we move forward with the appropriations bills.
    I thank the Committee for its time, and I look forward to your 
questions.

                                STAFFING

    Senator Durbin. Thank you, Mr. Director, and let me ask you 
a few questions about staff. Have you had any difficulties 
recruiting, hiring or retaining staff at OMB?
    Mr. Portman. We have not had a difficult time recruiting. 
As you may know, OMB was determined by a magazine entitled 
Partnership for Public Service, as one of the best places to 
work in the Federal Government. And, I sometimes wonder about 
that, since the hours are long, and the work is hard. But, it's 
a good place to work, people like working at OMB----
    Senator Durbin. Is that your brother-in-law's publication, 
or is that----
    Mr. Portman. Actually, I've told people it really is 
reviewing the year before I got there, because I've been there 
for 1 year. We'll see what happens next year.
    But, our FTEs are down a little bit right now, which is 
typical. After the budget cycle, we tend to have a drop off. 
We're about 5 percent down right now, from our budgeted FTE 
level, that enables us to do our work. We're down to about 470, 
instead of 489. So, we're down a little bit.
    We just finished our recruiting, we broadened our 
recruiting this year, as you and I talked about. We had very 
good luck, so we're hoping to be able to, once again, attract a 
lot of high-caliber young people to OMB.
    Senator Durbin. What percentage of your employees are 
eligible to retire in the next 5 years?
    Mr. Portman. It's growing. I don't know what the percentage 
is. We do have our baby boom generation, of which I am a part, 
and I think you are, Mr. Chairman. Our workforce is getting to 
that point where they can look at retirement. We'll get you 
that number.
    [The information follows:]

    There are a total of 101 OMB employees eligible to retire 
by December 2012.

    Mr. Portman. It concerns me, though. And, again, we're not 
having trouble recruiting good people. I'm very impressed with 
the young people we've brought in over the last year since I've 
been there, and we've had good luck on the college tour and 
graduate school tour, most recently, but it does concern me 
we're going to lose a lot of great talent.
    Senator Durbin. Does your agency use student loan repayment 
programs for recruiting and retention?
    Mr. Portman. We don't--we haven't had to. But, because of 
the prodding by a certain Senator from Illinois, we are now 
looking into that and that may well be something that I'll be 
able to report to you on very soon.
    Senator Durbin. It is a program to use if you need it. The 
point was, we feel that we can attract and retain many young 
people who are burdened with student debt to public service and 
to the Federal Government. We use it in the Senate, pretty 
extensively, so, I don't want to impose this on you, this is 
not a requirement to get approved budgets through this 
Appropriations subcommittee, but----
    Mr. Portman. We think it's an interesting option, and we 
are looking at it very seriously.

                             CONSOLIDATION

    Senator Durbin. There's a proposal in the President's 
budget to consolidate a number of appropriation accounts within 
the Executive Office--the actual number of accounts to be 
consolidated is eight--into one large account called, The White 
House. This was proposed last year and was not accepted by 
Congress.
    Why do you think it's a good idea to eliminate the separate 
accounts, and consolidate funding in one large account? 
Wouldn't Congress lose budgetary control and transparency? And, 
I might add, the Executive Office of the President has 
appropriations transfer authority in the annual appropriations 
bill, that allows transfers up to 10 percent. So, would you 
retain authority? In your 2008 bill proposal?
    Mr. Portman. Well, we--as you know--this has been a 
difference we've had with Congress. I think it's a good idea 
just for the efficiency and the best practices you can get by 
consolidating functions. I don't know how to answer your 
question in terms of the congressional impact, because I don't 
think--from what I know about it, and I must confess, I have 
not had the ability to talk to you or others about what you 
view as your current ability to influence some of these 
functions, but I don't think it will make a key difference. 
And, I think, the key difference is, your level of interest, 
and oversight. And, I think the White House Executive Office of 
the President would be very responsive to you.
    But, it's an effort to consolidate, it's an effort to gain 
efficiencies, and again, to focus on best practices, and all of 
the different elements within the Executive Office of the 
President.
    Senator Durbin. My colleague, and ranking member Senator 
Brownback of Kansas has arrived. I know he had a bill pending 
on the floor, so I'm going to give him an opportunity now if he 
would like to either make a statement or ask a question, if 
it's all right with Senator Nelson.
    Senator Brownback. Thank you very much, Mr. Chairman for 
doing that, thank you for allowing that.
    Thank you to my colleague from Nebraska for allowing me to 
step forward.

                            BALANCED BUDGET

    Mr. Director, thanks for being here at the subcommittee 
today. We've had a chance to visit on some of these issues in 
the past. I do want to get a thought on record from you, if I 
could. Your comments would be helpful about ways to be able to 
get us to a balanced budget, and change the system in a way 
that will produce more balanced budgets in the future.
    You and I have both been in the House of Representatives, 
and working on these issues in previous times, and we were able 
to get to a balanced budget in the past. It seems like to me, 
we were able to do that mostly by producing growth in the 
economy, and less by restraining spending. Yet, now we're at a 
time, we're getting some growth in the economy, although that 
economy appears to be slowing, we certainly don't want to 
increase taxes at this point in time. But, how would you 
systematically put in place programs or systems that would 
restrain the growth of Federal spending? If you had a chance to 
look at that as OMB Director, and I'd really like to get your 
thoughts on how you view that, and then I want to run an idea 
by you that I've been pushing on this issue as well.
    Mr. Portman. Well, thank you, and again, I--before you got 
here, I said that I appreciate the fact that you and the 
chairman were willing to meet with me and talk about some of 
the subcommittee issues individually. This is one of the issues 
you raised then, and you and I talked a little about your 
legislation, which I'm happy to address in a moment.
    Let me make a bigger point, if I could, though. You and I 
also talked about the growth of the entitlement programs, and 
the fact that they are becoming a bigger part of our overall 
budget, and to get to balance, in my view, it's necessary--not 
so much short term--where we can get to balance, working 
together, restraining domestic discretionary spending, looking 
at the economic pro-growth policies. But, over the longer haul, 
10, 15, 20 years, the way to stay in balance, as you say, must 
include looking at the unsustainable growth rate, because it is 
6, 7, 8, 9 percent growth rate of these important programs, 
like Medicare, Social Security, and Medicaid. Otherwise, it's 
very difficult to imagine us being able to stay in balance 
without huge tax increases which would result, I think, in a 
detriment to the economy.
    Within the roughly 19 percent of the budget that is the 
discretionary spending on the domestic side, particularly, 
there are things we can do. And, I think, looking at the 
performance measures that I talked about before you arrived 
that we're doing now with ExpectMore.gov, which is our website 
where we put up the assessments of 1,000 Federal programs, 
about 96 percent of our spending. We're making progress, we 
think, in determining which programs work, which don't, and 
spending the Federal dollar in the most efficient way possible.
    We also have, as you know, proposals for a commission that 
would look at waste, fraud, and abuse in our budget, and then 
we have a commission called the Sunset Commission, which 
actually has a lot in common with your CARFA proposal, the 
Commission on Accountability and Review of Federal Agencies.
    Senator Brownback. If I could, the CARFA bill was included 
in the budget resolution that the Senate approved before the 
Easter break, and I hope it's something that the administration 
could come out supporting in an official position. It takes the 
BRAC process--the military base closing commission process--and 
applies it to the rest of Government. And it's my conviction 
that we will not be able to restrain the growth of Federal 
spending if we use the current system, and just keep the 
current system in place. So, we need a systems change.
    You have a sunset proposal that you put forward--and I 
think that's a good idea, and a good way to go as well, so that 
there regularly is a sunsetting of bills.
    And, Mr. Chairman, I might note, I think this is a 
Republican and a Democrat proposal. Under either scenario, 
either party in control, we really need to be able to cancel 
programs that aren't performing. And, we've not been able to 
find a successful way of doing that. And, it's a great 
frustration to all Americans--whether you're liberal or 
conservative--I get people raising a number of programs that 
have been seen as conservative programs that they're saying, 
``Well, they're not producing.''
    Well, here would be a systems way that you could cancel 
programs that aren't producing results on an objective basis, 
and then force the Congress to vote.
    And, that's what I'm after, is getting that systems change, 
because I think we're just showing that the system is built to 
spend, and we need it to be built to save, particularly in 
entitlement programs.

                         MEDICARE AND MEDICAID

    Before my time runs out--on Medicare and Medicaid, in 
particular--what is it that you want to target to be able to 
get into more sustainable growth patterns, as you look at those 
two big entitlement expenditure programs?
    Mr. Portman. It's a great question, and probably the most 
critical budget question is healthcare and the entitlements, 
that combination. Not that Social Security isn't a priority, it 
is, but the fastest growth is actually in the healthcare side, 
and that's where--as you and I talked about--you see the 
greatest unfunded obligation, $32 trillion in Medicare alone 
over the next 75-year period.
    Two things, I guess, one is the cost of healthcare. 
Because, we know more and more about how healthcare drives 
Medicare and Medicaid, and vice versa, that's such a big part 
of our healthcare system. And this--as you know, the 
President's proposed in the budget some changes, with regard to 
the standard deduction, with regard to litigation in the 
healthcare area, and other things that are focused on getting 
the costs down, and keeping the quality up, in terms of 
healthcare.
    Second, is with regard to the programs themselves. We have 
some specific proposals in our budget, they tend to focus on 
two things. One is rightsizing the amount of Federal 
reimbursement to providers, the so-called market basket change 
that we have, a 0.65 percentage point change--it's relatively 
small--but it has larger out-year impacts.
    And then, second, is more income relating, which is a 
technical term for means testing. Telling seniors that if they 
are in part B or part D, that their subsidy under those 
programs, if they make over a certain income, would be, over 
time, effectively reduced. Right now, if you make over $80,000 
a year, $160,000 as a couple, you begin in part B to see that 
Federal subsidy reduced. We would like that in place under our 
budget proposal, and also apply it to part D.
    This has been a controversial proposal in the past--I'm 
sure it still is controversial--but actually, I've found in 
talking to Republicans and Democrats alike--that Members are 
willing to look at this, to listen to come of these ideas. 
These are our ideas, we're eager to hear ideas from other 
folks. By the way, those two proposals alone reduce that 
unfunded obligation by $8 trillion over the 75-year period. And 
again, we do not have a monopoly on good ideas, here, they're 
tough to come by. It's a difficult area politically, as well as 
substantively.
    But, we look forward to working with Congress on that, 
because you're right--those are key elements to not just 
getting to balance, which I believe we can do, working 
together, and I think we can do it in the next 4 or 5 years. 
But how do you sustain that over time without a huge tax burden 
on the economy?
    Finally on CARFA, your proposal, we do share your goals on 
this, and we want to work with you to get it enacted, we think 
it's good policy.
    Senator Brownback. Thank you.
    Thank you, Mr. Chairman.
    [The statement follows:]

              Prepared Statement of Senator Sam Brownback

    Good afternoon. I want to thank you, Chairman Durbin, for your 
leadership of this new subcommittee. I look forward to working together 
with you during this coming year as we make funding decisions and 
provide oversight to the various agencies within this subcommittee's 
jurisdiction.
    Director Portman, thank you for appearing before our subcommittee 
today. I look forward to hearing the details of your fiscal year 2008 
budget request and the key efforts that your agency will be undertaking 
this year.
    Looking at the President's budget, I am pleased that it assumes the 
continuation of the recent tax cuts, which have helped our economy 
rebound from recession to its current robust health. I am also 
encouraged that the President is projecting a balanced budget by 2012. 
I believe that the only way we can continue on a course toward balanced 
budgets is by growing the economy through lower taxes and by 
restraining federal spending.
    Lower taxes spur economic growth, which means more jobs, healthier 
businesses, and a better fiscal outlook for all Americans. Although the 
economy is strong and jobless numbers are down, I believe we have more 
work to do. We should continue to reduce the deficit and make the 
recent tax cuts permanent, especially the death tax which overly hurts 
small businesses and family farms.
    Mr. Portman, you note in your testimony that the Administration 
plans to direct additional resources to close the so-called ``tax 
gap.'' Certainly, we must ensure that taxes which are owed are 
collected. However, I remain concerned that our tax system is overly 
complex, complicated, and burdensome. Americans spend roughly $157 
billion each year in tax preparation to ensure they do not run afoul of 
the IRS. The system is in desperate need of reform. And as tax day is 
right around the corner, I must reiterate that I support a flat tax 
concept which simplifies tax preparation, applies a low tax rate to all 
Americans, and respects the special financial burden carried by 
American families raising children. One reason we have a ``tax gap'' 
may be that our tax system is so complex and convoluted that taxpayers 
cannot even figure out what they owe.
    Mr. Portman, I look forward to hearing your testimony this 
afternoon. Your agency has a key role in prioritizing how federal 
discretionary funds will be allocated. This is no small task. There are 
many programs and activities worthy of federal support. But we must 
always temper those funding needs with the goal of a balanced federal 
budget. We must be prudent stewards of American's tax dollars and not 
pile up debt for our children and grandchildren to pay. Just as 
American families must make difficult budget decisions about their 
hard-earned dollars, we must ensure that we are spending the people's 
money wisely. I will have some questions for you about how the federal 
government is spending taxpayers' dollars and how we can improve 
efficiency in government. From personal experience, I can tell you that 
few things are more upsetting to my Kansas constituents than to see 
wasteful government spending. Kansans often say to me, ``I don't mind 
paying the taxes I owe, but it is infuriating to see my hard-earned 
money being wasted. If I am going to work hard to earn money, I want 
what I have to pay in taxes to be spent wisely.''
    So thank you for appearing before this subcommittee today, Mr. 
Portman. And thank you, Mr. Chairman, for your leadership of this 
subcommittee. I look forward to working with you this year.

    Senator Durbin. Senator Nelson.
    Senator Nelson. Thank you, Mr. Chairman.

                         ADMINISTERING EARMARKS

    Director Portman, thank you for coming before the 
subcommittee today. Earlier we talked about the earmark issue, 
and the way in which they are administered by agencies. And, as 
you know, I am interested in this, and more than 1 month ago, 
before the database was finalized, I communicated with you, my 
ongoing interest in collecting information on the degree to 
which agencies assess fees on congressionally directed funds 
before they're allocated to the congressionally direct 
recipient. In which I stated my desire to see this information 
posted on OMB's website.
    I think the information would be useful, not only to OMB, 
but to Congress and the American taxpayer, in the spirit of 
transparency, to provide the full picture of exactly how this 
money is expended. Unfortunately, I only received a short 
response to my letter 2 months after I sent it, and I know we 
just visited about that, but the sense I got from your letter 
is that it hasn't really come down before others, other 
decisionmakers at OMB for consideration, and I'm wondering if 
you can give me your thoughts about developing information 
about what the agency's charge for the administering of 
earmarks, and where they have authority to do it, and where 
they don't have authority to do it, but they just have assumed 
authority.
    As a former Governor, I can tell you, my agencies never 
assumed any authority they didn't have, and get by with it. 
But, we're seeing agency after agency, ostensibly, based on the 
information they've reported to us, skimming or marking down 
earmarks before they are actually directed out to the 
congressionally mandated recipient. Earmarks being skimmed or 
marked down to the tune of 1 percent, up to 5 percent, or who 
knows what percent? Department of Defense said they couldn't 
even give us an answer. This is unacceptable. You cannot run a 
Government if you can't control the Government, and these 
appear to be--at least to me--in many cases, absolutely outside 
the budget, off-budget, if you will. And, it's unacceptable. I 
wonder if you might give me a response.
    Mr. Portman. Well, first, as I have said to you, I think 
it's a very helpful addition to the transparency that we're now 
providing in terms of earmarks. Also, as you know, we're in the 
process of working with the agencies on another challenge, 
which is implementing what we strongly support, which is the 
Coburn-Obama transparency on grants and contracts. In theory, I 
think, the difference between our earmark database, which has 
just gone up recently, and the new database we're working on, 
which would be the grants and contracts, should be the 
administrative expenses, there may be some other issues there, 
technical issues we have to work through. But, that should be 
very interesting information, we're eager to work with you to 
supply that information.
    As you know, some of these agencies have a statutory 
requirement to provide for some administrative expense as they 
deliver the funds. So, for instance, in the research area, it's 
a 4 percent number. I don't know that that's inappropriate--
that's something Congress has determined is appropriate. I 
don't know what the right number is, but for an agency not to 
take on any administrative expenses when there's a number of 
earmarks in an area, does provide a hardship for them and in 
fulfilling their other responsibilities Congress has given 
them.
    So, there probably is, in some cases, a number that is 
appropriate, that is statutory. In other cases, that may be 
something Congress wants to look at. And, in some cases, as you 
say, there is no statutory requirement. So, agencies have used, 
past practice has been to, for certain agencies to establish a 
certain number for a certain type of program, that's something 
that we would like to look at. So, I'm glad you brought it to 
our attention.
    Senator Nelson. Well, I might bring something to your 
attention too, just, in one case, the administration on aging 
program innovations, said that they withheld up to 1.3 percent 
to cover costs related to grant peer reviews, as well as 
unexpected costs--whatever those would be--payments for 
cancelled obligations, secretarial transfers, cited statutory 
authority left blank, other explanation of authority or reasons 
for a fee assessment, left blank. Food and Drug Administration 
(FDA), food technology evaluation--they say there's none by the 
FDA, the Army, which handles the payment for FDA, charges a 6-
percent administrative fee. I think we really do need to get a 
handle on this. As I say, you can't really budget effectively, 
if you don't know what your agencies are charging, and/or if 
they don't have any authority--statutory authority, or as part 
of the earmark, receive authority for withholding some amount 
for the administration of that earmark.
    This is something that, generally, is budgeted, because a 
number of the agencies went through and said they don't--they 
budget this in their overall budget, and they don't take 
anything for the administration of earmarks. And, it's 
skimming, if there's no authority, well-intentioned as it may 
be, or it's marking down, well-intentioned though it may be, 
but it's without apparent control, or under the authority or 
control of OMB. And yet, their budget comes out for a lower 
amount than what they're actually receiving in terms of money 
coming in. And, I don't know that that would create a slush 
fund within an agency, but one has to wonder how they match 
their expenditures to what they charge for that fee for 
administering the earmark.
    Mr. Portman. No, I think it's a very good point, the 
agencies, as you know, over the last 10 years have had almost a 
quadrupling of earmarks. And, so probably for some of these 
agencies, this was not a very big deal, in terms of their 
overall budget, 10 years ago, and they are making that 
adjustment. The House and Senate have come forward with new 
rules for increased transparency,. Chairman Obey has proposed 
that earmarks be cut in half. There will be fewer earmarks, I 
believe, just as there were this year as compared to last year, 
and 2006 as compared to 2005. But this is an issue that I do 
want to get on top of, try to figure out, again, as we're 
asking the agencies to go to this next level on the Coburn-
Obama grants and contracts, if we can also get this very 
specific information. And, thank you for your willingness to 
share the Congressional Research Service (CRS) report that was 
provided to you. I think that'll be very helpful to us, as 
well.
    Senator Nelson. Well, thank you. It sounds like things 
happen a little faster if there are a couple of names on a 
bill, so I'll get one of my colleagues, and we'll get something 
``Nelson-so and so'' to help you have the authority to do it. 
And/or the urgency might be expressed.
    Thank you very much, Director Portman.
    Thank you, Mr. Chairman.
    Senator Durbin. Thank you, Senator Nelson.

                                EARMARKS

    Director, let me ask you about earmarks. You sent out a 
memorandum to agencies and departments on February 15 about 
earmarks and how they were to be treated. Would you tell us 
what you were trying to accomplish with this memo, and what is 
your policy going to be about congressional earmarks in the 
future? Do you plan on maintaining an ongoing database on 
earmarks, and tell us a little bit about your new website, 
FederalSpending.gov.
    Mr. Portman. Well, thank you, Mr. Chairman. Let me 
distinguish, if I could, between the February 15 instruction, 
and the January instruction--I believe it was on January 25, so 
it preceded Senator Nelson's letter to me. We gave instructions 
to the agencies to compile earmarks for the purpose of the 
database, that was to be sure that the cut in half goal had a 
basis that was fair, frankly, that we were accountable, so that 
when Congress came to us with future appropriations bills, we 
had a basis that people could agree upon. It's also an 
opportunity for Congress to look at our definition, which it 
turns out, is very close to your definition in the Senate-
passed bill and the definition in the rules in the House, and 
to look at the individual earmarks, to see if you think they're 
appropriate or not.
    So, that is up--that database is based on the January 
guidance that we sent out to the agencies. To your question as 
to whether we plan to continue the database, the idea was to 
establish a database as a benchmark. We chose 2005. We thought 
that was the fairest year. It happened to have been the peak of 
earmarks. It also happened to be the year in which all of the 
agencies were represented. As you recall, in 2006, the Labor/
HHS bill did not include the earmarks it had previously 
included. From a congressional appropriations point of view, we 
thought 2005, frankly, was the fairest and the most 
comprehensive benchmark to use.
    We'll continue to monitor this, now, going forward. With 
regard to the guidance on February 15, that was with regard to 
the 2007 spending. And, what we were trying to do there, was 
not to establish any new guidance from OMB over and above what 
was in your 2007 continuing resolution. That was an attempt on 
our part, simply to take your 2007 guidance that you had 
provided us, through your continuing resolution, and make it 
very clear to the agencies what it meant in terms of their 
interaction with Congress for 2007. And, I think that's been 
fairly well-received by the agencies. Incidentally, I think the 
agencies have done a pretty good job on the earmarks. They 
didn't get everything into us on a timely basis, but it was a 
huge project, and we think this transparency will be helpful 
going forward.
    Senator Durbin. So, what is this new website?
    Mr. Portman. FederalSpending.gov is the name of the site 
where the Coburn-Obama database will be posted, so that's a 
third transparency issue, in addition to ExpectMore.gov and the 
database on earmarks, that will be up and going, by law, by the 
end of this year. We're making pretty good progress on it, and 
we're hoping to be able to have some preliminary data available 
before that time. But we believe at this point, Mr. Chairman, 
and you should hold us accountable for this, that we will be 
able to do this in a timely manner, per the statutory 
requirement.
    The database on earmarks is on OMB.gov and if you go to 
OMB.gov, and then you go to ``earmarks'' that's where you will 
find that database.

              OFFICE OF INFORMATION AND REGULATORY AFFAIRS

    Senator Durbin. One of my favorite agencies in OMB is the 
Office of Information and Regulatory Affairs (OIRA). This is 
kind of like freakenomics to the 10th power, and it apparently 
holds a very high place in the pantheon of your administration. 
So much so, that the President would make a recess appointment 
of Ms. Susan Dudley to follow, I believe, John Graham, who was 
one of the earlier people appointed.
    It seems that, from an outsider's point of view, that 
you're attempting to take away the regulatory authority of 
agencies, or circumscribe it, by vesting that authority in this 
office. That regulatory authority was created by legislation in 
each of these agencies, and it would seem that your goal is to 
supersede, or at least monitor, that authority, as it's being 
exercised.
    It also seems that there's--God forbid--politics involved 
here. I'm wondering if you could explain to me why it's a good 
idea to put a political appointee in charge of a regulatory 
office in each agency, as you have proposed. Why do you want to 
further centralize regulatory power in OIRA, and shift it away 
from individual agencies?
    Mr. Portman. First of all, with regard to OIRA, you're 
right, it's a very important entity, they have an important 
responsibility, because they do look at the regulations and 
rules--this has been true in previous administrations, as you 
know, as well as this one. They apply a benefit/cost analysis, 
ensuring that the agencies have gone through the proper process 
that Congress, incidentally, has asked them to do. In some 
cases, a risk assessment, depending on the kind of regulation 
or rule.
    When I first got to OMB, as you know, there was no 
Administrator of that Office, because John Graham had left, and 
it was open. We then nominated Susan Dudley who, I believe, is 
very well-qualified for this position. She has worked, among 
other places, at OMB, other agencies, and has a good 
background. I think six of the former OIRA Administrators, 
Republican and Democrat alike, had very kind things to say 
about her in their letter to you as someone who was 
professional, and someone who could do the job in a fair, 
nonpolitical way.
    We did try to go through the normal process, she was not 
able to be confirmed. So, for the first time in 1 year, since 
I've been there, we do now have, as of the recess appointment, 
a head of the Office who is a political appointee. I think 
she'll do a very good job, and I hope you get a chance, 
Senator, to meet her and look at her work. I think you'll find, 
as you look at it objectively, that she will do a fair, 
balanced job. That's certainly our idea.
    In the meantime, Steve Aiken, who is a career civil servant 
at OMB, who previously was in the General Counsel's Office, 
served in an acting role there, and he did a terrific job. And, 
so it's my hope that the good work Steve was doing continues. 
In other words, I don't view this as a political 
responsibility, I view it as OMB's role to look at regulations 
and rules, and make sure they are consistent with both the 
congressional dictates that we live under, including coming up 
with the right analysis of their impacts on both the benefits 
side and the cost side, but also consistent with the 
President's policies.
    Senator Durbin. Are you familiar with Ms. Dudley's 
background? Spending the last 3 years as director of regulatory 
studies for the Mercatus Center on the campus of George Mason 
University? Mercatus Center, founded by corporate interests, 
endowed by large corporations, free market-oriented 
foundations, and leaders of the corporate world?
    Mr. Portman. Yeah, I'm familiar with her background, 
generally, and her resume. Again, she was actually nominated 
about 1 year ago to Congress. I think the formal announcement 
to Congress was a little more than 8 months ago.
    Senator Durbin. And were you aware of the fact that in that 
capacity she opposed improved standards for airbags in 
passenger vehicles?
    Mr. Portman. I'm not aware of that specific issue.
    Senator Durbin. This is where this obscure little agency 
starts worrying me. Because someone from her background is now 
going to judge issues about health and safety. And, make 
calculations on cost benefits that seem like they're very 
scientific and very mathematic, which time and again always 
tend to hurt the consumer and help those who are, frankly, 
pretty well off in this country. It's a mindset that seems to 
drive this view toward regulation. So, I hope you'll understand 
why some of us were a little bit upset that she was put in by 
recess appointment, into this critical area and we're going to 
be watching it carefully.
    Senator Brownback.
    Senator Brownback. Thank you very much, Mr. Chairman.

                            SOCIAL SECURITY

    Director, I want to ask a couple of specific questions on 
areas of funding that portend on big policy issues coming up. 
We're considering a major immigration bill. I hope we're going 
to be able to move one forward. The President talked a lot 
about it. My colleague and I are both serving on the Judiciary 
Committee and hopefully this is one we're going to be 
considering, and moving forward with.
    There was an article that appeared March 29 this year in 
the Washington Times talking about uncredited earnings into 
Social Security. And, they put a big number on the amount of 
money going into Social Security from uncredited, or what would 
probably be undocumented people working in the United States. 
They said, ``In 2004, uncredited earnings Social Security tax 
payments that can't be matched to valid Social Security numbers 
totaled $65 billion or about 10 percent of the programs' total 
income.''
    They lead the story by saying, ``Uncredited contributions 
to Social Security grew by nearly $300 billion, from 2000 to 
2004.'' The article says, ``A giant increase attributable 
mostly to illegal aliens using erroneous Social Security 
numbers.''
    I wanted to ask you about this because if these numbers are 
accurate, there's a significant policy issue, financially, 
that's going to be happening to the country. Either we get the 
situation under control on undocumented workers, or nothing 
happens. Either way, you've got a big number that's involved 
here in Social Security and Social Security's future.
    Are you able to put your finger on these numbers? Are you 
looking at these, in particular, relative to the policy debate 
we're having on immigration?
    Mr. Portman. It's an interesting question and there has 
been analysis by the Congressional Budget Office (CBO), as you 
know, of the costs of the program and it takes into account 
some of these payroll tax potential surpluses as well as the 
fees that would be paid and what the impact on the budget's 
going to be. And, in some cases it's been analyzed to be close 
to a wash. In other words that there be additional income 
coming in to the Government through fees and yet maybe some 
increase in some social service costs or some changes in some 
of these Social Security earnings.
    On the specific report you're talking about, which I think 
is the Senior Citizen's League. Is that the group?
    Senator Brownback. It's a private group and I just, when I 
saw, these are eye-popping numbers and I wondered if these, if 
this is accurate or not?
    Mr. Portman. We don't know. You and I talked about this 
briefly at a previous meeting and I am trying to get more 
information about it. What I do know, at this point, is that 
the estimate is probably not accurate as to undocumented work. 
And, why do we say that? We say it because there are a lot of 
reasons that the name and the Social Security number (SSN) may 
not match SSN's file, the Social Security Administration's 
files, which is how they base the $65 billion figure.
    My own sense is, there are probably a lot of undocumented 
workers in that group. But, to be able to determine which are 
undocumented workers, which are there because there's a 
typographical error, a name change due to marriage or divorce, 
or some other issue, is just impossible for us to determine 
with precision.
    But, we are looking at it thanks to your raising it with 
me. I think it should be an important part of this debate. I 
tend to share your sense that this is, in large measure, due to 
undocumented workers who aren't claiming their Social Security.
    Senator Brownback. Well, it's a big number and it's going 
to have a big impact on this policy debate because it's a key 
part of the future funding of Social Security. And so, I would 
hope we could get tied down what that actual number is and what 
the amount there is.

                            WAR SUPPLEMENTAL

    Mr. Portman, the President has stated that he will veto the 
supplemental if it contains a deadline for pulling out of Iraq. 
I'm curious to get your comments on the additional funding in 
this supplemental. Would you recommend that the President veto 
the supplemental over the level of additional funding that's in 
the bill?
    Mr. Portman. Yes, I would. And, the President has 
actually--in regard to the Senate bill as it came to the floor 
and the House bill--that the excessive and extraneous spending 
that's not related to the war effort would be the basis for a 
veto.
    That number is, as you know in the Senate bill, I think 
just under $20 billion and the House bill over $20 billion. 
Some of that funding is nonemergency domestic spending that is 
not related in any way to security. Other aspects of the 
additional money is related to security in the broadest sense 
at least, because it has to do with returning war veterans, 
some of the Veterans Administration (VA) funding or DOD health 
money. Still other spending is related to Katrina where we do 
have, in our proposal as you know, a $3.4 billion request for 
the DRF, the Disaster Relief Fund, which is necessary for our 
ongoing commitment to Katrina.
    So, there are various categories of funding in here, Mr. 
Brownback, but I do believe that it is excessive and 
extraneous. And, I believe that it is troubling, in the sense, 
that it is a big increase in domestic spending on top of the 
budget proposals from the majority in the House and the Senate, 
which have now been passed in their respective Chambers, which 
also increase spending in some of these same areas.
    Senator Brownback. Well, I agree. I think it's too much and 
it's something that the President should stand his ground on. 
Both on the amount as well as on the war timetable. That's not 
a wise decision and not a move that should be put in the 
supplemental bill, but I wanted to get your specific view.

                            MEDICARE PART D

    Finally, and just if you have the quick numbers on this I 
would appreciate it, on the cost of Medicare part D. There was 
a lot of discussion when this policy issue passed that it was 
going to cost $400 billion and then there was some discussion 
that the numbers were cooked, and it actually should have grown 
to $600 billion and some even projecting it would be $800 
billion. What has been the cost to the Government of this 
Medicare part D, the drug benefit program? I think in my State 
it has been very well received by senior citizens and people 
that are receiving this benefit. There was some problems in 
getting the program up and going, but overall it's been a very 
positive benefit. But, I want to know what the cost figure has 
actually come in at.
    Mr. Portman. It's good news. And, incidentally, to your 
customer satisfaction, looking here at a number of 80 percent 
customer satisfaction with part D, that's an average number, 
which is relatively high for Federal programs, as you might 
imagine. The actual costs are far lower than we thought they'd 
be. You recall when you and I were both serving in the House 
that there was dispute between the actuaries at Health and 
Human Services (HHS) and the Congressional Budget Office. And, 
we were relying on the Congressional Budget Office estimate. 
Others were saying, that in fact, HHS actuaries were more 
accurate and that number was far higher. It turns out the costs 
are a little below CBO's estimates. So the actuary estimate, I 
think it was $634 billion over the 10-year period, was 
relatively high. It's come in at closer to $445 billion, we 
believe, and that number shifts. In fact, it's gone down a 
little in the last year, that estimate. So, not only is the 
cost of the drug program down about 30 percent from our 
estimates when the President signed the Medicare Modernization 
Act, but it is even below where CBO was at the time.
    Second, and I think this is more significant to your 
constituents, is that the beneficiary premiums are lower, about 
40 percent lower than we projected. I remember at the time we 
said it would be $39 a month. Right now, we're at about $23 a 
month on the average monthly premium cost.
    So, this is some good news. It's good news for taxpayers 
and the budget. From my perspective as OMB Director, it's good 
news in terms of our outlays, but it's also good because, as 
you say, most importantly it's a program that people are 
finding meets their needs and their costs are lower than 
projected.
    Senator Brownback. Thanks for mentioning that. And, it 
seems like it's one too, that we don't need major policy design 
changes at this point in time, that some of the cost control 
features are working, generally.
    Mr. Portman. The competition model seems to work because 
it's forced companies to compete for the business of millions 
of seniors.
    Senator Brownback. Thank you, Mr. Chairman.

                            WAR SUPPLEMENTAL

    Senator Durbin. Mr. Director, let's take a little walk 
through the supplemental. Because I think the standard that you 
wanted to use was whether or not the supplemental spending 
request supported the war effort. Is that what you said?
    Mr. Portman. What I was trying to do is be balanced in my 
response, saying that I would advise the President to veto over 
the excessive and extraneous spending. Some of the spending is 
purely domestic. You've heard about a lot of this. If you 
listen to the media, they talk about the peanut storage and 
they talk about the spinach growers and so on. It's hard to 
justify any of that either as an emergency, in my view, or 
certainly as related to the war. Other spending is though, at 
least broadly defined, security spending in the sense that it 
relates, for instance, to VA.
    Senator Durbin. So, let's take peanuts and spinach off the 
table and take a little walk through the supplemental, as I can 
remember it. I don't have the litany here, but I can remember a 
lot of it.
    We put in $2 billion over what the President requested, 
directly for the troops. And, a vote on the floor, an amendment 
offered by Senator Biden, supported on a bipartisan basis for 
the procurement of new vehicles that are safer for our troops 
when it comes to these improvised explosive devices (IEDs) and 
mines. So, would you consider that $2 billion to be extraneous 
and a reason for the President to veto the bill?
    Mr. Portman. I don't know. I'd have to look at the specific 
request. We, as you know, included funding for that in the 
original request and then in our amendment, which came about 3 
weeks after the February 5 request, we actually amended it to 
include more funds for the so-called MRAPs, which are the 
vehicles that have been more successful in avoiding injury to 
our troops with roadside bombs.
    So, we do think there's a need for more of those armored 
vehicles. The question has been how many can be produced, as I 
understand it. And, DOD has come up with their estimate of what 
the production possibility would be.
    Senator Durbin. But, would you call that wasteful pork-
barrel spending, $2 billion for safer vehicles for our troops 
in Iraq?
    Mr. Portman. Not if it can be spent productively to provide 
the vehicles for our troops.
    Senator Durbin. Good. And, about $2 billion in there for 
the Veterans Administration, to put more people processing the 
paperwork for some of the veterans who are waiting over 1 year 
for disability evaluations. Put more money into hospitals for 
traumatic brain injury units, upgrade the para-trauma units, 
poly-trauma units across the board, more money for post-
traumatic stress disorder (PTSD) for returning veterans where 
one out of three are suffering from this. Would you consider 
that $2 billion, roughly $2 billion for the Veterans 
Administration a reason for the President to veto the bill?
    Mr. Portman. Well again, I'd have to answer it by saying 
that we have worked closely with the Department of Veterans 
Affairs to come up with what is a fair number in our 
supplemental request. And, with regard to our amendment, we 
actually added more for DOD health after the Walter Reed 
incident because----
    Senator Durbin. Well, there's another line item for that.
    Mr. Portman. Yes, we believe that there might be a need for 
additional funding even in this 2007 emergency supplemental and 
pending the results of the commission, wanted to be sure that 
funding was available.
    But, I will refer you to VA's own analysis. And, their 
analysis is that the additional funding we're providing already 
is adequate to meet the very needs that you address. We have, 
as you know, about a 7-percent increase in VA funding for 
health, again, in our 2008 budget, over an 80 percent increase 
since 2001.
    Senator Durbin. I'm afraid the VA is notorious and the OMB 
is complicitous in low-balling the amount of money they need. 
It wasn't that long ago we came up with an additional $1 
billion, after we'd been assured over and over again, it was 
unnecessary. It turned out it was necessary. I spent the last 
10 days visiting VA hospitals, three separate hospitals. I can 
tell you what they need. They need resources and they need them 
now. These soldiers are pouring through the doors. They need 
help. They need specialists who aren't there. There's a lot 
more that we need to do. So, I hope you'll take a look at it.
    Now, we have about $1 billion or more for military 
hospitals like Walter Reed. And, do you think that that $1 
billion add-on to the President's budget request is reason for 
the President to veto this bill?
    Mr. Portman. Again, what we've done with regard to DOD 
health is added more funding, I think about $1 billion in our 
own request and then in the amendment added another $50 
million, in relation to the Walter Reed issue to be sure that 
was, there was adequate funding available.
    And, I would simply say, again, we need to have the 
adequate amount of funding to meet the needs of our returning 
veterans, our returning warriors. We're now in the process of 
an inter-agency group, that I happen to be part of, looking at 
this very issue. We're also, as you know, working with a 
commission co-chaired by Donna Shalala and Bob Dole. And, then 
finally DOD has started their own internal process. So, we do 
have some additional information coming forward that may change 
the administration's view on this. But, we have looked at this 
and that's why we included additional funds.
    Senator Durbin. You're very busy, and I don't want to hold 
you to this, but I've taken the time to visit these hospitals, 
in fact, Walter Reed within the last 10 days, to meet with the 
people there who I think are doing a wonderful job in their in-
patient care. But, then to meet with some of these veterans, 
soldiers who've been there for long periods of time. And, I 
will tell you, if you want to go to war with Congress over 
whether we need more money for Walter Reed, we're ready. I 
think we need it for Walter Reed and military hospitals across 
this country. We are not prepared for what this war is sending 
back home.
    Now, there's $3.1 billion in there for the Base Realignment 
and Closure Commission (BRAC). Do you think we should use the 
money in this supplemental to pursue the stated goals and 
objectives of the Base Realignment and Closure Commission?
    Mr. Portman. Well, as you know, we felt strongly that 
should have been included in the 2007 bill and that's why we 
proposed it, and Congress chose not to deal with that in the 
long-term continuing resolution. In fact it's, really when you 
think about it, the only exception that was made. As a result, 
when we saw that it was reemerging as part of the emergency 
supplemental, and we don't believe that was the appropriate 
place for it, because it's not an emergency, it's something 
that should be handled in the regular course. We did send, as 
you know to you all, some offsets that totaled $3.1 billion to 
be able to cover that expense and to have it be within the 
emergency supplemental, but paid for. And, that's our hope. We 
think it's very important that it be done. In fact, we think it 
should have been done in the 2007 process.
    Senator Durbin. So, now I'm up to about $10 billion out of 
the $20 billion, and I've never mentioned peanuts and spinach.
    We've talked about additional spending for the troops, to 
keep them safe, Veteran's Administration to deal with the 
hospitals, military hospitals, and BRAC. So, taken as a 
package, that $10 billion, do you think that's a good reason 
for the President to veto the supplemental appropriation?
    Mr. Portman. Again, it would depend on what the funding was 
for; we believe that we have funded a lot of these priorities 
already. We believe with regard to BRAC, it ought to be offset, 
we don't believe it's appropriate as an emergency. I don't 
think most Members of Congress do, either, incidentally, 
including the Appropriations Committees.
    Senator Durbin. Veteran's Administration is not an 
emergency?
    Mr. Portman. I'm talking about BRAC.
    Senator Durbin. Oh, okay.
    Mr. Portman. I'm talking about the BRAC funding.
    On those other issues, we'd want to look at them. We'd want 
to look at, again, where we have already addressed those 
issues, what has changed in the interim time period. As I said, 
there is an ongoing commission on the DOD health, VA health 
issue because that is--as you know--an issue where there's 
overlap, and there's a legitimate concern about the handover 
from DOD to VA.
    Senator Durbin. There's about $1 billion in there for the 
9/11 Commission recommendations for security at chemical 
plants, communications systems and the like--is this what you 
consider peanuts and spinach?
    Mr. Portman. Some of that, as you know, is in our 2008 
appropriations request, in other words, it's in our budget 
request that we would hope you would deal with in the regular 
process. We don't view that as appropriate to be part of the 
emergency supplemental----
    Senator Durbin. Homeland security, not an emergency?
    Mr. Portman. Huge priority, and a huge priority for the 
President. And that's why we've increased funding fairly 
dramatically. The question is, whether this is the time and 
place to add to the needed funding for the troops for their 
protection, for their equipment, for their training. Frankly, 
items that are more appropriately handled through the normal 
process--where you have oversight, where we have the ability to 
work through with other priorities, and where we have some 
rules applied.
    Emergency spending--as you all know--is something that this 
Congress has, and the new majority indicated, they wanted to 
avoid, because it is not paid for, it is not subject to the 
rules, including the caps on domestic discretionary spending 
that you may well want to enforce. And the only question is, 
you know, why should this be done as part of this emergency 
funding request for the war?
    Senator Durbin. So, the President----
    Mr. Portman. I'm not saying it's a bad idea to proceed with 
pandemic funding for HHS for flu, or to proceed with funding 
for BRAC--we think these are all good things. They're actually 
in our budget. In the case of pandemic, I think we have roughly 
the same number you do--which is $100 million less than the 
House. But, we think this is an appropriate expenditure to be 
in the budget, and part of your normal appropriations process.
    Senator Durbin. So, the President has asked for funding for 
this war as an emergency spending item each year, which kind of 
belies the argument that we need more congressional oversight, 
but let's step aside from that.
    Can you tell me, in previous years when these emergency 
spending requests for the war have been submitted to Congress, 
whether the Congress has added things that the President didn't 
include in his original request?
    Mr. Portman. I'm familiar--having come to this job about 1 
year ago with last year's supplemental from an administration 
perspective. When I served on the Budget Committee prior to 
that, I'm also familiar with the fact that there's always 
additional pressure from Congress to add to any emergency 
supplemental--whether it's connected with, in this case, 
Afghanistan and Iraq, or not.
    I'm also aware--as you know--that last year, by threatening 
a veto, as the President has done again this year, we were able 
to reduce the amount--in that case--by almost $15 billion under 
Republican majority. And, many of the items that were taken out 
of the bill were items that we're spending that the 
administration didn't oppose, but didn't believe were 
appropriate to be in an emergency supplemental, and were later 
dealt with in the regular appropriations process, that would be 
our hope.
    This year, as you know, we submitted our war supplemental 
request earlier, and with far more detail, in response to the 
concern that you, and others, had expressed to us about 
timeliness and level of detail. So, with the budget itself, we 
sent a supplemental request--not just for 2007, but for 2008--
we also provided account-level detail and for the first time, 
provided the justifications with that, hoping that 65 days ago 
when we did that, that Congress would have the ability to do 
the kind of oversight that I believe the Appropriations 
Committee has done.
    Senator Durbin. In previous years, has Congress added more 
money to the President's requested supplemental for the war in 
Iraq and Afghanistan?
    Mr. Portman. Has the----
    Senator Durbin. Congress added?
    Mr. Portman [continuing]. Added additional funding? Yes.
    Senator Durbin. And has the President signed the bill?
    Mr. Portman. Last year the President refused to sign it 
over his level, as you know. And his negotiations with Congress 
were successful, in the sense that the $15 billion in addition 
to what he requested was not included.
    Senator Durbin. So, you're saying the President has never 
signed an emergency supplemental bill for the war in Iraq that 
included any congressional add-ons?
    Mr. Portman. I think the situation last year was that the 
level of funding the President requested was maintained, and 
not a penny more. I'm not sure about the year before, or the 
year before.
    In terms of the quality, you know, what was in the bill, 
the substance of the bill, I'm sure there were some changes, as 
there would be any year, in terms of the President's request 
that came from the Appropriations Committees.
    Senator Durbin. The administration's opposed to the 
additional funds for Hurricane Katrina that are included in the 
supplemental?
    Mr. Portman. We included additional $3.4 billion, which we 
think is adequate to make good on our commitments, in addition 
to the roughly $110 billion that you all have already 
appropriated for Katrina and Rita and the aftermath. We think 
that's adequate to meet the needs.
    Some of the additional funding, in fact, the biggest part 
of it, as you know, is for levees--we do believe there's a need 
there, and a concern. We think it can be handled in the normal 
process. Most of that funding we don't believe can be spent in 
2007, in fact, we don't think much--if any--of it can be spent 
in 2007. So, it would be more appropriate for us to deal with 
that as part of the regular appropriations process, but we're 
going to work with Congress on that.
    Senator Durbin. So, you would recommend the President veto 
the bill if there's additional Hurricane Katrina relief?
    Mr. Portman. Well, again, I don't know that I can answer 
that question without knowing which parts of that--there are 
three general parts of the Katrina add-ons as we look at it 
with regard to the levee funding. We don't think it's 
appropriate in the emergency context. Again, if Congress were 
to offset that funding with other reductions elsewhere, we 
would certainly be much more likely to be supportive.
    Senator Durbin. And as far as agriculture disasters, we 
haven't had an agriculture disaster bill for 2 years, and--as 
you know, having served in Congress--it was a traditional 
program, funded program, it was a program that was used 
whenever something happened of a disastrous nature, affected 
farming across America. So, do you believe that adding 
agriculture disaster funds in this bill is a reason for the 
President to veto it?
    Mr. Portman. Well, you were much more involved in the 2002 
farm bill than I was, Senator. But, my recollection was that we 
were going to try to avoid these emergency supplementals by 
putting in place, not just the programs--marketing loan 
counter-cyclical programs--but also the Crop Insurance Program. 
And, I know you've heard from Secretary Johanns on this, but, 
you know, we believe that it is working, as intended, and we 
believe it is being responsive to the concerns in farm country, 
and that would be the preferred approach for us.
    Senator Durbin. Senator Allard.
    Senator Allard. Thank you, Mr. Chairman.

                           PROGRAM EVALUATION

    You've had an opportunity to show up before me a couple of 
times, I think, already this year, Director Portman, and I have 
complimented you on your efforts on implementing the 
legislation we passed from the Government Performance and 
Results Act (GPRA). In fact, as the various agencies show up in 
front of us, I look at your scorecard and ask about the 
programs that are rated ineffective, and ask them about those 
programs that are rated as ``results not demonstrated.''
    I think it helps add to budget transparency, at least as 
far as I'm concerned, when we ask these questions. Sometimes 
it's legitimate reasons, perhaps, that they're terminating the 
program, and they just started in the process, and it's 
understandable. They've recognized the problem, so they're 
getting rid of it.
    And then, in other instances, they just seem very 
defensive, and so, we kind of pick up on that, too.
    Do you feel that this has added to the transparency in the 
budgeting process?
    Mr. Portman. I do, I feel strongly about it, and I know 
you've made a decision to leave the Senate, I hope you will 
pass along your GPRA and your scorecard interest to some of 
your colleagues, because it's an important part of the 
transparency that leads us to better Government.
    I talked earlier with the chairman and other members who 
are here about the website, that I know you're very familiar 
with--ExpectMore.gov--and the fact that we now have 1,000 
programs up that are subject to this scorecard, and we're 
looking at 96 percent of Federal spending now, which is an 
amazing resource, and so I thank you for raising it with the 
agencies. I do think it adds to the transparency. I think, as 
you say, sometimes there's a good reason for not scoring well 
on the scorecard, getting a red rather than a yellow or a 
green. Sometimes there's not. And one thing that we do is try 
to determine not just, whether they have met the standards--
which we lay out, by the way, we ask the Agency, ``What are 
your goals?'' And then we judge them based on their goals. And 
that's all transparent.
    As we develop the proposed funding level for the budget, we 
look at whether it's an appropriate governmental activity. In 
some cases the program could get all greens, but it isn't an 
appropriate Federal governmental expense or activity.
    In other cases, you could have a lower score, but it's such 
an important program that we want to re-double our efforts to 
make sure it's working well for your constituents.
    Senator Allard. I found it fascinating to look down through 
that ExpectMore.gov and I asked my question, well, what 
agencies are not on there? And, I notice there's nothing on 
OMB. Do you apply the assessment that you give to the----
    Mr. Portman. That surprises me, actually.
    Senator Allard [continuing]. Other agencies to yourself, 
and do you have measurable goals and objectives?
    Mr. Portman. The ExpectMore.gov website includes PART 
analyses of programs. OMB does not have programs, which the 
chairman noted at the outset, so we don't have programs that 
are up there, but we do apply the President's management agenda 
to ourselves, which you can find on results.gov.
    Senator Allard. But, you do spend taxpayer dollars.
    Mr. Portman. We do. And we apply all five categories of the 
President's management agenda to ourselves.
    Senator Allard. But they're not public?
    Mr. Shea. Yes, they're public.
    Senator Allard. Okay, so can we get a report from OMB?
    Mr. Shea. We grade ourselves on the scorecard----
    Mr. Portman. All right, I'm going to ask the Associate 
Director for Management, Robert Shea, to answer your question, 
if that's all right.
    Mr. Chairman, is that okay if I have Mr. Shea----
    Mr. Shea. Yes, sir. OMB is assessed on the President's 
management agenda scorecard each quarter. So, we're assessed on 
our personnel management, financial management, information 
technology (IT) management, competitive sourcing, and 
performance management. We do have annual goals that collect 
data on and use to manage the agency. We don't manage programs, 
so we haven't assessed ourselves with the program assessment 
rating tool.
    Senator Allard. So, how--if you were under that rating 
tool--how would you grade yourselves?
    Mr. Shea. We'd have to do that assessment first.
    Senator Allard. Okay.
    Mr. Shea. And, we could show you how we're performing 
against our goals, and using the President's management agenda, 
how well we're managed.
    Senator Allard. Well, Director Portman is liable to show up 
before me again. Will you have an answer when I ask that 
question?
    Mr. Shea. Yeah, we can give you a much detailed report on 
the quality of our management.
    [The information follows:]
    
    
    
    Senator Allard. Well, I think that--we want to make sure 
that everybody applies under that. Are there other programs 
that we are not evaluating that perhaps we should?
    Mr. Portman. The PART we're using to assess all programs 
over time--we've assessed 96 percent and we're making progress 
assessing the rest.
    Senator Allard. Okay, well, if you happen to pick up on any 
that we're not assessing, I'd like to know why, if you would, 
please. Maybe the subcommittee would be interested in that, as 
well. I will be anxious to get your own evaluation back on 
this, Director. Thank you.
    Mr. Portman. One of the things I'm doing as Director is 
ensuring that we are meeting what we ask other agencies to do. 
And, I can tell you it's sometimes difficult, and, you know, we 
are going for the green like everyone else is. So, it's 
something we do drive through the agency, just as other agency 
heads, too. Even though we do not have programs, we assess 
ourselves based on those five categories.
    Senator Allard. I think it's helpful for other agencies to 
know you're doing the same, you know, everybody's living under 
the same rules, and what you expect of others, you're willing 
to live under, too.
    Mr. Portman. Right. I agree.
    Senator Allard. I think that helps add credibility, and I 
just ask that question in a positive vein, by the way.
    And, also, Mr. Chairman, that concludes my questions, I'd 
just ask that my introductory remarks be made part of the 
record.
    Senator Durbin. Without objection.
    [The statement follows:]

               Prepared Statement of Senator Wayne Allard

    I would like to thank Chairman Durbin and Ranking Member 
Brownback for holding today's hearing to review the fiscal year 
2008 budget request for the Office of Management and Budget 
(OMB). This is a very important agency, and I appreciate having 
the opportunity to review the agency's budget.
    OMB's primary role is to prepare the federal budget and to 
supervise its administration in Executive Branch agencies. So 
although the size of their actual budget might be somewhat 
small in Washington terms, the agency has enormous power and 
influence. This has been especially true over recent decades as 
OMB has taken a much stronger role in policy coordination.
    The federal government has thousands of programs designed 
to meet various needs. Yet, while the needs in this country 
might be virtually limitless, the resources to meet those needs 
aren't. We can never forget that each dollar we spend as a 
federal government is a dollar that was taken from a taxpayer 
in this country. Accordingly, we must exercise great care in 
choosing how to invest those dollars. I say ``invest'' rather 
than ``spend'' quite deliberately. To spend simply indicates an 
outflow of resources. By contrast, to invest indicates that the 
outflow was made strategically with the expectation of a return 
on the investment.
    To help make determinations between the many competing 
priorities, OMB has devised the PART assessment, which is a 
result of the Government Performance and Results Act (GPRA). 
The PART assessment holds agencies accountable for devising 
meaningful, outcome based measures for their programs. Programs 
that provide a good investment for taxpayer dollars should see 
that reflected in their budget, whereas inefficient programs 
should also see the status reflected in their budget.
    I have been a bit puzzled recently by those who are 
increasingly resistant to the PART program. As I said earlier, 
given that taxpayer dollars are much more limited than needs, 
we must view allocations as investments. Would those same 
critics invest in a stock, bond, mutual fund, hedge fund, or 
other investment vehicle without ever asking about the return 
it has produced? Of course not. It would be irresponsible for 
us to not ask similar questions of federal programs.
    I am pleased that we have Director Portman here with us 
today. I always enjoy hearing from him as part of the Budget 
Committee, but I look forward to this opportunity to delve more 
into the workings of OMB as an agency.
    Director Portman, I know you have a very busy schedule, so 
I sincerely appreciate your time today, and I look forward to 
your testimony.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Durbin. I'd like to say that there are other 
questions for the record that will be submitted for your 
consideration, I hope you can provide us with prompt responses. 
The hearing record will remain open for a period of 1 week 
until Wednesday, April 18 at noon for subcommittee members to 
submit statements and/or questions for the record.
    [The following questions were not asked at the hearing, but 
were submitted to the Office for response subsequent to the 
hearing:]
                Questions Submitted by Richard J. Durbin
competitive sourcing: inherently governmental vs. commercial activities
    Question. Circular A-76 states that agency personnel shall use the 
circular's definition of ``inherently governmental'' in preparing their 
justifications. Is any other guidance provided to agencies as to what 
type and scope of information constitutes sufficient justification?
    Answer. Since the Circular was revised in May 2003, OMB has not 
issued additional guidance regarding the development of justifications 
to explain the inherently governmental nature of an activity. We expect 
justifications to include sufficient information about the function 
performed to enable a reasonable person to understand why the function 
was categorized as inherently governmental.
    Question. What happens if OMB does not agree with an agency's 
justifications for inherently governmental activities? Who has final 
authority over the agency's list of inherently governmental activities 
and accompanying justification?
    Answer. Pursuant to the requirements of the Federal Activities 
Inventory Reform Act, OMB reviews agency inventories prior to their 
publication. OMB may offer comments on the inventory during the 
consultation process, but does not make final determinations on whether 
specific agency positions are inherently governmental or commercial. 
All final determinations regarding the classification of activities are 
made by the agency.
    Question. Have consultations between OMB and agencies ever resulted 
in shifting activities from an inherently governmental list to a 
commercial inventory or vice versa? How many functions and FTEs have 
been shifted, for each agency and each year, from one list to another? 
What has been the net result government-wide?
    Answer. Over the years, there has been some shifting between the 
inherently governmental and commercial lists as agencies gain a clearer 
understanding of their activities and make incremental improvements to 
more clearly and accurately identify the functions performed by their 
workforce. In 2005, 43.1 percent of activities were identified as 
inherently governmental and 57.9 percent of activities were identified 
as commercial. In 2004, the figures were nearly identical--i.e., 42.5 
percent inherently governmental and 57.5 percent commercial. We expect 
the same general figures for 2006.
    Since 2003, there has been a slight shift in overall figures with 
an increase in commercial activities. However, this shift has had only 
a negligible impact in terms of work being shifted from agency to 
contract performance. After revisions were made to Circular A-76 in 
2003, no work has been converted from public to private sector 
performance unless a public-private competition was conducted, and 
competitions have been applied only to a small fraction of the entire 
workforce--less than 3 percent of all activities since fiscal year 
2003. Moreover, Federal employees have won 83 percent of all 
competitions conducted during this time period.
    Equally important, agencies have carefully tailored their use of 
competition to highly commercial support activities that the private 
sector is well equipped to perform. According to agencies' 2005 
inventories, a substantial number of commercial activities (more than 
40 percent of all commercial activities) are excluded from 
consideration for competition. These exclusions are largely based on a 
need to preserve in-house core capabilities. Some commercial positions 
are excluded from consideration for competition for other business 
reasons (e.g., private sector interest unlikely).
    Question. Currently, OMB devises for agencies competitive sourcing 
plans that cover three out-years. It is my understanding that OMB has 
now determined to devise competitive sourcing plans that cover eight 
out-years.
    Is this true? If so, why is a longer period necessary? What would 
this mean practically for agencies? Would agencies, for example, be 
required to review for privatization additional employees? What does 
this mean for the current ``green'' plans? Will they all have to be 
revised?
    Answer. Agencies--not OMB--develop competitive sourcing plans that 
are tailored to the mission and workforce needs of their agencies. OMB 
has not asked agencies to develop new plans or significantly modify 
their existing plans. However, since 2003, when OMB first developed 
guidance on ``green'' competition plans, we have asked agencies to 
continually update plans based on changed conditions, improved insight 
into their programs, and results achieved in conducting competitions. 
This approach has helped agencies focus their attention where 
competition makes the best sense. As a result, projected savings are 
significant despite the small percentage of the workforce competed. In 
fiscal year 2006, for example, agencies competed only 0.4 percent of 
the workforce. Yet these competitions are expected to generate savings 
of $1.3 billion for taxpayers over the next 5-10 years.

                                STAFFING

    Question. How is your staff allocated among the various offices and 
organizational units within the agency? How many are in each?
    Answer.

              EXECUTIVE OFFICE OF THE PRESIDENT, OFFICE OF MANAGEMENT AND BUDGET--PERSONNEL SUMMARY
                      [Distribution by Program Activity for Full-time Equivalent Positions]
----------------------------------------------------------------------------------------------------------------
                                                                                                        Fiscal
                                                                    Fiscal      Fiscal      Fiscal     year 2007
                   Program Activity Structure                      year 2006   year 2007   year 2008   to fiscal
                                                                  FTE actual      FTE         FTE      year 2008
                                                                               estimate    estimate   difference
----------------------------------------------------------------------------------------------------------------
National Security Programs......................................          62          65          65  ..........
General Government Programs.....................................          51          64          64  ..........
Natural Resource Programs.......................................          57          61          61  ..........
Human Resource Programs.........................................          66          67          67  ..........
Office of Federal Financial Management..........................          17          18          18  ..........
Information and Regulatory Affairs..............................          50          50          50  ..........
Office of Federal Procurement Policy............................          11          14          14  ..........
OMB-wide Offices................................................         152         150         150  ..........
                                                                 -----------------------------------------------
      Total Direct Program......................................         466         489         489  ..........
----------------------------------------------------------------------------------------------------------------

    Question. What is the percentage of OMB employees who will be 
eligible for retirement over the next five years?
    Answer. As of 2012, 21 percent of OMB's current employees will be 
eligible for retirement.

                     ENTERPRISE SERVICES INITIATIVE

    Question. Within the Executive Office of the President (EOP), there 
is an initiative known as the Enterprise Services Initiative. This 
involves EOP agencies, including yours, transferring their space rental 
costs and some other costs to the Office of Administration to be paid 
by that office.
    Why is this a good idea?
    Answer. The intent of the Enterprise Services Initiative is to gain 
administrative efficiencies by having only one single manager and payer 
for common services that cut across the EOP, thereby making more 
efficient use of the OA financial staff, component financial managers, 
and representatives from supporting servicing agencies. Specifically, 
the net result will consolidate over 28 relatively small service 
agreement accounts into six service agreement accounts with a 
corresponding significant reduction in the processing of over 180 
payment transactions between multiple staffs. Further, agencies outside 
the Executive Office of the President will have a single point of 
contact in coordinating and negotiating service agreements vice having 
to work individually with each of the separate EOP components included 
in the fiscal year 2008 Enterprise Services Initiative.
    Question. What are the benefits?
    Answer. Specifically regarding the consolidation of space rent, 
most EOP components have already successfully consolidated space rent 
costs in the OA appropriation. Completing this consolidation initiative 
for OMB and ONDCP will provide consistency in managing rent across the 
EOP while facilitating the oversight of office space allocation. 
Currently, managing space rent allocation and corresponding rent costs 
between OA, ONDCP and OMB is complex, especially in light of the 
ongoing EEOB modernization program entailing frequent office moves 
within the EOP complex. (Note: OMB rent was included in the Enterprise 
Services initiative in fiscal year 2005 but was subsequently returned 
to OMB's appropriation in fiscal year 2006.)
    Question. How much of your budget would be transferred to the 
Office of Administration?
    Answer. OMB's fiscal year 2008 budget request proposes to move 
$7.903 million to the Office of Administration as part of the 
Enterprise Services Initiative.
    Question. The Office of Administration budget includes about $12 
million for a Capital Investment Plan. Does OMB benefit from those 
funds?
    Answer. Yes, OMB benefits. The Capital Investment Plan is used for 
system lifecycle replacements for OMB's desktop computers, printers, 
and laptop replacements. Additionally, these funds support the 
Executive Office of the President's network infrastructure upgrades. 
This includes e-mail upgrades, HSPD-12 implementation, network and 
server regular upgrades, network storage upgrades, enterprise software 
licenses, and server ``virtualization.'' These are improvements made to 
the systems supporting the entire EOP, as such OMB is a beneficiary.
    Question. Do you receive funds from that source for IT projects?
    Answer. No, the Office of Management and Budget does not receive 
funds from the Office of Administration's Capital Investment Plan.

              PRIVACY AND CIVIL LIBERTIES OVERSIGHT BOARD

    Question. The Privacy and Civil Liberties Oversight Board was 
established by the Intelligence Reform and Terrorism Prevention Act of 
2004. It consists of five members appointed by and serving at the 
pleasure of the President. The Board advises the President and other 
senior executive branch officials to ensure that concerns with respect 
to privacy and civil liberties are appropriately considered in the 
implementation of all laws, regulations, and executive branch policies 
related to efforts to protect the Nation against terrorism. This 
includes advising on whether adequate guidelines, supervision, and 
oversight exist to protect these important legal rights of all 
Americans.
    What is the current 2007 budget for the Privacy Board and what is 
the request for 2008?
    Answer. For fiscal year 2007, the Privacy and Civil Liberties 
Oversight Board (PCLOB) budget is $1.5 million. As for fiscal year 
2008, funding for PCLOB is funded within the White House Office program 
as are other offices within this program.
    Question. In which account in the Executive Office of the President 
is the Board funded?
    Answer. The Privacy and Civil Liberties Oversight Board is funded 
within the White House Office program.
    Question. Why shouldn't this Board be funded through its own 
account?
    Answer. The Privacy and Civil Liberties Oversight Board operates 
similarly to other offices within the White House Office program where 
staff and supporting infrastructures are routinely shared and networked 
within the White House as they provide direct support to the office of 
the President. Accordingly, it would be impractical and add additional 
administrative costs to segregate and track responsibilities between 
the Board and other offices operating within the White House Office 
program.
    Question. How many staff members does the Board have?
    Answer. The 5 member, part-time board, as appointed by the 
President, is in place with the exception of one member who recently 
resigned. Additionally, there are 3 staff members supporting the Board.
    Question. Many civil libertarians and others believe that this 
Board lacks the independence it needs to do its job and believe that it 
should be removed from the Executive Branch and be independent.
    What are the Administration's views on this?
    Answer. As the Administration has recently explained in its 
Statement of Administration Policy (SAP) on S. 4, Improving America's 
Security Act of 2007, ``The Board's present structure is in full accord 
with not only the spirit but also the letter of the 9/11 Commission's 
recommendation.'' In addition, the SAP explained that the Board ``has 
integrated itself into the Administration's policy formulation and 
implementation processes and has moved to integrate its operations with 
those of the many other privacy and civil liberties offices that exist 
within the Executive Branch.'' Therefore, the Administration ``supports 
the work and structure of the existing Privacy and Civil Liberties 
Oversight Board.'' To change the structure of the Board, as S. 4 
proposed to do, ``would thrust unwarranted disruption onto a structure 
that is operating effectively to fulfill its statutory mission.''
    In addition, the Board recently issued its first annual report to 
Congress in which it detailed its stand-up activities and advisory and 
oversight initiatives. The report further outlines the Board's plans 
for the year ahead and demonstrates its commitment to fulfilling its 
statutory responsibilities. As explained in the report, ``By empowering 
the Board with broad access to records, the Intelligence Reform and 
Terrorism Prevention Act of 2004 has created a Board that can offer a 
distinctly independent perspective to the President, along with 
oversight of executive agencies.''

                 PROGRAM ASSESSMENT RATING TOOL (PART)

    Question. Can you tell the Committee how you can ensure the 
objectivity of PART so that it is not influenced by political 
considerations?
    Answer. The Program Assessment Rating Tool (PART) is designed to 
provide credible, objective assessments of program performance to 
inform resource decisions and actions to improve program effectiveness. 
The PART asks basic questions about program design, management, and 
execution and requires evidence to document affirmative answers. The 
explanation for each question and the supporting evidence are made 
available to the public at www.ExpectMore.gov, making them subject to 
public scrutiny. The PART is a comprehensive assessment of a program 
that draws from available data; reports from the Government 
Accountability Office and Inspectors General are common sources of 
evidence for PART answers.
    In addition, the process for completing the PART--a collaborative 
one where agency and OMB staffs cooperate to review the program--also 
helps ensure the assessment is fair. A key aspect of this collaboration 
is identifying appropriate performance measures for the program that 
focus on the outcomes that are important to the American people. Each 
year there is a centralized review of all PARTs to ensure they are 
being completed consistent with the guidance and to review the quality 
of performance measures. Finally, agencies have the opportunity to 
appeal any disagreements to high level interagency panel of deputy 
secretaries.
    While these controls are meant to ensure PART questions are 
answered objectively, users of the instrument can and should make their 
own judgments by assessing the evidence on which answers to PART 
questions are based, all of which is available at www.ExpectMore.gov.
    Question. If a program has a low PART score, does that 
automatically mean that its budget will be cut?
    Answer. Program performance, as assessed with the PART, is an 
important factor in budget decisions, but it is not the only factor. We 
should work to invest taxpayers' dollars into programs that produce the 
greatest results, but we also need to meet all the nation's priorities, 
including improving the performance of key programs. A good PART rating 
does not guarantee a specific level of funding. A program may be 
effective, but if it has completed its mission, if it is unnecessarily 
duplicative of other programs, or if there are higher priorities, its 
funding may be reduced. Likewise, an Ineffective or Results Not 
Demonstrated (RND) rating does not guarantee decreased funding. An 
program rated Results Not Demonstrated may receive additional funding 
to address its deficiencies and improve its performance.
    PART is a factor, though rarely the only factor, in determining a 
program's funding.
    Question. How is a program's PART score determined? What is the 
process?
    Answer. With the PART assessment, agencies and OMB answer 
approximately 25 common-sense questions about each program's 
performance and management. These include:
  --Is the program's purpose clear and is it well designed to achieve 
        its objectives?
  --Does the program have clear, outcome-oriented goals?
  --Is the program well managed?
  --Does the program achieve its goals?
    The answers to specific questions in the PART translate into 
section scores which are weighted to generate an overall score. Because 
reporting a single weighted numerical rating could suggest false 
precision, or draw attention away from the very areas most in need of 
improvement, numerical scores are combined and translated into 
qualitative ratings: Effective, Moderately Effective, Adequate and 
Ineffective. Regardless of overall score, programs that do not have 
acceptable performance measures or have not yet collected performance 
data generally receive a rating of ``Results Not Demonstrated.''
    The Results Not Demonstrated rating suggests that not enough 
information and data are available to make an informed determination 
about whether a program is achieving results. On the other hand, a 
program earns an Ineffective rating when there is clear evidence that 
is not achieving its intended outcomes. For instance, there may be data 
showing the program has failed to meet its goals and has external 
evaluations documenting its ineffectiveness.
    Ineffective programs have been unable to achieve results due to a 
lack of clarity regarding the program's purpose or goals, poor 
management, or some other significant weakness.
    Once each assessment is completed, the agency and OMB develop a 
program improvement plan so we can follow up and improve the program's 
performance.
    Assessing and improving how programs are working is a key part of 
OMB's statutory mission. Our conclusions about program performance and 
management are based on the Program Assessment Rating Tool (PART), a 
diagnostic tool that helps us make budget decisions, but also drive 
program improvements.
    Question. GAO has recommended extending the Program Assessment 
Rating Tool to tax expenditures, many of which are just programs run 
through the tax side. What are your plans for moving forward to develop 
a framework and set a schedule for conducting performance reviews of 
tax expenditures?
    Answer. The PART has been used to assess tax expenditures, like the 
New Market Tax Credit and the Earned Income Tax Credit. Although there 
are no plans to examine tax expenditures with the PART this year, we 
will look for opportunities to apply this assessment to other tax 
expenditures in the future.
    Question. I would ask that for the record you provide examples of 
programs in the fiscal year 2008 budget that: (1) received additional 
funding due to strong PART scores; (2) received additional funding to 
correct deficiencies, as measured by PART; and (3) received less 
funding due to poor PART scores.
    Answer. While PART and other performance information are an 
important factor in developing the President's Budget, these proposals 
are not based just on the overall PART rating. Instead, resource 
allocations consider specific aspects of program performance that 
suggest how taxpayer dollars could be most effectively invested.
    Refugee Transitional and Medical Services (rated Effective) in the 
Department of Health and Human Services is recommended for additional 
funding in the fiscal year 2008 President's Budget for additional 
caseload support. A PART review conducted by HHS and OMB found that the 
program is focused on achieving meaningful performance outcome goals, 
works well with its partners, including State Refugee Coordinators, 
voluntary agencies, and ethnic organization partners; and has 
demonstrated improved efficiencies since fiscal year 2000. In addition, 
the program is working with grantees to improve data collection and 
monitoring.
    The fiscal year 2008 President's Budget recommends an increase in 
funding for the National Parks Service Facility Maintenance (rated 
Adequate) so that it can continue improvement the quality of park 
facilities. The condition of park facilities has not been at acceptable 
levels, but the Parks Service now has a comprehensive inventory and is 
working systematically to improve its facilities and monitor results 
using a Facility Condition Index.
    The fiscal year 2008 President's Budget proposes to eliminate the 
Supplemental Education Opportunity Grants (rated Results Not 
Demonstrated) in the Department of Education. Program funds are 
distributed using a formula that benefits more established institutions 
and results in proportionally less funding going to institutions that 
educate the largest proportion of low income students. In addition, a 
higher proportion of program funds support administrative costs, as 
compared to Pell Grants. The savings from this termination and other 
student aid reforms are directed to better-targeted programs, such as 
Pell Grants.

                        E-GOVERNMENT INITIATIVE

    Question. For the past several years, you have had an initiative 
that you call e- government, or ``egov''. This is an attempt to make 
government more efficient through the increased use of information 
technology to perform some of the basic functions of government.
    Can you give us a status report on the e-gov initiative? How much 
progress has been made?
    Answer. Marking the 4th anniversary of the E-Government Act of 
2002, OMB recently released a report highlighting the progress and 
future goals of the Administration to make government more effective 
and citizen-centered through improved utilization and management of 
information technology. The report identifies the successes and 
aggressive goals set by agencies under the President's Management 
Agenda (PMA) E-Government Initiative to improve information resources 
management, enhance customer service, and for the first time, measure 
the impact, utilization, and effectiveness of programs on the users of 
these services.
    Also, in February 2007, OMB submitted to Congress the second annual 
``Report to Congress on the Benefits of the E-Government Initiatives''. 
The report outlines the purpose of the E-Government and Line of 
Business Initiatives and highlights the benefits agencies receive from 
the initiatives to which they provide funding contributions. The report 
is available at www.egov.gov.
    Five years ago, OMB and agencies launched the Presidential E-Gov 
Initiatives for improved government services. Operated and supported by 
agencies, these Presidential initiatives are providing high-quality and 
well-managed solutions throughout the Federal government. In 2005, the 
Lines of Business (LoB) task forces were initiated with the intention 
of identifying common solutions and methodologies to increase 
operational efficiencies, improve services and decrease duplication. 
During fiscal year 2006, agencies successfully completed major 
development milestones and are showing greater adoption and use of 
these services from citizens, businesses and government agencies.
    In the past few years, we have worked with agency managing partners 
of the E-Gov initiatives to specifically identify clear and measurable 
goals to achieve the maximum use and benefit. The metrics with 
descriptions and type to address adoption/participation, customer 
satisfaction and usage are now available on our website, http://
www.egov.gov.
    Highlights include:
  --Government to Citizen Portfolio.--To date, GovBenefits.gov receives 
        more than 301,875 visits per month by citizens and provides 
        more than 118,579 referrals per month to agency benefits 
        programs. In the 2006 tax filing season, over 3.9 million 
        citizens filed taxes online for free using IRS Free File.
  --Government to Business Portfolio.--As of August 2006, the Expanding 
        Electronic Tax Products for Businesses initiative made 
        electronic forms available for business to electronically file 
        Employment Taxes, Corporate Income Taxes, Employer 
        Identification Number and Wage Reporting, with these 9 percent 
        of corporate income tax forms were filed electronically.
  --Government to Government Portfolio.--Since 2006, all 26 grants 
        making agencies use Grants.gov to post the over 1,000 grant 
        programs they make, with an overall customer satisfaction of 56 
        percent.
  --Internal Efficiency and Effective (IEE) Portfolio.--Federal job 
        seekers have continued to use USAJobs.gov to look for 
        employment opportunities and create resumes online, with an 
        overall customer satisfaction of 77 percent.
  --Lines of Business (LoB) Efforts.--Federal agencies continue to work 
        on implementations in the areas of Financial Management and 
        Human Resources. The other LoBs; Health, Case Management, 
        Grants Management, Cyber Security, Infrastructure, Budget 
        Formulation and Execution and Geospatial, continue to 
        facilitate collaboration amongst agencies.
    Question. What are the main functions of government that lend 
themselves to an e-gov approach?
    Answer. E-Government uses policy and technology to ensure security 
and privacy of data within the Federal government while working to 
improve government efficiency and effectiveness supporting the delivery 
of citizen-centric services. With the increasing use of technology 
throughout all aspects of the public and private sectors, the ``E-Gov 
approach'' is applicable government-wide. For example:
  --Grant Management.--There are many agencies in the government that 
        perform this functionality. Working as a group the grant making 
        agencies can save money by investing in technology solutions 
        together and foster interoperability by using joint standards.
  --Geospatial.--There are many emerging technologies in this area. 
        Agencies can work together to evaluate and select technologies 
        that are best suited for the federal government, rather than 
        independently doing evaluations duplicating the process and 
        cost to the federal government.
    Question. What is OMB's role in the e-government initiative?
    Answer. OMB works with agencies and the CIO Council to establish 
strategic direction and performs ongoing oversight to assist agencies 
in achieving results through government-wide solutions including the E-
Gov initiatives and the Federal Enterprise Architecture (FEA). This 
oversight includes ensuring the E-Government initiatives follow their 
agencies' capital planning and investment control (CPIC) processes and 
adhere to all applicable policies and law, including privacy, security, 
and earned value management. Also, OMB has provided leadership in the 
area of governance processes to assist agencies in working 
collaboratively.
    Question. How much money is budgeted for e-gov initiatives in 
fiscal year 2008?
    Answer. In fiscal year 2008, agencies will contribute $150 million 
towards E-Gov initiatives.
    Question. Do you have any new e-gov initiatives planned for the 
coming year?
    Answer. Currently, there are no new E-Gov initiatives planned, 
however, as an opportunity/need arises we will certainly consider the 
addition.

                         INFORMATION TECHNOLOGY

    Question. The Management Watch List and the High Risk List are 
tools used by OMB to help agency officials monitor agency Information 
Technology (IT) planning, as well as improve project performance. These 
lists are updated quarterly to ensure that agencies are effectively 
managing their IT investments and improving the ability of the Federal 
government to deliver information and services to the public.
    First, tell us specifically what the Management Watch List is and 
how it is used.
    Answer. The President's fiscal year 2008 budget reported 263 major 
investments representing about $10 billion on the ``Management Watch 
List.'' Investments on the ``Management Watch List'' need overall 
improvement in capital planning and investment activities--including, 
but not limited to: performance measurement, earned value management or 
system security. Before the start of the fiscal year, agencies were 
directed to remediate the shortfalls identified prior to expending 
additional funds. The agencies work to remediate the weaknesses and 
monitor the progress of the IT investment. If an investment is still on 
the ``Management Watch List,'' agencies must describe their plans to 
manage or mitigate risk before undertaking or continuing activities 
related to that investment, and the investment is placed on the High 
Risk list.
    Question. How does it differ from the High Risk List?
    Answer. The Management Watch List (MWL) is based on planning 
documentation presented in the exhibit 300 (or ``business case''). The 
High Risk List is based on agency execution of IT projects. The 
Management Watch List is for the upcoming fiscal year while the High 
Risk is based on the current fiscal year. Therefore, items on the High 
Risk List are not necessarily based on past performance--rather, they 
are projects requiring additional monitoring due to the size and 
complexity of the project, or the nature of the risk for the project. 
Conversely, items on the Management Watch List appear to require 
additional planning and/or implementation of controls based on 
documentation available. Finally, the Management Watch List is based on 
IT investments while the High Risk List is based on IT projects.
    Question. What are the criteria that are used to decide whether to 
put an IT project on one of these lists?
    Answer. Investments are placed on the Management Watch List if 
their investment justification needs improvement in various stages of 
the capital planning and investment control process, including, but not 
limited to areas such as: project management, performance measurement, 
earned value management or system security.
    A project is placed on the high risk if it meets the following 
criteria per OMB memo, M05-03, ``Improving Information Technology (IT) 
Project Planning and Execution,'' http://www.whitehouse.gov/omb/
memoranda/fy2005/m05-23.pdf. High risk projects as defined in OMB 
Circular A-11 include those requiring special attention from oversight 
authorities and the highest levels of agency management because--
  --the agency has not consistently demonstrated the ability to manage 
        complex projects;
  --of the exceptionally high development, operating, or maintenance 
        costs, either in absolute terms or as a percentage of the 
        agency's total IT portfolio;
  --it is being undertaken to correct recognized deficiencies in the 
        adequate performance of an essential mission program or 
        function of the agency, a component of the agency, or another 
        organization; or
  --delay or failure would introduce for the first time unacceptable or 
        inadequate performance or failure of an essential mission 
        function of the agency, a component of the agency, or another 
        organization.''
    Question. Is the number of projects on these lists increasing each 
year?
    Answer. The number of projects for the High Risk List and the 
number of investments on the Management Watch List are dynamic.
    The High Risk List OMB published in April 2007, includes 549 
projects determined to be high risk due to different factors, such as 
the complexity, risk, or the level of importance. The President's 
budget reported in February identified 477 projects on the High Risk 
List. The increase on the High Risk List is attributable to increased 
management oversight reported by agencies.
    The number of investments on the Management Watch List varies. 
While an investment might be initially placed on the Management Watch 
List, agencies have an opportunity to remediate these planning 
documents prior to the fiscal year. When the President released his 
fiscal year 2007 budget, there were 263 investments initially placed on 
the Management Watch List; however, by the end of the fiscal year 2006 
there were just 84. When the President released his fiscal year 2008 
budget there were 346 investments placed on the Management Watch List. 
However, agencies are able to continue to remediate these deficiencies 
and as of March 31, 2007, there are 183 investments on the Management 
Watch List. OMB continues to work with agencies to remediate the 
deficiencies in the remaining investments.
    Question. Does OMB have the resources to adequately follow up on 
the Management Watch List projects? If not, what plans, if any, do you 
have to seek assistance from others (e.g. IG offices and other 
oversight bodies) in tracking the resolution of projects with weak 
business cases?
    Answer. Yes, OMB has the resources to adequately follow up on the 
investments on the Management Watch List. Additionally, OMB works with 
the President's Council on Integrity and Efficiency (PCIE), as well as 
agency Inspector Generals (IGs), to assist with independent 
verification and validation for areas of concern. OMB also works in 
partnership with agencies and GAO to address deficiencies in several 
high-risk programs.
    The so-called exhibit 300s are essentially business cases that OMB 
requires agencies to develop to justify funding requests for their 
major IT projects.
    Question. In a review conducted about a year ago, GAO found that 
agencies' exhibit 300s were not always reliable or accurate. What 
actions have OMB and agencies taken since that time to address this 
issue?
    Answer. OMB and agencies took a number of actions to address this 
issue. OMB made significant changes to both the guidance and the actual 
exhibits 53 and 300 for agencies' fiscal year 2008 IT Budget request. 
The changes were intended to improve the quality and accuracy of the 
data. OMB met with agencies to discuss the changes to the exhibits and 
answer questions from the agencies. As part of this year's budget 
review, OMB also increased its requests for the underlying 
documentation referenced in the exhibit 300. At OMB's request, the PCIE 
and Executive Council on Integrity & Efficiency (ECIE) also conducted 
an assessment to ascertain the reliability of agencies' Exhibit 300s. 
This review was completed in March, 2007. OMB will continue to work 
with the PCIE and ECIE on areas identified for improvement. Finally, 
OMB continues to work with the agencies and the CIO Council to help 
improve agency employee understanding of their IRM responsibilities 
including the planning for information technology projects.

                           REGULATORY POLICY

    Question. On January 18, President Bush issued amendments to 
Executive Order 12866, which further centralize regulatory power in the 
Office of Information and Regulatory Affairs (OIRA) in OMB and shift it 
away from the federal agencies given this power by legislative 
enactments.
    Three aspects of the amendments seem troubling: (1) the 
identification of ``market failure'' as the first principle in 
promulgating regulations, (2) the designation of a presidential 
appointee as the Regulatory Policy Officer in each agency covered by 
the Executive Order, and (3) the requirement that significant guidance 
documents undergo nearly the same OIRA review process required of 
significant regulations.
    Why were these changes made in the Executive Order?
    Answer. The primary purpose for the issuance of Executive Order 
(EO) 13422 was to amend EO 12866 in order to establish an interagency 
review process for significant guidance documents, which would serve as 
a complement to OMB's issuance of the Final Bulletin on Agency Good 
Guidance Practices (the Bulletin). The Bulletin and EO 13422 are aimed 
at ensuring that significant agency guidance documents are developed 
through procedures that ensure quality, transparency, public 
participation, coordination, and accountability. As EO 12866 was being 
amended to establish the interagency review process for significant 
guidance documents, this provided an opportunity to make additional 
(non-guidance) amendments to EO 12866 that reflect good-government 
practices.
    The review process for guidance documents is quite different from 
that of regulations. First, pursuant to EO 12866, OIRA reviews an 
agency's significant regulations. Pursuant to EO 12866, as amended, 
however, agencies will provide advance notice of significant guidance 
documents to OIRA and OIRA will notify the agency if additional 
consultation will be necessary before the issuance of the significant 
guidance document; OIRA will not review all significant guidance 
documents. Second, under EO 12866, an agency must prepare a formal 
cost-benefit analysis for an economically significant regulation. By 
contrast, under EO 12866, as amended, while agencies must make basic 
estimates to determine if a guidance document is economically 
significant, there is no requirement for the agency to prepare a formal 
cost-benefit analysis. Accordingly, guidance documents will not undergo 
the same review process as do regulations.
    EO 12866, as amended, provides that agencies must identify in 
writing the specific market failure or other specific problem that they 
intend to address. As an initial matter, the reference to market 
failure is not a new concept; it was referenced in the ``Statement of 
Regulatory Philosophy and Principles'' in the first section of EO 12866 
as it was issued by President Clinton in 1993. It was also discussed 
extensively in other OMB documents issued under President Clinton (in 
then-OIRA Administrator Katzen's 1996 ``Memorandum re: Economic 
Analysis of Federal Regulations Under Executive Order No. 12866'') and 
President Bush (in the 2003 proposed and final versions of OMB Circular 
A-4 for Regulatory Analysis). EO12866, as amended, includes reference 
to the classic examples of market failure including externality 
(environmental problems being the classic example), market power, and 
inadequate or asymmetric information. Second, EO 12866, as amended, 
does not make the identification of a market failure the only basis on 
which a Federal agency can justify regulatory action. The revised 
section also encourages agencies to identify any ``other significant 
problem that it intends to address.'' Finally, this revision does not 
impose a new requirement on rulemaking agencies as agencies should 
already have been identifying in writing the precise nature of the 
problem that the agency is seeking to remedy through regulatory action 
to demonstrate to the public, Congress, and the courts that the agency 
has exercised its regulatory authority in a reasonable and well-
considered manner.
    EO 12866, as amended, provides that each agency head shall 
designate one of the agency's Presidential Appointees to be its 
Regulatory Policy Officer and advise OMB of such designation. However, 
many of the Regulatory Policy Officers had already been Presidential 
appointees (and most of these Presidential appointees held Senate-
confirmed positions) prior to the issuance of EO 13422. The chief 
advantage of having a Presidential appointee serve as the Regulatory 
Policy Officer is that it ensures accountability with respect to this 
role.
    Question. Have you estimated the number of guidance documents OMB 
will be expected to review in fiscal year 2008?
    Answer. Under EO 12866, as amended, after agencies provide advance 
notice of significant guidance documents to OIRA, OIRA will notify the 
agency if additional consultation will be necessary before the issuance 
of the significant guidance document. As EO 13422 was issued in January 
of 2007, OMB does not yet have much experience in its implementation, 
and OMB has not determined how many significant guidance documents it 
will review in fiscal year 2008. The number of significant guidance 
documents selected by OIRA for additional consultation will likely vary 
from year to year, depending on a variety of factors, one of them being 
the types and number of significant guidance documents that agencies 
develop from one year to the next.
    Question. How many additional staff, with what sets of skills, will 
be needed to accomplish these reviews? Were the revised regulatory 
review requirements considered in formulation of OMB's budget request 
for fiscal year 2008? If not, why not?
    Answer. It is not expected that additional staff will be necessary 
as it is OMB's plan to utilize OIRA s existing staff in the 
implementation of EO 12866, as amended, and the Bulletin. OIRA staff 
currently review draft rules pursuant to EO 12866, draft information 
collections pursuant to the Paperwork Reduction Act, and some drafts of 
guidance documents. These same staff will review significant guidance 
documents selected for review by OIRA pursuant to EO 12866, as amended. 
The submitted budget request documents do not contain requests for 
additional funding because it is expected that EO 12866, as amended, 
and the Bulletin can be implemented with existing resources.

        OUTSOURCING--``COMPETITIVE SOURCING'' OMB CIRCULAR A-76

    Question. Recently, OMB Associate Administrator Matthew Blum was 
reported to have said that the Administration would soon publish new 
guidance relating to the public-private competitions that federal 
agencies conduct. (Government Executive article, dated 4/4/07)
    Can you tell me more about what you will be proposing and why?
    Answer. On April 13, 2007, OMB issued a memorandum to the 
President's Management Council providing guidance to help agencies 
substantiate that savings are achieved and performance is improved 
through public-private competition. The guidance includes a requirement 
for all PMA agencies to develop plans for the independent validation of 
a reasonable sampling of competitions. The guidance is available at 
http://www.whitehouse.gov/omb/procurement/comp_src/
cs_validating_results.pdf.
    Question. Do you expect this guidance to result in more federal 
employee jobs being privatized?
    Answer. No. The purpose of the guidance is to ensure agencies and 
taxpayers receive the expected benefits from competition. OMB hopes 
these efforts will further strengthen accountability for results--
irrespective of who the selected provider is--and reinforce public 
trust and confidence in the competitive sourcing initiative.
    Question. Currently, federal employees do not have the same rights 
that contractors possess to appeal contracting-out decisions to GAO and 
the Court of Federal Appeals. A senior procurement official whose job 
is not among those being considered for contracting-out can appeal on 
behalf of affected employees in very narrow circumstances. In order for 
there to be any confidence in the integrity of the ``competitive 
sourcing'' process, it is understood that both sides should have the 
same appeal rights.
    What approach would the Administration prefer the Congress to take 
to rectify this imbalance: giving appeal rights to federal employees 
actually being reviewed for privatization or taking away appeal rights 
from contractors, so that there can be a level playing field?
    Answer. OMB believes protest rights are more balanced than 
described above. For example, contractor employees, like federal 
employees, do not have an independent right to protest to the GAO. 
Although the law limits the representative for agency protests to the 
agency tender official (ATO), the law also requires the ATO to notify 
Congress whenever the ATO fails to pursue a protest to the GAO on 
grounds requested by a majority of the employees engaged in the 
performance of the competed function. There is no similar reporting 
requirement for companies that do not pursue protests requested by 
their employees.
     are political activities being encouraged at federal agencies?
    Question. Recent reports have discussed potential improprieties by 
the GSA Administrator and the activities of the top aide to political 
advisor Karl Rove. That aide and the GSA Administrator apparently met 
with GSA political appointees about the 2006 election results and 
Republican goals for 2008.
    To what extent are the White House and OMB engaged with the 
political appointees at federal agencies about election outcomes?
    Answer. OMB regularly circulates Hatch Act guidance to its 
employees. First, OMB includes Hatch Act information in its annual 
mandatory ethics training for employees. OMB senior staff receive live 
ethics training each year, in compliance with Office of Government 
Ethics regulations; other OMB staff receive live ethics training every 
third year and paper ethics training in the ensuing years. All training 
sessions, whether live or paper, include Hatch Act guidance. Secondly, 
OMB circulates specific Hatch Act guidance to all employees every two 
years, which coincides with the federal election cycle. OMB last 
circulated its specific Hatch Act guidance on September 25, 2006.
privacy and security of personal information role of omb in government 

                         COMPUTER DATA BREACHES

    Question. Personal data security breaches are being reported with 
increasing regularity. These breaches occur not only because of illegal 
or fraudulent attacks by computer hackers, but often because of 
careless business practices, such as lost or stolen laptop computers, 
or the inadvertent posting of personal data on public websites.
    Federal agencies are not immune from this unsettling problem. In 
May 2006, 26.5 million veterans and their spouses were in danger of 
identity theft because a Veterans Affairs data analyst took home a 
laptop computer containing personal data which was later stolen in a 
burglary. Other incidents of potentially compromised data in 2006 
involved the Departments of Agriculture, Commerce, Defense, Energy, 
State, and Transportation, the Federal Trade Commission, the Internal 
Revenue Service, the Government Accountability Office, the National 
Institutes of Health, and the Department of the Navy.
    Director Portman, it appears some steps have been taken to address 
this disturbing problem of data breaches involving personal and 
sensitive information in government computers, but are they the right 
ones?
    Answer. Yes, and we are continuing our efforts in this area. As 
recommended by the President's Identity Theft Task Force in their 
interim recommendations issued by Clay Johnson on September 20, 2007 
titled, ``Recommendations for Identity Theft Related Data Breach 
Notification'' (www.whitehouse.gov/omb/memoranda/fy2006/
task_force_theft_memo.pdf), agencies use a risk-based approach when 
analyzing and responding to data breaches of sensitive information.
    Question. Are we doing enough?
    Answer. Although there is continued progress toward the 
establishment of appropriate safeguards, most Federal agencies are 
still at risk for improper access and disclosure of personally 
identifiable information and other sensitive information, as described 
by the IGs evaluations completed in October 2006. There is continued 
need for agencies to identify and properly categorize sensitive 
information; refine organizational policy, and implement comprehensive 
solutions to protect sensitive information being transported or stored 
offsite, or remotely accessed.
    Question. Can we achieve ``zero tolerance'' in this arena? What 
tools and resources would it take?
    Answer. A significant factor in data breaches is human error, which 
results from failure to successfully implement security and privacy 
policies. ``Zero tolerance'' would only be possible when agencies focus 
beyond compliance and manage the risk through the use of an integrated 
and comprehensive privacy and security awareness training of all 
personnel, responsibility-specific training when appropriate, and 
successful implementation of privacy and security policies. However, we 
cannot guarantee these incidents will not happen, but rather the 
agencies will have the ability to properly respond to minimize the risk 
of our citizen's data.
    Question. In addition to the directives on encryption, access, 
timely reporting, and management response issued last year, what other 
initiatives is OMB considering to help resolve this problem or mitigate 
the risk?
    Answer. OMB is focused on implementing existing law and policies, 
and following the recommendations identified in the report submitted to 
the President by the Identity Theft Task Force on April 23, 2007.
    Question. Are you contemplating issuing any further directives that 
compel agencies to enhance IT inventory controls, including the 
creation of comprehensive databases for all departmental property?
    Answer. We rely on the information agencies provide in the annual 
report on security under the Federal Information Security Management 
Act (FISMA) and the assessment by the agencies' Inspectors General for 
the quality of agency system inventories. Additionally, the E-
Government Act requires agencies to report on their privacy program, 
and agencies report to us on the number of completed privacy impact 
assessments (PIAs) and system of records notices (SORNs).
    Question. Are there special or unique challenges that Federal 
departments and agencies face when it comes to tackling this problem?
    Answer. The public and private sectors are faced with similar 
security and privacy issues, and would benefit by exchanging lessons 
learned and best practices. Because Federal agencies provide the public 
services requiring we maintain significant amounts of information 
concerning individuals, we have a special duty to protect that 
information from loss and misuse.
    Question. Are the funding amounts agencies are requesting 
sufficient?
    Answer. The budget submitted by the President requests the 
appropriate funding amount to address the Administration's initiatives 
for security and privacy.
    Question. How do you know whether agencies are complying with your 
July directive to timely report within one hour? Are there any 
consequences for delays or failures to report?
    Answer. We have seen an increase in the amount of reports submitted 
through US CERT, which would suggest increased compliance with the 
directive. Individual agencies are responsible for establishing 
consequences for failure to follow agency policies. However, it is 
important to recognize reporting in and of itself is not a failure, but 
rather, a necessary procedure to help agencies respond to incidents in 
a timely and effective manner, and protect citizens to the maximum 
extent possible when a situation does arise.
    Question. Did all agencies meet the August 7, 2006 deadline for 
encryption requirement as directed in OMB's Memorandum issued last 
June? If so, how do you know? If not, why not?
    Answer. Memorandum 06-16 presented four recommended actions for 
agencies to implement to provide better protection for information 
accessed remotely--one of which is to encrypt all data on mobile 
computers/devices which carry agency data unless the data is determined 
to be non-sensitive, in writing, by the agency's Deputy Secretary or 
designee--to be implemented through the existing framework provided 
within current law and policy. As of October 2006, most agencies were 
still in process of implementation. The public results of the 
Inspectors General assessment of Departments' and Agencies' status in 
meeting the recommendations of OMB memo 06-16, as of October 2006, are 
published on Internet at www.ignet.gov/pande/faec/summarypiireport.pdf. 
We have been working with the PCIE IT Committee to formulate an 
additional evaluation to measure agency progress.
    Question. Should OMB play a stronger role in checking on agency 
compliance with your directives to date?
    Answer. OMB provides the appropriate amount of oversight to the 
federal agencies; however, it is the responsibility of the agencies to 
manage the risk of their services and data in accordance with existing 
laws and policies.
    Question. Should we heighten employee accountability standards? Is 
there a need to expand training?
    Answer. Agencies provide employees with clearly defined policies 
addressing expected rules of behavior and accountability for failure to 
follow those rules, reinforced with training to ensure employees 
understand the standards and practices for which they will be held 
accountable. To help agencies administer effective training programs, 
the Information Systems Security Line of Business (ISS LoB) identified 
three agency training programs to serve as a common baseline for other 
agencies to use.
    Question. Are there any legislative reforms that would be 
beneficial?
    Answer. Legislative reform is not necessary at this time. We are 
focused on moving agencies towards better implementation of existing 
laws and policies and managing their risk levels--so that we can move 
``beyond compliance'' to achieve improved security and privacy outcomes 
for our citizens to ensure trust in our services.
privacy and security for information systems: omb directives on budget 

                                REQUESTS

    Question. Privacy and security of data are important elements of 
planning, acquisition, and development of Federal information 
technology systems. The E-Government Act of 2002 and the Federal 
Information Security Management Act (FISMA) provide significant privacy 
and security responsibilities for federal information technology system 
operators.
    Seven years ago, OMB issued instructions to agencies on how to 
integrate security into the funding for information technology 
(``Incorporating and Funding Security in Information Systems 
Investments,'' Memorandum M-00-07, issued 2/28/00 and incorporated in 
OMB Circular A-11 on budget preparation policy).
    Under OMB's guidance requirements, agencies are required to: (1) 
Integrate security into and fund it over the lifecycle of each system 
undergoing development, modernization, or enhancement; and (2) Ensure 
that steady-state system operations meet existing security requirements 
before new funds are spent on system development, modernization, or 
enhancement.
    Last July, OMB's Administrator of E-Government and Information 
Technology reminded agencies of the requirement to incorporate and fund 
security and privacy requirements within their IT investments as part 
of the fiscal year 2008 budget process. Agencies were specifically 
directed to provide additional detail on resources they devote to 
fixing security weaknesses. Furthermore, agencies with significant 
isolated or widespread weaknesses identified by the agency Inspector 
general or GAO were directed to identify the specific funds they were 
requesting to correct the security weaknesses.
    Did all agencies comply with the directive on incorporating 
security funding in submitting their fiscal year 2008 budget requests?
    Answer. Yes. All agencies submit an Exhibit 53 identifying the 
percentage of the agency's IT spending used for security. In addition, 
the Exhibit 300 submitted as part of the budget submission includes 
details on IT security spending.
    Question. How can we be assured that all agencies across the 
federal government are adhering to this directive?
    Answer. As part of the budget process, agency CIOs and IGs, as well 
as OMB, review agency Exhibit 53s and Exhibit 300's.These documents 
show agencies are planning for, and incorporating, security spending 
over the course of the investment lifecycle.
    Question. What did OMB's review of the agency submissions show? Did 
all agencies identify the funding needs to address system security 
vulnerabilities as expected?
    Answer. We review agency budget requests to ensure agencies 
identify the costs for securing their investments. When agencies submit 
budget requests without information about the costs for securing their 
investments, the Investments are placed on the Management Watch List. 
We also analyze agency FISMA reports and other information to help 
determine whether agency budget requests are justified.
    Question. Can you cite some examples of budget submissions for 
fiscal year 2008 in which a federal agency identified specific funding 
requirements to address privacy and security vulnerabilities?
    Answer. All agency budget submissions identify the costs for 
securing their investments to address privacy and security 
vulnerabilities.
    Question. Has OMB ever substantially reduced or denied an agency's 
request for funding to address security weaknesses?
    Answer. Agencies identify the costs for securing their investments 
as part of their budget request, and we use this information when 
determining whether agency requests are justified.
    Question. Do you believe all agencies have adequate resources to 
address this problem of information security? Why or why not?
    Answer. We believe that agencies have adequate resources to address 
information security. They request the funding they need in their 
annual budget submission, based on their assessment of security control 
needs and remediation of weaknesses. To determine this amount, we rely 
on agencies to use their plan of action and milestone process, capitol 
planning, and the associated information to prioritize and determine 
the adequate amount of resources to request in order to mitigate any 
weaknesses that exist.
    Question. What checks are in place to assess agency systems 
acquisition projects to ensure that security is an integral part? Are 
there any consequences for non-compliance, or for proceeding to spend 
new funds despite not meeting existing security requirements?
    Answer. The Federal Acquisition Council published a Federal 
Acquisition Register clause outlining the requirement for agency 
acquisitions to follow the requirements of federal security policies. 
FAR clause 52.239-1(b) includes a broad reference to programs, 
including security, which includes FISMA. Compliance with this clause 
is enforced through the FAR process. On April 25, 2007, OMB issued a 
memorandum regarding the Federal Acquisition Certification for Program 
and Project Managers. This memorandum establishes a structured 
development for program and project managers that will improve the 
partnership and collective stewardship of taxpayer dollars.
    Question. What role does OMB play in reviewing IT spending plans to 
ensure that the security and privacy components are appropriately 
addressed?
    Answer. Besides oversight from reviewing Exhibit 300s and Exhibit 
53s, and other budget documents, OMB works with agencies throughout the 
year to assist in their project planning and implementation.
    Question. Has OMB (or any agency head that you are aware of) ever 
halted a systems procurement due to the failure to include IT security 
funding in the project?
    Answer. OMB views this activity as an internal agency procurement 
matter, and therefore, we would not necessarily know of any specific 
projects that have been halted. However, information related to 
procurement and security is submitted to OMB through the budget process 
in Exhibit 300 planning documentation, and it is considered as we 
review agency budget requests. It is important to also note agencies 
apply a methodology called ``Earned Value Management'' to regularly 
assess whether IT project implementation is on schedule, and within 
cost and performance expectations. When projects deviate significantly 
from established expectations, agencies have to determine whether the 
project should be halted, adjusted, and/or terminated.
                                 ______
                                 
              Questions Submitted by Senator Sam Brownback

    Question. Mr. Portman, I have introduced a bill that would 
establish a ``Commission on the Accountability and Review of Federal 
Agencies.''--CARFA.
    CARFA would: (1) evaluate executive agencies and their programs; 
and (2) submit to Congress a plan recommending agencies and programs 
that should be realigned or eliminated.
    Are you supportive of this bill?
    Answer. Yes. The Administration is strongly supportive of 
legislation that would enhance scrutiny and improve performance of 
programs.
    Question. Do you believe that it would eliminate wasteful 
government spending and improve government agencies' performance?
    Answer. Yes.
    Question. Could you help me analyze taxpayers' savings that this 
legislation could realize by reducing government waste?
    Answer. I cannot now give an accurate estimate of the amount of 
waste, fraud, and abuse that inflicts government today. The President's 
Council on Integrity and Efficiency reported $9 billion in potential 
savings that could result from recommendations Inspectors General made 
in fiscal year 2006. While eliminating government waste is a priority 
of the Administration, even more can be gained by making programs more 
effective and efficient. We are using the PART process to identify and 
pursue opportunities for agencies to get the taxpayers more for their 
money and eliminate unnecessary duplication of services. Based on 
agency and OMB assessments of program performance, we can say that 
proposed fiscal year 2008 spending on programs rated Ineffective or 
Results not Demonstrated exceeded $140 billion.
    Question. What is the current level of uncredited contributions to 
Social Security by undocumented persons working in this country?
    Answer. The Social Security Administration (SSA) does not know how 
much undocumented workers are contributing to Social Security. 
Uncredited contributions to Social Security are captured in the 
Earnings Suspense File. Employers report wages to SSA, and SSA uses the 
SSN to record the employees' earnings histories. The Earnings Suspense 
File captures all wage reports where SSA cannot verify the name and SSN 
of the worker against SSA s records. If SSA later resolves the 
mismatch, SSA removes the item from the suspense file and credits the 
wages to that person's record.
    There are many reasons that a name and SSN may not match Social 
Security's records, including typographical errors and name changes. A 
mismatch may also occur is if a worker is using an SSN obtained 
fraudulently, and their name does not match the SSN in SSA s records.
    SSA has no way of estimating the percentage of the Earnings 
Suspense File that represents work done by undocumented workers using 
fraudulent SSNs. The primary challenge in producing such an estimate is 
that SSA does not have a basis for estimating how many of the 
undocumented workers currently in the United States are paying payroll 
taxes.
    Question. What would be the affect on Social Security if illegal 
aliens were to gain legal status?
    Answer. The effect on the Social Security Trust Funds would depend 
on the number of undocumented immigrants receiving an adjustment in 
their status, and whether they were paying payroll taxes prior to that 
time. Under current law, individuals illegally present are not eligible 
to receive Social Security benefits. The effect on Social Security 
would also depend on how work completed prior to receiving legal status 
is treated for benefit eligibility and benefit calculation purposes.
    The 2007 Social Security Trustees Report provides some illustrative 
figures regarding the effect of immigration on the Social Security 
program. The Trustees Report intermediate assumptions assume that net 
immigration will total 900,000 people per year. When net immigration is 
increased to 1.3 million a year, the long-range outlook improves. The 
75-year actuarial balance as a percentage of taxable payroll would 
improve from -1.95 under intermediate assumptions to -1.70 under the 
higher immigration scenario. In general, increasing the number of net 
immigrants by 100,000 would increase the 75-year actuarial balance by 
.07 percent of taxable payroll.
    Question. You express concern about the level of mandatory spending 
in the budget, how do you propose to reduce this?
    Answer. While the near-term outlook in the President's 2008 budget 
of smaller deficits and a surplus starting in 2012 is encouraging, the 
current structure of the Federal Government's major entitlement 
programs will place a growing and unsustainable burden on the budget in 
the long-term. Currently, spending on Medicare, Medicaid, and Social 
Security is approximately eight percent of the Nation's GDP. With the 
first of the baby boom generation becoming eligible for Social Security 
in 2008, Social Security spending will accelerate. Three years later, 
the problem will become more pronounced as these individuals become 
eligible for Medicare, under which program costs rise even faster due 
to health care inflation. By 2050, spending on these three entitlement 
programs is projected to be more than 15 percent of GDP, or more than 
twice as large as spending on all other programs combined, excluding 
interest on the public debt.
    The President's budget proposes a number of reforms in mandatory 
programs, particularly in Medicare, resulting in savings of $66 billion 
over five years and growing to $252 billion over 10 years. These 
proposals will not solve the Government's long-term fiscal challenges, 
but they are an important and meaningful step, producing a significant 
improvement over the long term. Under the President's budget policies, 
the deficit in 2050 is projected to be 4.7 percent of GDP. In contrast, 
if the Congress fails to adopt the President's mandatory proposals and 
permits current law to remain in force, the deficit in 2050 is 
projected to be 7.5 percent of GDP.
    Question. Director Portman, in your testimony you have requested 
$410 million for enhanced income tax enforcement, how much increased 
tax revenue would this yield?
    Answer. The budget proposes to improve the effectiveness of the 
IRS' activities with a $410 million package of new initiatives to 
enhance enforcement and taxpayer service and to improve the IRS' 
technology. Budget scoring rules do not permit CBO and OMB to ``score'' 
the estimated revenue increase from IRS enforcement efforts. The IRS 
collects $51 billion per year (2007 estimate) in direct enforcement 
revenue, and its enforcement program helps maintain the more than $2 
trillion in taxes voluntarily paid each year. The budget's proposed 
funding levels for the IRS will help maintain the base revenue, and the 
proposed enforcement initiative should boost revenue further.
    Based on historical realization rates, the IRS estimates there is a 
4:1 return on expanded enforcement activities once new staff is fully 
trained. During 2008, the proposed enforcement initiatives are 
estimated to yield more than $300 million in new enforcement revenue, 
and once new staff are trained and become more experienced, the 
enforcement revenue impact of the work they complete each year is 
estimated to increase to approximately $700 million. However, this 
Return on Investment (ROI) estimate is likely understated because it 
does not reflect the indirect impact enhanced enforcement has on 
deterring non-compliance. Research suggests this indirect impact is at 
least three times as large as the direct impact on revenue.
    Question. Competitive sourcing is an integral part of the 
President's Management Agenda, as such, what is the expected benefit of 
this concept?
    Answer. The reasoned and strategic application of competition is 
helping agencies achieve greater efficiencies and better performance. 
By making commercial services that support programs more efficient, 
agencies have more resources to spend directly on their missions. 
Competition motivates agencies to become more efficient through the 
development of improved performance standards, the adoption of new 
technologies, workforce realignments, the consolidation of operations, 
and lower contract support costs. Projected savings are significant for 
the small percentage of the workforce competed. In fiscal year 2006, 
for example, agencies competed only 0.4 percent of the entire civilian 
workforce. Yet these competitions are expected to generate savings of 
$1.3 billion over the next 5-10 years. Competitions completed since 
2003 are expected to produce almost $7 billion in savings for taxpayers 
over the next 5-10 years. This means taxpayers will receive a return of 
about $31 for every dollar spent on competition. Annualized expected 
savings are around $1 billion.
    Question. What is precluding the full application of competitive 
sourcing?
    Answer. Despite impressive results, a number of legislative 
provisions limit agencies from taking full advantage of competition 
where it makes sense. Some restrictions prohibit agencies from 
competing certain activities or conducting competitions at certain 
organizations while others limit agency resources for competition or 
marginalize the consideration of quality, forcing agencies to choose 
between the government and the private sector solely based on lowest 
cost.
    Many legislative restrictions appear to be rooted in concerns that 
competitive sourcing will be used to weaken the workforce. In fact, 
agencies have carefully tailored their use of competition and given 
federal employees a full and fair opportunity to demonstrate their 
value to the taxpayer. Federal employees have fared well, receiving 87 
percent of the work competed in fiscal year 2006 and 83 percent of the 
work competed between fiscal years 2003-2006. OMB would welcome the 
opportunity to work with members of Congress to eliminate statutory 
restrictions so that competition may be used, where appropriate, to 
improve government operations and deliver the best results for the 
American taxpayer.
    Question. How much has the deficit declined the past two years and 
do you expect it to decline again this year?
    Answer. The size of the deficit and the debt is best assessed in 
relation to the economy as a whole, as measured by GDP. In his 2005 
budget, the President set a goal to cut the deficit in half by 2009 
from its projected peak in 2004. The President achieved his goal in 
2006, three years ahead of schedule. The deficit in 2006 was 1.9 
percent of GDP, or $248 billion. This was a reduction from the actual 
2004 deficit of 1.7 percent of GDP, or $165 billion. The 2006 deficit 
was below the 40-year historical average of 2.4 percent of GDP, and was 
smaller than the deficit as a percent of GDP in 18 of the previous 25 
years.
    In the 2008 budget, we project the deficit to decline even further 
for 2007 to 1.8 percent of GDP, or $244 billion. OMB will update these 
projections in the Mid-Session Review.
    Question. Would you recommend that the President veto the 
supplemental over the level of additional funding in the bill?
    Answer. The President vetoed this bill on May 2 based on the 
inclusion of an artificial deadline for troop withdrawal from Iraq, and 
the addition of billions of dollars in unrelated spending.
    Question. Last year OMB had its lowest staffing levels in over 30 
years, how are you able to complete the important work you do under 
such tight budget constraints?
    Answer. We have reduced staff levels over the past 6 years and 
attempted to be more productive with these lower staff levels. OMB has 
an extraordinarily dedicated and talented team of career professionals. 
OMB is consistently rated as the best or one of the best places to work 
in the federal government. We strive to recruit, train and retain the 
best staff we can at OMB. While the request for fiscal year 2008 is a 
disciplined budget, we believe it provides the resources necessary for 
OMB to maintain a staff of 489 and fully meet its mission.
                                 ______
                                 
              Questions Submitted by Senator Wayne Allard

    Question. What are OMB's scores on the management scorecard?
    Answer. OMB's current progress score for Human Capital, Competitive 
Sourcing, Financial Performance, and Budget and Performance Integration 
is green. While our progress score for E-Gov is red, we are taking 
steps to improve that score. OMB is currently yellow in status on Human 
Capital, but red in status on Competitive Sourcing, Financial 
Performance, E-Gov, and Budget and Performance Integration.
    All current and past scores for all agencies on the President's 
Management Agenda can be found at results.gov.
    Question. Why hasn't OMB undergone a PART review?
    Answer. Early in the development of the PART, the Administration 
made a decision to focus our evaluation efforts on programs that most 
directly impact the government's services to the American people. We 
excluded from the PART process policy functions (e.g., Office of the 
Secretary), central administrative functions that are not associated 
with specific programs, and programs and activities with a limited 
impact. The central administrative functions are evaluated using the 
President's Management Agenda scorecard.
    OMB has not been assessed with the PART primarily because it serves 
in a policy role. This does not mean OMB has escaped oversight or 
scrutiny. In fact, OMB management has been held to the same standards 
as every other major agency with the President's Management Agenda 
Scorecard. That scorecard assesses the quality of OMB's personnel, 
financial, information technology, procurement, and performance 
management. Each quarter, OMB's progress and status on each of these 
initiatives is made available on Results.gov.

                          SUBCOMMITTEE RECESS

    Senator Durbin. Director Portman, I thank you for your 
testimony.
    Mr. Portman. Thank you, Mr. Chairman.
    Senator Durbin. This meeting of the subcommittee stands 
recessed.
    [Whereupon, at 4:19 p.m., Wednesday, April 11, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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