[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
  COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR 
                                  2011

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED ELEVENTH CONGRESS
                             SECOND SESSION
                                ________
    SUBCOMMITTEE ON COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES
                ALAN B. MOLLOHAN, West Virginia, Chairman
 PATRICK J. KENNEDY, Rhode Island   FRANK R. WOLF, Virginia
 CHAKA FATTAH, Pennsylvania         JOHN ABNEY CULBERSON, Texas
 ADAM SCHIFF, California            ROBERT B. ADERHOLT, Alabama
 MICHAEL HONDA, California          JO BONNER, Alabama          
 C.A. ``DUTCH'' RUPPERSBERGER,      
Maryland                            
 JOSE E. SERRANO, New York          
 PATRICK J. MURPHY, Pennsylvania    
                                    

 NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full 
Committee, and Mr. Lewis, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
              John Blazey, Dixon Butler, Adrienne Simonson,
              Diana Simpson, Darek Newby, and Brad Daniels,
                           Subcommittee Staff
                                ________
                                 PART 5
                                                                   Page
 Department of Commerce Fiscal Year 2011 Budget Overview..........    1
 National Oceanic and Atmospheric Administration Fiscal Year 2011 
Budget Overview...................................................  123
 National Institute of Standards and Technology Fiscal Year 2011 
Budget Overview...................................................  233
 Economic Development Administration Fiscal Year 2011 Budget 
Overview..........................................................  313
 Economic Development Administration Grantees.....................  393
 United States Patent and Trademark Office Fiscal Year 2011 Budget 
Overview..........................................................  461

                                   S

                                  ______
         Printed for the use of the Committee on Appropriations
PART 5--COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS 
                                FOR 2011
                                                                      ?

  COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR 
                                  2011

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED ELEVENTH CONGRESS
                             SECOND SESSION
                                ________
    SUBCOMMITTEE ON COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES
                ALAN B. MOLLOHAN, West Virginia, Chairman
 PATRICK J. KENNEDY, Rhode Island   FRANK R. WOLF, Virginia
 CHAKA FATTAH, Pennsylvania         JOHN ABNEY CULBERSON, Texas
 ADAM SCHIFF, California            ROBERT B. ADERHOLT, Alabama
 MICHAEL HONDA, California          JO BONNER, Alabama          
 C.A. ``DUTCH'' RUPPERSBERGER,      
Maryland                            
 JOSE E. SERRANO, New York          
 PATRICK J. MURPHY, Pennsylvania    
                                    
                                    
                                    

 NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full 
Committee, and Mr. Lewis, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
              John Blazey, Dixon Butler, Adrienne Simonson,
              Diana Simpson, Darek Newby, and Brad Daniels,
                           Subcommittee Staff
                                ________
                                 PART 5
                                                                   Page
 Department of Commerce Fiscal Year 2011 Budget Overview..........    1
 National Oceanic and Atmospheric Administration Fiscal Year 2011 
Budget Overview...................................................  123
 National Institute of Standards and Technology Fiscal Year 2011 
Budget Overview...................................................  233
 Economic Development Administration Fiscal Year 2011 Budget 
Overview..........................................................  313
 Economic Development Administration Grantees.....................  393
 United States Patent and Trademark Office Fiscal Year 2011 Budget 
Overview..........................................................  461

                                   S

                                  ______
         Printed for the use of the Committee on Appropriations
                                  ______

                     U.S. GOVERNMENT PRINTING OFFICE

  56-756

                            WASHINGTON : 2010

                                  COMMITTEE ON APPROPRIATIONS

                   DAVID R. OBEY, Wisconsin, Chairman

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

                 Beverly Pheto, Clerk and Staff Director

                                  (ii)


  COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR 
                                  2011

                              ----------                              --
--------

                                           Thursday, March 4, 2010.

                         DEPARTMENT OF COMMERCE

                                WITNESS

HON. GARY LOCKE, SECRETARY OF COMMERCE
    Mr. Mollohan. Well, good afternoon.
    Welcome, Secretary Locke, to our hearing today.
    Today we will hear from Secretary Locke of the Department 
of Commerce. The fiscal year 2011 budget request includes $8.9 
billion in discretionary funds for Commerce, a decrease of $5.1 
billion, or 36 percent below the fiscal year 2010 enacted 
level. The significant decrease is attributable to the 
anticipated completion of the 2010 Decennial Census.
    But there are some significant increases in the proposed 
budget as well, including $809 million in the National Oceanic 
and Atmospheric Administration, or NOAA, for satellites, catch 
shares and conservation and climate change related programs, 
and $87 million in the International Trade Administration, or 
ITA, for the National Export Initiative.
    Last week this subcommittee heard testimony from the 
director of the National Institute of Standards and Technology, 
or NIST, Dr. Pat Gallagher. Later this month, we will hold 
separate hearings on the Economic Development Administration 
(EDA), NOAA and the U.S. Patent ` Trademark Office (USPTO), 
which will provide us with the opportunity to look more closely 
at programs within those agencies.
    Today's hearing will allow us to touch on issues of 
Departmental oversight and overarching policy issues affecting 
these agencies, while also delving into issues and funding 
related to other Departmental agencies, including the Census 
Bureau, the International Trade Administration, and the 
National Telecommunications and Information Administration 
(NTIA).
    The 2010 Decennial Census has officially begun, with 
enumeration in remote Alaskan villages completed. We look 
forward to a status report and timeline for the rest of the 
country, as well as discussions on current concerns, including 
the effectiveness and cost of Decennial advertising.
    Apparently, Census has gotten one thing right, Mr. 
Secretary, because everyone appears to have seen the Super Bowl 
ad, whatever one might think of it.
    NTIA has significant American Recovery and Reinvestment Act 
responsibilities in overseeing $4.7 billion in broadband grant 
awards. While there are concerns about the delay in first-round 
awards, it is exciting to contemplate a future where high-speed 
Internet connections are as common as telephones.
    We also will discuss how ITA's proposed National Export 
Initiative will help promote U.S. exports and protect U.S. jobs 
from unfair export subsidies.
    And finally, the Department has held a number of events and 
made quite a few announcements in fiscal year 2010. At times, 
the announcements are made well in advance of any actual 
implementation, and so details are scarce. The focus appears to 
be more on getting good press coverage for the Department's 
efforts and less on the actual benefits to the public, so we 
intend to get to some of those details today.
    There is much to discuss, and Secretary Locke, thank you 
for coming.
    Following the opening statement of Ranking Member Wolf, we 
will ask you to provide a brief summary of your written 
testimony, and your written testimony will be made a part of 
the record.
    And now, I will call on Mr. Wolf.
    Mr. Wolf. Thank you, Mr. Chairman.
    I apologize for being late. I had some veterans in my 
office I just could not leave.
    With that, I will just submit the statement for the record.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T6756A.001
    
    Mr. Wolf. Secretary Locke, I want to welcome you. Thank you 
very much.
    Mr. Mollohan. Secretary Locke, as I mentioned, your 
statement will be made a part of the record, and we invite you 
to summarize.

                  Opening Statement by Secretary Locke

    Secretary Locke. Well, thank you very much, Chairman 
Mollohan and Ranking Member Congressman Wolf. I am pleased to 
join you to talk about the President's budget for the 
Department of Commerce for fiscal year 2011.
    With the 2010 census field operations ending this year, the 
President's $8.9 billion request decreases overall spending 
from fiscal year 2010, but funds targeted increases for vital 
economic activities. Because in these challenging times, the 
central mission of the Commerce Department is very clear and 
straightforward, helping American businesses become more 
competitive so they put more people back to work.
    I want to highlight four areas where the Commerce 
Department's efforts described in the 2011 budget are integral 
to that goal of putting more people back to work. First, 
businesses use our unparalleled statistical and technical 
research to develop new products, identify new markets and make 
long-term investments. For instance, the National Institute of 
Standards and Technology, or NIST, provides metrics that enable 
development of everything from a National Smart Grid, advance 
manufacturing processes, to airport screening devices and new 
cyber security measures. NIST also provides consulting services 
to American manufacturers to become more efficient and 
profitable so that they become more viable and competitive in a 
global economy.
    Increasingly, businesses are turning to NOAA for its 
unmatched weather and climate observations, and much of NOAA's 
2011 budget increase will finance its added responsibilities to 
implement the long called for restructuring of the National 
Polar-orbiting Operational Environmental Satellite System, 
commonly known as NPOESS. This effort will help us better meet 
civil and military weather forecasts, storm tracking and 
climate monitoring requirements.
    And at a time when both businesses and the President have 
called for more accurate and readily available climate 
information, the fiscal year 2011 budget assigns additional 
responsibilities NOAA's proposed new Climate Service Office 
which is the result of a proposed budget-neutral reorganization 
to bring together its observational and analytical resources, 
now scattered throughout NOAA, all under one roof.
    A second key function of the Commerce Department is 
overseeing the patent protection that has incentivized American 
inventors and entrepreneurs for over 200 years. When I came to 
the Department of Commerce, the Patent and Trademark Office had 
a backlog of almost 800,000 patent applications and a waiting 
period of over 3 years just to receive a yes or no on a 
proposed patent. We have already taken important steps to fix 
these problems, knowing that every patent application waiting 
in line could be a new product not going to market and a new 
job not being created.
    And through short-term surcharges and other fee provisions, 
as well as upgrades to our outmoded IT systems, the 2011 budget 
will, along with management innovations and employee process 
improvements, enable the Patent and Trademark Office to grant 
or deny a patent within 12 months, and our goal is to do this 
by the year 2014, except for those innovations that are also 
seeking FDA approval, which takes several years.
    Area number three, Commerce provides direct consultation 
and funding to help communities develop crucial economic 
infrastructure through the Recovery Act's Broadband Technology 
Opportunities Program, BTOP. By tomorrow, we expect to announce 
or will have announced close to a billion dollars to lay or 
activate over 20,000 miles of high-speed Internet cable lines 
in underserved communities. And the fiscal year 2011 budget 
provides critical funding to ensure that all of these projects 
have rigorous oversight.
    Our BTOP program, our broadband technology program is a 
true public/private partnership because, just as the Federal 
Government might fund construction of an interstate across the 
State and then have local communities and governments build the 
streets and the roads that branch off of it, our infrastructure 
grants fund super high-speed Internet lines or highways that 
local providers, the private sector, will then connect to or 
tap into to bring high-speed Internet service directly to homes 
and businesses.
    The 2011 budget also provides $75 million to our Economic 
Development Administration for planning and infrastructure 
grants to help communities identify their unique economic 
strengths and then to develop Regional Innovation Clusters 
similar to what we have seen in Silicon Valley or the Route 128 
corridor in Boston.
    And area Number four, in foreign countries, the Commerce 
Department serves as a lead advocate for U.S. companies looking 
to break into new markets or grow their shares in existing 
ones. The 2011 budget provides a 20 percent increase to the 
International Trade Administration, which, among other things, 
will allow us to hire some 328 new trade specialists, mostly 
stationed in foreign countries, to help find buyers and 
customers for U.S.-made goods. And our target is for medium- 
and small-sized businesses, because when American companies 
export more, they manufacture more; and when they manufacture 
more, they hire more people. The International Trade 
Administration will play a key role in implementing the 
President's National Export Initiative, which aims to double 
American exports over the next 5 years and support 2 million 
new jobs.
    And as we implement all these programs, results, cost 
effectiveness, performance and accountability are paramount 
objectives. And so we take to heart the Department's managerial 
challenges and operational issues, as identified by our 
Inspector General, Todd Zinser, and his staff. His findings are 
acted upon and used to re-evaluate other operations and serve 
as benchmarks or metrics of performance improvement.
    We are pleased to support and pleased that the President 
has granted our request in the 2011 budget to have increased 
funding for the Inspector General for increased oversight of 
departmental acquisitions and contracts.
    So I thank you for the opportunity to come before you today 
and for your continuing support of the Department of Commerce 
and its programs, and I look forward to your questions.
    Thank you.
    [The written statement of Gary Locke, Secretary of 
Commerce, follows:]

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[GRAPHIC] [TIFF OMITTED] T6756A.003

[GRAPHIC] [TIFF OMITTED] T6756A.004

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[GRAPHIC] [TIFF OMITTED] T6756A.006

[GRAPHIC] [TIFF OMITTED] T6756A.007

                         CENSUS--2010 DECENNIAL

    Mr. Mollohan. Thank you, Mr. Secretary.
    Mr. Secretary, the 2010 Decennial is upon us. Could you 
give us a brief timeline of the upcoming Decennial? When will 
surveys be mailed? What is the actual Census Day? What happens 
if people don't return their surveys? Just give us an overview.
    Secretary Locke. Actually, starting around March 8th, 
residents will be receiving advance letters notifying them that 
they are going to be soon receiving the Census form, and around 
March 15th, they will actually receive those Census forms. 
Around 11.7 million of those Census forms will be bilingual 
English and Spanish.
    By around March 22, we are going to actually make available 
to mayors and governors and local government officials, elected 
officials as well as Members of Congress, an interactive map 
which will enable people to actually go Census tract by Census 
tract and see within their communities how people are starting 
to return those Census forms compared to what happened in the 
year 2000, so that policymakers, mayors, public officials can 
do more publicity campaigns, public service announcements, or 
even target specific areas within their community or their 
State or their region to ensure that there is a full count.
    We are asking that people send back their Census forms 
around March--excuse me--April 1. And by around April 20th, all 
those forms not processed, not returned, will then become our 
targets for what we call the nonresponse follow up, which means 
people going door-to-door and trying to have the forms filled 
out then. That activity will actually start May 1st and go all 
the way through the middle of July.
    Mr. Mollohan. How much does that nonresponse follow up cost 
per visit?
    Secretary Locke. I can't tell you the exact, because 
sometimes we may have to go several times, and it depends on 
location. But for every 1 percent mail-back response, we save 
the Federal Government approximately $80 million to $90 
million, which is why we have that unprecedented media 
campaign.
    In the year 2000, when we had the first media campaign, we 
actually saw an increase in participation rate, reversing a 
decline of several decades of households not returning the 
Census form. And of course, this year we are trying to make it 
even more simple and more convenient to people to fill out. 
Only 10 questions, should only take about 10 minutes.
    [The information follows:]

    The average cost per household during non response follow 
up (NFRU) is $57.

    Mr. Mollohan. How much did the Super Bowl ad cost?
    Secretary Locke. I think we spent about $2.5 million, and I 
think we reached about over 50 percent or 45 percent of all 
households in America. You compare that with a 30-second ad, 
and we had three 30-second ads during that Super Bowl, compared 
to, I think, a cost of almost a half million for one 30-second 
ad during American Idol, and that reaches only about 10 percent 
of American households.
    [The information follows:]

                         2010 Decennial Census

    The 2010 Census advertising campaign spent $2.5 million for one 30-
second and two 15-second pregame spots, two on air mentions during the 
pregame show, and a one 30-second ad during the third quarter of the 
game.

    Mr. Mollohan. And how much was that per person that saw it?
    Secretary Locke. Two cents per person.
    Mr. Mollohan. 2.15.
    Secretary Locke. 2.15. And I know there has been a lot of 
comment about that Super Bowl ad, along with all the other 
Super Bowl ads. And it seems like maybe that is the point of 
it, to foster this discussion. Because I was puzzled by many of 
the other ads that I saw during the Super Bowl, wondering what 
their point was. But what we do know is that there was a lot of 
discussion, both pro and con, about that Super Bowl ad 
involving the Census, and there was unprecedented chatter among 
YouTube and other social media. So we got people talking about 
the Census.
    Mr. Mollohan. Well, for 2 cents a person, you got a lot of 
play on it, didn't you?
    Secretary Locke. Yes.
    Mr. Mollohan. Good. Congratulations.
    The cost of the nonresponse follow up, that has been 
recently revised, and I am just curious. What made it necessary 
to revise it, if you're able to answer that?
    Secretary Locke. Well, we are trying to constantly revise 
that, and we also have a cushion, but we took some of the 
lessons that we learned from the address canvassing, which was 
conducted in the spring, when we sent several hundred thousand 
people to make sure we had the right addresses, documenting 
that new buildings were there, or buildings may have been 
demolished, updating really the list of addresses from local 
governments as well as the Postal Office.
    And we had some cost overruns in that particular operation, 
primarily because we hire people and train them and expect a 
certain rate of attrition, people who, after 1 day canvassing 
addresses, saying, this is not for me. I don't want it. I am 
quitting. Or people who then get another job and say, I am 
quitting, and I don't need this temporary job from the Census 
Bureau. It turns out that because of the tough economy, we had 
a much smaller attrition rate, and so we ended up training more 
people than we actually needed. And so we are taking that into 
account in terms of the number of people we will actually hire, 
building in a revised attrition rate for the non response 
follow up.
    Mr. Mollohan. So you feel this is going well? Do you 
anticipate any problems? And to the extent you have anticipated 
any problems, do you have adequate funding to address them?
    Secretary Locke. We do have a reserve built in. We have had 
other operations that have come in under budget and ahead of 
schedule. But we still have almost a half a billion dollars set 
aside for the nonrespone follow up.
    Starting around March 22nd, when we start seeing the 
initial mail-back of the Census forms, community by community, 
ethnic group by ethnic group, we will have a better sense of 
how things are going and how we can redeploy, using local 
government officials, nonprofit agencies, churches to get the 
message out and to be as proactive and as nimble as we can.
    Mr. Mollohan. If your mass advertising was a success, how 
about your targeting specific hard-to-reach groups? What are 
your strategies with regard to that, and how successful do you 
think you are being or are going to be?
    Secretary Locke. We have an unprecedented level of 
community partnerships, churches, community organizations, 
nonprofits, corporations, most of the mayors and governors, 
elected officials. Local elected officials have put together 
what they call complete count committees, because we rely on 
community organizations, faith-based organizations, respected 
organizations within the community to basically buttress and 
reinforce our message. A lot of concern among immigrant groups 
about participating, people who are new to this country, who 
don't understand the history and the constitutional basis for 
the Census may not want to participate. So it is a challenge to 
get that message out.
    For the first time ever we are sending out the bilingual 
Census forms in Spanish and English. We have language guides in 
some 59 different languages, also Census forms printed up in 
other languages, Vietnamese, Korean, Russian, Chinese, and one 
other. But it is an unprecedented effort to really try to reach 
out to people.
    Mr. Mollohan. Do you think you are being successful, and do 
you have any measurement of that to date?
    Secretary Locke. We do have Gallup polling which shows the 
awareness of the Census is pretty high.
    Mr. Mollohan. What about willingness to participate by 
these hard-to-reach groups?
    Secretary Locke. It is fairly high. I think we always would 
want as close to 100 percent, but right now, I think the 
indicators are about 80 percent of households plan to 
participate.
    Mr. Mollohan. And is that a general number, or is that----
    Secretary Locke. That is on average, but we are tracking it 
ethnic group by ethnic group.
    Mr. Mollohan. I am really looking at these hard-to-reach 
groups, these groups where language challenges, maybe 
community, cultural issues make it more difficult. Do you have 
unique strategies to identify those people and to make sure you 
get as exact an account as possible in those communities?
    Secretary Locke. We are tracking both awareness by ethnic 
group, traditionally hard-to-count groups, as well as intent to 
participate. Then we have unprecedented direct media in 
different languages, Telemundo, Univision, local newspapers, 
and radio stations among the different ethnic groups.
    Mr. Mollohan. Trying to take the fear out of it where it 
might exist.
    Secretary Locke. A lot of it. And that is why the trusted 
leaders of the community are so critical. It is one thing for a 
government official to say it, but when church leaders say it, 
when key members of their local community say it, that has much 
more power.
    Mr. Mollohan. Mr. Wolf.

                    U.S. PATENT AND TRADEMARK OFFICE

    Mr. Wolf. I thank you, Mr. Chairman.
    Mr. Secretary, a few months ago, an inventor came to my 
office to raise concerns that the USPTO put his complete patent 
application for cryptology software on the Internet. He is 
prohibited from exporting this product because of its potential 
military and intelligence capabilities. And he did not want to, 
I want to make that clear.
    Our system of export controls is meaningless if the plans 
for developing dual-use technologies are posted by the U.S. 
Government on the Internet. We all know that our country's 
adversaries and rivals are aggressively working to steal as 
much of our intellectual property as possible. It is a national 
security issue. It is a job issue, too, but it should be 
addressed immediately.
    If you need legislation, would you please submit a proposal 
and maybe some language that the committee could carry.
    Are you concerned that patent information on dual-use 
technologies is on the Internet? And what is your plan for 
addressing this national security issue?
    Secretary Locke. Well, I am not aware of that particular 
situation, and I do know that information, applications, to 
some extent, are posted on the Internet to make sure that those 
who might contest the novelty or the uniqueness of that 
innovation can be heard as we make the determinations about 
patentability and whether it should be patented.
    But obviously, I don't know the extent to which we do 
reveal or publicize on the Internet or any other method the 
complete contents of a new technology. And especially, as you 
say, if it involves military application we need to be very, 
very careful about that because, on the one hand, the United 
States Government wants to protect our national security, and 
we are trying to restrict exports, making sure that items that 
have strictly military applicability on the list conducted and 
administered by the Department of State, or even things that 
are dual-use civilian products that may have military 
application do not fall into the wrong hands. And as Brent 
Scowcroft, the former National Security Adviser to President 
Bush indicated in the study conducted by the National Academy 
of Sciences a year ago, we need to do a much better job of 
protecting various technologies that could really do us harm.
    Mr. Wolf. Well, could you look into this? Because we have 
heard from others that the Chinese surf your information and 
see what ideas are out there and, many times, take it. And we 
know the cyber attacks--we have some questions on that--come in 
to find information. So if you could do that, maybe get back to 
the committee, right away because it may be something that you 
are not aware of, your people are not aware of that could be 
corrected without any legislative of language. But if you could 
let us know, we would appreciate it.
    Secretary Locke. Thank you.

         BUREAU OF INDUSTRY AND SECURITY--EXPORT CONTROL REFORM

    Mr. Wolf. We understand the administration has undertaken a 
multi-agency effort to reform our Nation's export control laws. 
This could be beneficial exercise because our export control 
laws are very complicated with Commerce, Energy, State and 
Defense all playing different roles, depending on the product.
    However, I am concerned that business interests may prevail 
over national security interests. How would these reforms 
strengthen our ability to prevent our enemies and rivals from 
stealing dual-use technology that could be used against the 
United States and our allies, or used against their own people 
to restrict basic human rights?
    Secretary Locke. Thank you very much, Congressman Wolf.
    And as I indicated, Brent Scowcroft and others authored the 
report by the National Academy of Sciences and called for major 
reforms of our export control system that, in many cases, we 
need to build higher fences around very sensitive technologies 
that are unique to the United States, manufactured, produced in 
the United States, that if they fall into the wrong hands could 
do us harm.
    At the same time, the report indicated that there are many 
other things, civilian items that may have military 
application, that are readily available by other countries from 
other companies around the world and that our restrictions 
oftentimes put our U.S. companies at a disadvantage, especially 
when those products are readily available almost at Radio Shack 
or Home Depot, or other companies around the world advertise 
that they will ship it to a purchaser within the next 24 hours.
    And even the head of the European Aerospace Industries 
Association openly advised members within Europe not to seek 
any technology that might come from the United States because 
of the difficult export control regime. That deprives U.S. 
companies of opportunities to engage in research, to advance 
their products, and to get revenues so that they can continue 
to perfect their products, which can then also benefit our 
military and our national security.
    In this export control reform that the President has called 
for, first and foremost must always be national security. Are 
we protecting, enhancing our national security? And whatever 
commercial benefits may come from modernization or reform of 
the export control system, the number one objective has to be 
national security. And that has to be paramount.
    I can tell you that, for instance, within the Bureau of 
Industry and Security, when we issue licenses for dual-use 
exports, we may allow a U.S. Company to export something to, 
let's say, France. We never really follow up to see if that 
company in France is improperly re-exporting to a country that 
is unfriendly to the United States. So what we would like to do 
within the Department of Commerce is reform that effort, free 
up people, so that we are actually doing that additional 
monitoring to make sure that those items that are properly 
licensed are not falling into the wrong hands.

                    BIS--CRIME CONTROL TECHNOLOGIES

    Mr. Wolf. Well, I would encourage you to do that quickly; 
60 Minutes had a piece on that about 3 weeks ago, that precise 
thing. And if there is anything, again, that the committee can 
do to give you that authority and that ability, I hope you will 
let us know.
    Crime control and law enforcement technologies can be 
exported to foreign governments and used to abuse human rights. 
The Bureau of Industry and Security is currently working to 
update crime control and law enforcement items contained on the 
Commerce Control List. In addition, they are working on a more 
complex crime control review to address developing 
technologies, such as biometric identification systems, 
training simulators and surveillance systems.
    What is the status of these efforts? It is not uncommon to 
hear stories of a dissident in a particular country being 
tortured with equipment that has been made in the United States 
and that sometimes an American company, either knowingly or 
maybe unknowingly, has sold to that company, cattle prods, 
things like that. Can you update us on where that is?
    Secretary Locke. Well, our Department of Commerce and 
Bureau of Industry and Security is very much committed to 
effectively controlling these dual-use items that also, not 
just could be used for military application against us and our 
allies but also could hinder or abuse human rights. And so we 
are looking at prohibitions on the export of crime-control 
items to countries such as China and even instruments that 
could be used for torture. So that is part of our control list, 
and we take that seriously.
    Mr. Wolf. It should not only be China, though. I think that 
is very good. But Egypt has done some torturing, and you can 
just go down the line. So I would hope it would be with all the 
countries that may very well be.

           NTIA--CELLULAR DETECTION AND JAMMING TECHNOLOGIES

    Secretary Locke. Yes, sir.
    Mr. Wolf. We understand that contraband cell phones--and 
the prison system will tell you this--are increasingly being 
smuggled into State and Federal prisons and used by inmates to 
orchestrate prison breaks, conduct illegal activity, and harass 
or intimidate judges, lawyers or former victims. The fiscal 
year 2010 conference report directs the Department of Commerce 
to work with the FCC and the Department of Justice to develop a 
plan to investigate and evaluate how wireless jamming detection 
and other technologies might be utilized for law enforcement 
and correction applications in Federal and local prisons. What 
is the status of this plan, and what is the Department doing?
    Secretary Locke. We just recently conducted such a test 
involving the Federal Bureau of Prisons, along with 
manufacturers, and we did this at the Federal correctional 
facility here in Maryland.
    Mr. Wolf. And what did you find?
    Secretary Locke. The results are not yet in. But our goal 
is to make sure that we can jam those cell phones that are 
somehow being smuggled in to prisons, State or local prisons, 
and make sure that whatever technology that we use is not 
hampering cell phone use by, let's say, prison guards or 
administrators within the prison, or even first responders who 
might have to come into a prison in a time of a riot or a 
disturbance.
    So we have got to make sure that, whatever we do, it is not 
hurting the necessary communication of law enforcement 
individuals who are operating within a prison or who are coming 
into the prison on an emergency basis. So we don't have a 
report yet, but we are very interested in getting that.
    Mr. Wolf. How close are you to having a report?
    Secretary Locke. I would have to get back to you, sir. The 
test was just conducted on over a 3-day period from February 
16th to the 19th, so that was only about 2 weeks ago.
    [The information follows:]

    It is the Administration's view that the use of cell phones 
by prisoners to carry out criminal enterprises is intolerable 
and demands an effective solution. The solution may include 
jamming technology, but we must ensure no harm is done to 
public safety, Federal and law enforcement activities or to use 
of cell phones by law-abiding citizens. In December and early 
January, NTIA's Institute of Telecommunications Sciences in 
Boulder, Colorado performed radio measurements of a jamming 
device in a closed environment. These tests were followed by 
on-site measurements at the Cumberland, Maryland federal 
correctional facility. Those tests were coordinated with the 
equipment manufacturer and the Bureau of Prisons and NTIA 
worked with the Bureau of Prisons to issue final reports on 
test findings. NTIA released its findings on the Cumberland 
test in May 2010. In May, NTIA also produced a technical 
memorandum analyzing the data in these reports. NTIA then 
issued a Notice of Inquiry seeking public input concerning 
technologies that could help eliminate contraband cell phones 
in prisons. Comments on this NOI are due in mid-June. NTIA 
expects to complete a report by the end of 2010.

    Mr. Wolf. Who did the test?
    Secretary Locke. It was conducted by our NTIA, National 
Telecommunications Information Administration, along with the 
Federal Bureau of Prisons.
    Mr. Wolf. When do you think you are going to have the final 
report? And how do you plan on letting the different prison 
systems know? Is there any particular approach you have in mind 
or what?
    Secretary Locke. Well, we will definitely inform the 
members of the committee and all others who are interested.
    I know that, for instance, Senator Mikulski and Senator 
Hutchison have a strong interest in this, and we will certainly 
report back to the appropriate committees.
    And I think that ultimately we need to share this with law 
enforcement and prison officials because this is a growing 
problem, not just in the Federal prisons but the State prisons. 
Our jurisdiction, of course, can only be over the Federal 
prisons, but I think we would want to share this with local law 
enforcement.
    Mr. Wolf. Maybe you ought to ask Director Lappin once it is 
available to get it out to all of the State and local prison 
systems and to the Governors. But if you could kind of keep us 
informed.
    I have some other questions, but I will pass. And thank 
you.
    Thank you, Mr. Chairman.
    Mr. Mollohan. Thank you, Mr. Wolf.
    Mr. Schiff.

                            ACCESS TO CREDIT

    Mr. Schiff. Thank you, Mr. Chairman.
    There were a couple of areas that I wanted to raise with 
you, Mr. Secretary, and if one or either are in a different 
jurisdiction, that is fine. Let me know that. The first is 
probably the most recurrent concern that I hear from my 
constituents in terms of the business climate and the economy--
the inability of small business owners to access credit. And I 
have so many business owners that will tell me that they have 
had a perfect relationship with their bank for 25 years. They 
have a perfect credit history. They want to make an investment 
in equipment or maybe want to make additional hires, and their 
bank of all that time is telling them they can't do it or are 
requiring such onerous conditions that they can't get access to 
credit, can't meet payroll, certainly can't expand their 
businesses.
    So I would like to get your sense of what you think, within 
the jurisdiction of Commerce, can be done about this.
    The other area that I wanted to raise, which is very 
important to my constituents as well, many of whom are in the 
business of producing content that is sold all over the world, 
and I just met with a group of publishers who are very 
concerned about the dramatic proliferation of intellectual 
property theft of published works. But this has been true for a 
long time in the music industry and film and TV industry. So I 
would like to ask you about how we can beef up our efforts to 
go after intellectual property theft.
    Secretary Locke. Two very important issues.
    On the issue of access to credit, we are hearing that in 
talking to small- and medium-size companies and large companies 
all around the country. It is a major, major problem because 
while the big banks have been rescued and are profitable, 
nonetheless, the regulators appear to be putting enormous 
pressure on them to be much more conservative with respect to 
their lending practices, even to companies that have long been 
very good, who have always repaid their loans and are very, 
very profitable.
    Mr. Schiff. Can I just ask you about that? I am sorry to 
interrupt. I won't interrupt you again. But I do hear that 
comment made secondhand via the small business owners. They 
say, well, the bank is telling me the regulators are breathing 
down their neck, and I have really been curious about that. Is 
it really the regulators telling them not to lend or to be 
really, really conservative in their lending? Or is this an 
excuse being used by some of the banks to hold on to their 
capital and increase their liquidity on the books? Is it really 
a problem with the regulators, or are the regulators being the 
fall guy for the banks?
    Secretary Locke. Well, it could be a combination of the 
two. And it would have to depend on a bank by bank situation. 
Perhaps Treasury officials could, and banking officials are the 
ones really more appropriate people to really ask or to dive 
down into to get that information.
    But I can tell you that the President, of course, has 
called for a redirection of some $30 billion in not used TARP 
money to be targeted toward community banks with incentives for 
those community banks, which oftentimes are closest to those 
small- and medium-size companies who have that relationship 
with them, familiar with their operations, to make these loans 
available.
    Also, the Small Business Administration has increased its 
Loan Guarantee Program up to 90 percent, and there is 
consideration to modifying even that.
    And of course, under the National Export Initiative that 
the President announced, he has called on the Ex-Im Bank to 
increase the amount of financing available for medium- and 
small-size business from the current $4 billion of activity to 
$6 billion of activity.
    But it is going to require, I think, a very comprehensive 
holistic approach to address this issue of access to capital.
    Mr. Schiff. On the President's program, and I support that 
completely, to use some of these TARP funds to incentivize the 
small and community banks to lend, will there be conditions 
placed on the access of those small and community banks to 
these funds, in the sense that if they are going to get the 
funds, they really need to increase their lending portfolio? 
Because, you know, I have heard secondhand some of the small 
banks saying, we will take the money, but we are not going to 
use it to lend. They are just going to hang on to it.
    And I think we saw this with some of the big banks that got 
TARP funds, that they used it to improve their bottom line but 
not necessarily to get the economy moving. How can, through 
this program, we ensure that if banks make access to this, that 
they in fact use it to lend?

                  USPTO--INTELLECTUAL PROPERTY RIGHTS

    Secretary Locke. I would have to really defer to Secretary 
Geithner and others in the Treasury Department for all those 
details in terms of the checks and balances or the incentives 
and the requirements.
    With respect to the issue of content and publishers, 
violation of intellectual property rights is a big concern. 
American companies are losing billions and billions of dollars 
in lost sales, and actually hurting job creation, whether it is 
in the music industry or the film industry, and we are focusing 
on that.
    The Vice President has convened a multi-agency task force 
involving Homeland Security, Justice Department, Commerce, 
Patent and Trademark Office. And we know that there is a lot of 
tension even among the new information technology providers in 
terms of their responsibilities. Are they simply the postmen 
and should not be liable for what is contained or transmitted 
over their lines?
    So the Department of Commerce, while we help enforce 
intellectual property rights and in all of our meetings with 
government officials really press the issue of enforcement of 
intellectual property rights, nonetheless, we, for instance, 
the Department of Commerce are hosting a forum of industries, 
both those who provide, create the content as well as those who 
transmit that content through to look at this very issue.
    Mr. Schiff. Thank you Mr. Secretary.
    And thank you, Mr. Chairman.
    Mr. Mollohan. Thank you, Mr. Schiff.

                    ITA--NATIONAL EXPORT INITIATIVE

    Mr. Secretary, the fiscal year 2011 budget proposes a net 
appropriation of $534.3 million for the International Trade 
Administration. Of that amount, the budget requests $83.5 
million for a National Export Initiative. You have referenced 
that. Does this initiative include an increase in funding for 
the agency responsibilities associated with challenging unfair 
trade?
    Secretary Locke. Yes, it does. Part of that funding for the 
International Trade Administration under the National Export 
Initiative includes folks dealing with trade compliance and 
enforcement.
    Mr. Mollohan. How much of this initiative is directed to 
the responsibility associated with challenging unfair trade?
    Secretary Locke. About 15 percent of the funds.
    Mr. Mollohan. Is this increased funding on imports coming 
into the U.S. from abroad, or does it just increase funding for 
challenging unfair trade when the U.S. exports?
    Secretary Locke. It would be both.
    Mr. Mollohan. Can you talk about it separately, and how 
much is for challenging unfair imports versus----
    Secretary Locke. Well, excuse me, the 11 percent is more 
for enforcement and compliance of U.S. trade laws. Then we have 
another sector of trying to break down market barriers in other 
countries to U.S. products and services.
    Mr. Mollohan. Well, that is what I am trying to tease out 
of here. How much of the increase will be used for challenging 
unfair trade on imports, unfair imports?
    Secretary Locke. That is approximately $11.8 million or 15 
percent of the funds requested for the Department of Commerce.
    Mr. Mollohan. Do you agree that the production of a billion 
dollars, for example, worth of goods in the United States that 
substitutes for a billion dollars worth of unfairly traded 
imports creates or preserves just as many jobs as a billion 
dollars worth of exports?
    Secretary Locke. That was a pretty complicated question 
there.
    Mr. Mollohan. Do you agree that if you save the number of 
jobs that it takes to create a billion dollars worth of 
exports, that that is worth just as much as preventing a 
billion dollars worth of unfair imports; that for the domestic 
market it is worth just as many jobs as going out and creating 
export opportunities worth a billion dollars?
    Secretary Locke. Oh, very much so. A billion jobs is a 
billion jobs.
    Mr. Mollohan. Well, it is a billion dollars worth of jobs. 
My point is that we hope that the Commerce Department will 
focus just as aggressively on unfair imports as we are in 
trying to break the barriers, unfair barriers that exist to our 
exports. And there are a lot of industries that are very 
sensitive to that and felt that not as much attention has been 
given at Commerce. And so we applaud you for this initiative 
and hope that it is focusing on unfair imports as well as 
trying to break log jams that unfairly exist for exports.
    Secretary Locke. As the President has noted on many 
occasions, America is perhaps one of the most hospitable 
countries for investment. We have almost the fewest barriers of 
any country around the world, and that is why, if we open our 
markets to products from other countries, it is incumbent upon 
other countries to reciprocate. And it also means that other 
countries have to abide by the rules of trade. Otherwise, 
American companies don't get the advantage or the full measure 
of whatever bargains and treaties and agreements we make with 
our countries.
    If we are able to create jobs and create new jobs, that is 
terrific. But if we already have jobs that are here in America, 
we need to save every single one of those. And if that means 
making sure that countries are not improperly selling their 
products at below normal cost, or not taking advantage or 
having extra advantage because their governments subsidize 
those products or services, then we need to go after those 
because we are talking about existing jobs. And unfair trade 
practices by other countries that disrupt existing jobs has 
tremendous impact to the people involved, their families they 
support, as well as their entire communities.
    Mr. Mollohan. Thank you for that affirmation, Mr. 
Secretary, and we look forward to working with you in ensuring 
that the administration is really up on full alert with regard 
to that.

                   ITA--TRADE COMPLIANCE--ENFORCEMENT

    The positions included in the overall trade compliance 
enforcement increase, will any of those positions work on 
reducing foreign subsidy programs? In other words, are you 
increasing your staff to look at foreign subsidy, where foreign 
subsidy programs exist, and identifying that as unfair 
competition?
    Secretary Locke. Well, we do have specialists who look at 
those various parts.
    Mr. Mollohan. Do you have sole jurisdiction over subsidy 
investigations?
    Secretary Locke. We don't have people focused on subsidy 
investigations unless they are part of a complaint that has 
been filed that we then investigate.
    [The information follows:]

                     Trade Compliance--Enforcement

    The Department of Commerce has sole authority for investigating 
subsidy allegations in countervailing duty proceedings. In addition to 
the responsibilities for subsidy investigations, the Department also 
has a team of subsidy experts which research, monitor, analyze, and 
assess the WTO-consistency of foreign government subsidy practices. 
These practices are addressed, as appropriate, including through WTO-
dispute settlement action, working with USTR. I envision that these 
enforcement efforts will increase under the NEI.

    Mr. Mollohan. Do you agree that, in order to have free 
trade, currencies must float?
    Secretary Locke. That is the position of the United States.

                   ITA--CHINA'S CURRENCY MANIPULATION

    Mr. Mollohan. On February 26, 2010, the Wall Street Journal 
reported that 15 Senators, including six Republicans, sent a 
letter to you, Secretary Locke, noting serious concerns about 
the Commerce Department's failure to conclude that China's 
currency manipulation is, in fact, a countervailing subsidy to 
its domestic exporters.
    The article goes on to state that you made a pledge in 
December to thoroughly investigate such allegations. The 
article quotes the President as saying that the U.S. needs ``to 
make sure our goods are not artificially inflated in price, and 
their goods are not artificially deflated in price; that puts 
us at a huge competitive disadvantage.''
    And the article notes that the Federal Reserve Board 
chairman, Ben Bernanke, ``echoed these concerns, calling on 
China to be more flexible towards its currency.'' Is the 
Department investigating the allegations that China's currency 
manipulation is a countervailing subsidy for its domestic 
exporters?
    Secretary Locke. The petitioners in that particular case 
have filed an amended complaint alleging that the 
undervaluation of the currency constitutes an unfair subsidy, 
along with several other allegations, and we are investigating 
that. And I cannot comment because it is under investigation 
right now.
    Mr. Mollohan. My question was only, is that under 
investigation by the Department?
    Secretary Locke. Yes.
    Mr. Mollohan. When will we hear results of that 
investigation?
    Secretary Locke. I believe that it depends on whether or 
not the petitioners will grant us an extension to add these 
additional elements into our investigation. If they don't grant 
us an extension, we have a statutory deadline by which me must 
respond to the initial set of allegations, and with these 
additional allegations, that is are very complex in nature, we 
need to be sure that we have sufficient time.
    Mr. Mollohan. Thank you Mr. Secretary.
    Mr. Fattah.

                  CENSUS 2010 DECENNIAL PARTICIPATION

    Mr. Fattah. Thank you, Mr. Chairman.
    Mr. Secretary, it is good to see you again.
    And let me just, I want to focus in on the Census which is 
one of the instant matters before your Department.
    The Census, plan was essentially developed under the 
previous administration?
    Secretary Locke. Much of the work of the Census was planned 
several years ago, under the previous administration, almost 4 
years ago.
    Mr. Fattah. Because there is some noise out in the 
atmosphere from conservatives with respect to the Obama Census 
plan--yet this is a plan that was put in place years ago, 
before the President was sworn in and before you took office, 
too, in terms of this year's Census, right? There should be no 
reason for anyone in our country, no matter what their 
political stripes, to not encourage people to comply with the 
Census. It is important data that the government needs to go 
forward, right?
    Secretary Locke. It is a constitutional responsibility of 
the government, and it goes all the way back to 1790 under 
President George Washington. It is the sacred duty of every 
resident of the United States.
    Mr. Fattah. I just raised it because I heard someone on Fox 
News, saying that if they had gotten this form, they weren't 
going to fill it out; that they couldn't encourage anyone else 
not to fill it out. This person is a judge or a former judge 
purported to be giving, you know, some overview about this.
    But I think that we should be encouraging everyone, 
wherever they may be to participate in the Census. It is 
important to the work of the long-term planning for a whole 
range of issues, transportation, education, and the like.
    And I just wanted to see if we could just put on the record 
that the program of the Census, that is, the short form, the 
planning for the implementation of this, that you really are 
the conductor on this train, but, as the conductor on the 
train, the tracks and the direction of this program was put in 
place by the former administration, which was a Republican 
administration. Is that correct?
    Secretary Locke. That is correct. And, in fact, the 
questions were all submitted to the Members of Congress, I 
believe 2 years ago, and approved by the Members of Congress 2 
years ago.
    Mr. Fattah. So this nonsense is nonconstructive in terms of 
doing the important constitutional work that your Department 
has. And I just wanted to put that on the record. I appreciate 
you being here.
    I thank the Chairman for yielding me time.
    Secretary Locke. Thank you.
    Let me just add that the Census program is really run by 
career people, nonpolitical people.
    Mr. Fattah. I know, but the political atmosphere sometimes 
in our city doesn't allow common sense to rise to high places, 
or when people have responsibility to act responsibly. So thank 
you.
    Secretary Locke. Thank you.
    Mr. Mollohan. Occasionally.
    Mr. Wolf.
    Mr. Wolf. I thank you, Mr. Chairman.
    I didn't know Mr. Fattah watched Fox News. I think that was 
interesting.
    Mr. Fattah. I do. I am a big fan.
    Mr. Wolf. Oh, good. There you go.
    Mr. Fattah. It is hard to find the news portion thereof; it 
is colored with so much opinion.

                    JOB PROTECTION, COMMERCE'S ROLE

    Mr. Wolf. I have a couple of questions, and I think we are 
going to come back. And I don't want to miss the vote.
    One thing I would like, and it is not really a question, 
but have you ever considered, because your job is a very 
important job, I think the Secretary of Commerce can make a 
tremendous difference with regard to jobs. And following up 
with what Mr. Mollohan, the chairman said, have you ever 
thought of having a tiger team or an advocate team in the 
Department of Commerce to help small businesses who are looking 
to protect jobs? For example, a Chinese firm will hire a Case & 
White up in New York and come in and just pound and pound onto 
a small business who really can't afford a Wall Street firm or 
a K Street firm. Have you ever thought of putting together an 
advocate team that will help people who are going through 
exactly what the Chairman was saying, where there is a foreign 
entity coming over, pounding, taking the jobs away? Have you 
ever given that any thought?
    Secretary Locke. Well, we do have various groups like that. 
For instance, we recently created an Office of Innovation and 
Entrepreneurship reporting directly to me, focusing on the 
issues of entrepreneurs because, for instance, in the last 30 
years, virtually all the net new jobs in America came from 
entrepreneur start-up companies.
    Mr. Wolf. But I mean to protect them in a way that when 
they, when these high-powered people are coming in? If you are 
an entrepreneur, you are small; all of a sudden, this foreign 
interest comes in. They have one of the best law firms in Wall 
Street coming in. How do you advocate or protect them? Or maybe 
you should-- would you think about it? Maybe there are some 
ideas that maybe you and I can chat about.
    Secretary Locke. Sure.

                           JOBS REPATRIATION

    Mr. Wolf. The second thing was, and I don't know how much 
time we have left, have you ever given any thought to putting 
together a repatriation team, a team whereby you would go 
around the country talking to American companies that are doing 
business in China and Bangladesh and Mexico and Guatemala, 
wherever the case may be, and say, we want to repatriate you. 
Not a Governor from Washington State taking a job from 
California or vice versa, but getting a job back from China, 
back from India, back from wherever. You would put together a 
high-level, bipartisan, nonpartisan team that would go out and 
meet with the head of Intel and say, hey, we have a great 
opportunity. Come home. Bring your jobs back home. Have you 
ever put together a major effort to do that?
    Secretary Locke. Not in the way that you have described, 
but we have been having discussions with major industries about 
what we can do to help them create more jobs here at home.
    Mr. Wolf. Well, the best job, though, is a job that is 
abroad that should have never left a little town in West 
Virginia or a little town in Virginia, that was taken over by 
it, and it is gone. And I think to find these American 
companies who, I believe, if given the right incentive and the 
right encouragement by the administration and by somebody like 
you, I would encourage you, if we can talk about it, maybe 
offline here, putting together a team and picking 25 of the 
largest American companies, good companies. Generally, the way 
to bring them back and in the past has been punish, but instead 
to see if there can be an incentive where there can be an 
incentive to scatter. Because you may want to come to 
Martinsville in southern Virginia, whereby you can pay a little 
less of a salary than you may pay if you are going to move it 
to the suburbs of New York City. But they want to come home. 
They want to come back.
    But if we could talk about maybe developing an incentive 
and if you could also have someone call me to see what 
literature is out there about any major action that has been 
done by this administration or other administrations in 
repatriation. Again, I am not talking about Governor of this 
State stealing from this State, but a Governor or a President 
or administration looking to go abroad, American companies 
solely, beginning, who were doing a good job in the United 
States, who, for whatever reason, moved abroad, to see if we 
could repatriate them back.
    Secretary Locke. I will be happy to have that conversation 
with you.
    Mr. Wolf. If you could. Thank you.
    With that, Mr. Chairman, I will yield back. And we are 
going to come back I assume.
    Mr. Mollohan. We are coming back from the vote.

                    ITA--NATIONAL EXPORT INITIATIVE

    Mr. Secretary, in the National Export Initiative, you 
propose $4.4 million for increased outreach and guidance to 
small and medium enterprises. And that includes a new 
Nationwide Export Education and Awareness Campaign and a 
National Series of Export Conferences and a Program of 
Assistance Outreach and Education tailored to the small and 
medium enterprises. This is a worthy goal. This is a worthy 
initiative. This, I am sure, works well in some places, this 
whole notion of really trying to mine companies who are not 
sophisticated exporters and are small- to medium-sized and to 
try to pull--it is a mine-pull program. It is not easy. I wish 
you all the success in the world.
    My first question has to do with the statement that 
accompanied our fiscal 2010 omnibus where we directed ITA to 
provide a report to the Committee on Appropriations, not later 
than 60 days after enactment, on the status of the current 
program, the pre-National Export Initiative program. And you 
can reference the language, the omnibus language in the 
conference report. But we haven't yet received the report. The 
question is, why not? And when can we expect it?
    What I am really interested in is telling you how strongly 
this committee will actually support this initiative. And we 
will be looking to see what reality is with regard to it after 
a short period of time. We recognize, those of us who are from 
economies that are extraction and manufacturing, how important 
it is to get this small- and medium-size business 
entrepreneurial engine going in, hopefully, a lot of 
diversified kind of economies. But getting access to that 
international market, and I can tell you I have personally been 
involved with, in a serious real way, with trying to help other 
entities facilitate those relationships, is not easy to do.
    So I will be really interested to see what this National 
Export Initiative ends up looking like. I will be very 
interested to see your report, and to work with you on it, and 
to support it in this bill, and look to your request, which 
will make judgments, obviously, to the extent which we support 
it on performance. I think I would like to, before we recess 
here for the vote--and we will be coming back right after these 
three votes to finish up. And it won't take very long to finish 
up after we come back.

                 EMERGENCY STEEL GUARANTEE LOAN PROGRAM

    The Emergency Steel Guarantee Loan program, Mr. Secretary. 
The fiscal year 2011 request, proposes to reduce the Emergency 
Steel Guarantee Loan program by $43.1 million. And Congress 
just extended the authorization for this program in the 2010 
omnibus. What is the administration's rationale for reducing 
the Emergency Steel Guarantee Loan Program nearly 90 percent?
    Secretary Locke. We have not had any loan activity on that 
for several years. The loans have all been paid back. There has 
been no activity, no loans. Only three loans have been made 
through the program, none since the year 2000.
    Mr. Mollohan. Well, if we approved your request and then 
there were a need, particularly in this current economic 
climate, then you wouldn't have any money to effect the 
program?
    Secretary Locke. Well, there are no outstanding loans. 
There have not been any requests, even in the last year.
    Mr. Mollohan. I know, but we are looking perspectively. We 
are looking into 2011.
    Secretary Locke. That is why we have proposed leaving at 
least some money in the account.
    Mr. Mollohan. But the money you have in the account is less 
than a placeholder. I mean, I can't imagine a situation that 
could exist that would actually be benefitted by $5.2 million.
    Secretary Locke. That is the administration's position, and 
we have just looked at the course of the history of the program 
since its inception.
    Mr. Mollohan. Well, let me ask you this, do you think it is 
possible that some steel companies in the next year might have 
a need and be able to participate in the Emergency Steel 
Guarantee Loan Program? Do you think that is possible?
    Secretary Locke. That is possible. That is why we have left 
some funds in the account.
    Mr. Mollohan. What will that, if you were, if we were to 
approve your request, what would the $43.1 million, how would 
you redirect that? Is any of it going to be used for import 
trade enforcement programs?
    Secretary Locke. Well, that is all part of the funds that 
go into the Department, and that includes funding for all the 
enhancements including the National Export Initiative. So I 
can't say that it was this dollar that went into this program 
because once it goes into the kitty, how do you know which 
dollar is funding which?
    Mr. Mollohan. Well, it is not here, and it is there, so--
well, we will be looking at this very closely and working with 
you.
    And we will return after the third vote, Mr. Secretary, and 
should finish up within a half hour of that.
    Secretary Locke. Okay. Thank you.
    Mr. Mollohan. The hearing will resume.
    Mr. Wolf.
    Mr. Wolf. Thank you, Mr. Chairman.

                           JOBS REPATRIATION

    Following up, could you have someone--and I know how busy 
you are--call me next week who you think is the most 
knowledgeable person in the Department on this issue? I would 
love to see us put together a repatriation program. And because 
I think there has been a tendency to just criticize and 
condemn, and maybe to flip it the other way around and see what 
incentives could be granted. I think most of these companies 
would really, like to have an opportunity to kind of come home.
    And I know, as a Governor, you have probably been in 
competition with different Governors to get someone to come to 
your State versus another--this would be different. This would 
be to get an American company to come to the United States and 
maybe to your State, maybe to another State, but on an 
incentive basis. So if you could have somebody call me, I would 
appreciate it. And if there is something that we could maybe 
put some language in here that would do something that would 
kind of help you.

                            USPTO--TELEWORK

    One other thing. When you came by, you mentioned about PTO 
and telework. And, for the record, the Department is interested 
in creating a long-distance telework pilot program. We 
understand that such a program could increase employee 
recruitment, and retention. Is there a legislative fix or 
language that the committee could carry that would give you 
that ability to have more people to telework than USPTO 
currently does? If you recall the conversation that we had.
    Secretary Locke. Right. We are really proud that the Patent 
and Trademark Office, of all the Federal agencies and bureaus, 
perhaps has the most number of people, the largest percentage 
of people who telecommute or telework. But there is a Federal 
requirement that they come back to the home office a couple of 
times a month, I believe. And so when we have a lot of people 
on the West Coast and around the country doing patent work, it 
is burdensome and actually cuts into their productivity to have 
them come back into Washington, D.C.
    So I believe that that is being addressed under the patent 
law that is being contemplated both in the House and the 
Senate.
    Mr. Wolf. Contemplated. Is that passing or is that just 
contemplated?
    Secretary Locke. Well, they have a manager's amendment in 
the Senate, and the House Members are conferring with the 
Senate.
    [The information follows:]

                        Patent Law and Telework

    The Administration supports developing a travel expenses test 
program proposal to provide agencies with the flexibility to enhance 
telework opportunities for employees.

    Mr. Wolf. Will there be a bill this year?
    Secretary Locke. You are a better predictor of that than I 
am.

               HUMAN RIGHTS AND ECONOMIC TRADE WITH CHINA

    Mr. Wolf. Well, maybe you could give the Chairman some back 
up language that, if that were not the case, that could help 
you do this.
    The last issue, your assessment as to the current economic 
trade relationship with China. About a decade ago, when 
Congress was considering most-favored-nation trading status, 
which I voted against. Many urged its passage and said it would 
strengthen the rule of law and accelerate domestic reforms. Ten 
years have passed and conditions are worse today in China than 
they have been in the last 20 years.
    Economically, they are booming. The Uighur population is 
having a very, very tough, tough time. Tibet, and I was 
disappointed that the President didn't meet with the Dalai Lama 
the first visit; I am glad he did the second time. But what 
they are doing to Tibet--have you ever been to Tibet?
    Secretary Locke. I have never had a chance. I have always 
wanted to go to Tibet.
    Mr. Wolf. I have been to Tibet. I went in with a young 
Buddhist monk. I went in with a trekking group, not as a 
Congressman. They didn't know what I did. I got a clean 
passport. We went back into the bowels of the monasteries. And 
what they are doing, they are literally bulldozing large 
portions of Lhasa. Lhasa is almost turning into a Chinese city 
and not a Tibetan city. They are destroying the culture.
    A large number of Catholic bishops now, it is 34, I think 
the latest figure is 35, are under house arrest. Protestant 
pastors.
    We had a hearing in the Tom Lantos Human Rights Caucus 
about 2 and a half months ago. One of the lawyers that we had 
as a witness was arrested when he got back. His family was 
arrested. And we just have to do a better job of advocating and 
connecting with regard to human rights and religious freedom. 
And I am not going to get into too much of the detail.
    It does trouble me, though, that the insensitivity of the 
previous administration and of this administration and of this 
Congress, of the Republicans in this Congress, and of the 
Democrats in this Congress, the issue of human rights and 
religious freedom means less today than it ever has. The number 
of people, we used to have Congressman Lantos and Henry Hyde 
and the giants that used to speak out. Now it is almost like no 
one even cares.
    And so I am not asking you a question. I would hope that 
the administration could be very aggressive in advocating for 
human rights, religious freedom, and for people that are being 
persecuted because of their faith or because of their belief. 
And that is not a question. It is a statement for the record. 
With that, I will just maybe, Mr. Chairman, I will just end and 
yield back.
    Secretary Locke. Congressman Wolf, let me just say that I 
accompanied the President on his most recent trip to China and 
was there when he was meeting with President Hu Jintao and 
Premier Wen Jiabao, and I can say that he did raise those 
issues of human rights. I have always raised it in all my 
meetings with top government officials, indicating that the 
strength of America is our diversity of thought, of opinion, 
religion and ethnic groups, and that they should embrace that 
as well. I can tell you the President did address those issues 
and raised those issues of human rights of the different ethnic 
minorities within China.
    Mr. Wolf. I would think, though, and I would urge you, the 
next time you go to China, and I will give you the telephone 
number and I will put you in touch with the people, if you 
would go to a house church and worship, not with a recognized 
church, with a house church, whether it be the Catholic 
underground church or the Protestant, it doesn't matter. They 
would love to have you there.
    Secondly, when we advocate for them it isn't enough to do 
it privately. It needs to be done publicly. It is like when you 
are in Congress and you are running for office, somebody says 
to you, I am really for you. Now, I am just not for you so much 
that I want to be identified to have my name down, and but I am 
really for you.
    Well, if you can't be with me publicly, then--so I think 
when the President goes and you go, it is important to speak 
out. It is important we have good relations. It is important we 
trade, but to advocate publicly, to stand, and so I would ask 
you, I am not going to put you on the spot, but I would ask to 
consider and if you are interested, call us, and we will put 
you in touch with the people, that the next time you go, that 
you go and worship with a house church. And I think to have, 
particularly, you would send such a message, it would resonate, 
and you wouldn't have to come out and make a press statement or 
say anything. Just by showing up physically there would really 
give hope to some of the people. So if you want to do that, 
just give us a call. We will put you in touch with them.
    Anyway, thank you for your testimony.
    Thank you, Mr. Chairman.
    Secretary Locke. Thank you, Congressman.
    Mr. Mollohan. Thank you, Mr. Wolf.
    Mr. Ruppersberger.
    Mr. Ruppersberger. Mr. Secretary, first, there are three 
areas if I have time I would like to get into, and it is STEM 
education, the issue of ITAR, and also the weather satellite, 
NPOESS.

  INTERNATIONAL TRAFFIC IN ARMS REGULATIONS AND EXPORT CONTROL SYSTEMS

    First thing, let me start with ITAR. The ITAR was what 
happens a lot in Congress, unintended consequences as a result 
of the Chinese getting some of our equipment. When we passed a 
law, the existing ITAR law right now, that is in existence, the 
United States controlled about 73 percent of the space 
industry. As a result of ITAR, we control about 27 percent and 
slipping as we speak. I believe not only does this hurt 
commerce, but it hurts national security.
    We were able to get a bill passed in the House, one of my 
other committees is Intelligence, and we worked with the 
Foreign Relations Committee, Congressman Berman, to get a bill 
passed, which basically takes the jurisdiction away from the 
State Department into Commerce. And then the list would be 
really more controlled by Commerce and the President on what 
could be and what could not be on the list. I mean, there are 
some ridiculous provisions in the list; a wooden table that 
doesn't impact anybody. But it is really something that the 
entire space industry in the United States, whether the larger 
groups or the smaller or whatever, is really being put at a 
disadvantage to the point that our allies and non allies are 
now selling our equipment, ITAR free they call it.
    So the bill is now in the Senate, in the Foreign Relations 
Committee, Senator Kerry's committee. I would like to know what 
your position or the administration's position is, and whether 
or not you can help us move this forward. The President has 
given different speeches that he wants to deal with ITAR. But 
from where we sit, it is almost a no-brainer. And then that 
list that is controlled by the President and Commerce would 
then come back to Congress for a final say.
    Do you have any comments on the ITAR issue?
    Secretary Locke. I cannot give you a comment now. I am not 
familiar with the legislation that you just referenced.
    But I can tell you that the President is very supportive of 
reforming our export control regime. And there was a 
Presidential Study Directive that was completed. We are 
beginning to meet with Members on the Hill to talk about the 
administration strategy and ideas.
    And it really comes from the report authored by Brent 
Scowcroft, the former National Security Advisor to President 
Bush, who said that our export control systems are 
irretrievably broken and that we don't protect enough those 
technologies that really warrant more protection, and then we 
have undue and unnecessary restrictions on other items that 
actually hurt our national security and our economic 
competitiveness.
    And you talk about satellites. Mr. Edelstenne, who is 
president of the European Aerospace Industries Association, has 
openly written and opined to all the members of the association 
that none of them should use any technology from U.S. companies 
because of our export control regime and the uncertainty it 
would provide, that would come with trying to incorporate U.S. 
technology.
    Well, that actually hurts our national competitiveness, our 
national security, because if our defense industries and those 
involved in high technology don't have opportunities in which 
to build products and provide services, then they are not able 
to receive the revenues for further R&D or even opportunities 
to perfect their products which ultimately can be used for our 
national security.
    Mr. Ruppersberger. I appreciate your answer. I would like 
someone from your staff to get with my staff. This is a 
consensus within the industry. We know we have to keep certain 
things secret. But when you take an industry in the United 
States from 73 percent to 27 percent and slipping, it is 
something that we have been working on for 10 years, and I 
think it is time we move forward, so I really would like 
someone from your staff to get with my staff and work maybe a 
strategy with the Senate.
    The Senate doesn't object to it. It is just a lot of things 
happen in the Senate that we don't understand, and they are not 
moving a lot. So let's see where that goes.

                           WEATHER SATELLITES

    The second issue, and I am not going to get into it. This 
isn't your realm. It is more in other areas, about what 
happened in other areas with NASA and the President's new 
program, which we all have an issue with, about whether or not 
we don't move forward with manned space. And you know, we 
control the world because we control the skies. And Russia and 
China are that close to us, so we really have to work close 
with the administration.
    But the weather satellites, they were really controlled by 
both the, I think, Commerce and by Defense.
    Secretary Locke. Defense Department.
    Mr. Ruppersberger. And now Defense gave it over to you, and 
then you all came in and you cancelled the program. It is 
called NPOESS. And you know, it is a concern at this point on 
why this was done. And when I had--who is the science advisor?
    Secretary Locke. John Holdren.
    Mr. Ruppersberger. Holdren. I was questioning him and I 
think I believe it was this committee about, what are we going 
to do? You know, we have two older satellites in the barn, so 
to speak, but, you know, when you are talking about moving 
forward in the research and development and staying, again, 
ahead of Russia and China, but just generally, I think the 
answer was, well, we are going to rely a lot more on the 
Europeans. Well, that just doesn't get it for me. I mean, we 
are a strong country. We have been dominant in space, and we 
can't afford to take any slip at all in where we are moving 
ahead.
    Do you have any opinion on the NPOESS program? Supposedly 
it has been cancelled, and I think there is going to be a lot 
more work that we need to do working together, Congress and the 
administration on this issue.
    Secretary Locke. Thank you, Congressman.
    We are not cancelling the program. This is a very troubled 
program that started originally with six satellites, and it has 
been cut down to four satellites. The original cost for the six 
satellites was about $8 billion. It is now, for even the four 
satellites, gone up to I think $14 billion. And it keeps 
climbing.
    A whole host of different studies, Inspector General, GAO 
audit reports on this program, and in fact, expert review 
panels involving experts and leaders from the space industry 
have looked at this. And they basically said it had to be 
completely restructured or completely abandoned. And I read 
those reports upon becoming Secretary of Commerce and 
immediately brought this to Mr. Holdren and others within the 
White House, and we have finally been able to prevail and 
follow those recommendations of the expert panels, and we are 
restructuring it.
    So NOAA will be working with NASA at the Goddard Space 
Flight Center to focus on our two satellites, and Defense 
Department will focus on its two satellites. And NOAA will 
still operationalize or focus on the operations, the 
information gathering from all the satellites. But instead of a 
50/50 cost share, where we were paying half of the development 
of the Defense Department's satellites and they are paying half 
of the development and cost of our NOAA satellites, especially 
the afternoon satellites, we will separate our ways. We will 
now have NASA in charge of the acquisition of the afternoon 
satellites on behalf of NOAA and the management of the 
development of the satellites and the instruments. So we are 
going our separate ways.
    [The information follows:]

    The JPSS decision severs NOAA from an open-ended liability 
of having to fund 50 percent of a contract that it had limited 
control over. By placing NOAA in charge of the afternoon orbit 
and providing funds to develop JPSS, NOAA can exercise greater 
control over the management of the contracts. The JPSS budget 
of $11.9 billion gives NOAA high confidence that the program 
will be implemented and protects NOAA's non-space portfolio 
from the risks to uncontrolled cost growth that was evident 
under the NPOESS program.
    Each year, NOAA works with the Administration and Congress 
to create a balanced portfolio of programs to address the 
Nation's most critical needs. NOAA undergoes an extensive 
planning process to ensure the highest priorities are addressed 
in its annual request within the constraints of the current 
fiscal environment. NOAA's FY 2011 Budget request of $5.6 
billion includes investments to strengthen NOAA's science, 
promote economic development, strengthen energy and security, 
sustain oceans and coasts, and protect lives and livelihoods.
    Satellites are our most critical observing platforms that 
provide data to support all of NOAA's mission priority areas 
ensuring continuity of space-based climate, weather, and ocean 
observations. The FY 2011 Budget Request of $2.2 billion for 
satellite systems supports national priorities for: improving 
weather forecasts and disaster warnings; ending overfishing and 
transforming fisheries management, protecting and recovering 
species and habitat; strengthening climate science and 
services; enhancing the vitality of coastal communities and 
ecosystems; and strengthening Arctic science and stewardship.

    Mr. Ruppersberger. I can understand that.
    But, on the other hand, when you take Defense satellites 
and intelligence satellites and you have the NASA satellites, 
which includes NOAA and the weather satellites, there is not 
enough money for all. And, if anything, I would think that the 
three areas, and that Defense will push back more than anyone, 
DOD, is we have got to start collaborating and maybe using 
certain Defense or intelligence satellites for weather or 
whatever. It just has to be done.
    The other issue we need to focus on, too, is commercial. 
The other countries, European countries who don't put the money 
into the satellites that we have throughout the years, are 
using commercial, and it is about half the price. And they are 
getting the same pictures we are getting throughout the world, 
including issues involving terrorism.
    So I would hope that when you meet, that we would really 
focus on the issue of collaboration between DOD, between intel 
and NASA, and then we are going to have to really decide where 
we are going to go; what is going to be commercial, what is 
not. But I just don't want to rely on other countries for what 
we get out of these satellites. That, I think, puts the United 
States at a disadvantage.

                             STEM EDUCATION

    On STEM, as we know, we are having issues in our country 
with younger generation going to, being out of math and science 
and engineering, whatever. China just last year, I think, 
graduated over 660,000 rocket scientists, mathematicians and 
engineers. I think we were about 66,000. Now the good news is 
that we are still are ahead curriculum wise, but they are 
gaining on us. China's gaining on us in a lot of different 
areas.
    A program that I have been working on in my area, and I 
represent NSA, they are in my district and Fort Meade, all of 
those different areas, is trying to start focusing on middle 
school, on high school and getting some testing and developing 
and regional, because I am from the Baltimore region, and to 
get these students who have aptitude and test them in the area 
of math and science and whatever and start working them in a 
kind of a STEM school possibly maybe on the campus of NSA or 
NASA, which is up the street, so to speak, and to get them 
involved early so that they can learn the culture and the 
intern programs.
    Now, I know you all work on these type of programs I think 
in your Regional Innovation Clusters and areas like that. But 
most of it is either college or postgraduate. I would hope you 
would consider really starting to focus and working on the 
middle school and high school and identifying these students in 
an early way.
    I met with a group today that I have been working with for 
years at Fort Meade, NSA, the Anne Arundel County Education 
System. They have put together a program that we are going to 
start involving UMBC, which is one of the top technology 
schools in the country, University of Maryland, Baltimore 
Campus, and they are going to come together and bring students 
in from different regional areas, as long as we find them 
money, but the education component and the business component 
coming together. And this is so important to our future and in 
the area of science and technology and engineering, which also 
deals with the issue of space.
    In the old days, when Russia came out with Sputnik, we 
responded by putting a man on the moon in 8 years, and there 
was enthusiasm. It was when astronauts were as popular as NFL 
football players. Americans were behind the program. I think 
Americans just aren't getting into the fact that we just go 
back and forth to the Space Station, especially if we are going 
to have to hitch a ride with Russia now.
    But we need to start generating more activity in the area 
of space, because Russia and China are communist countries, and 
they will take their best and say, you are working in space, 
whether you like it or not.
    So I really think and I would hope that Commerce can start 
focusing and working, and we are going to look at it from a DOD 
point of view and whatever, start focusing and helping us on 
the middle schools and the high schools involving STEM. Could 
you consider doing that? What is your opinion on it?
    Secretary Locke. I would love to be part of those 
discussions. In a lot of my meetings and speeches in front of 
business groups, I keep emphasizing to them, maybe it is my 
former hat as Governor, that the business agenda must always 
include the education agenda, especially in math and science 
and engineering.
    [The information follows:]

                            STEM Activities

    The Department of Commerce has a number of existing Science, 
Technology, Engineering and Mathematics (STEM) Education programs 
within the National Institute of Standards (NIST) and Technology and 
the National Oceanic and Atmospheric Administration (NOAA).
    NIST's primary STEM education program is the prestigious NIST 
National Research Council Postdoctoral Research Associateships program. 
NIST also supports the 12-week Summer Undergraduate Research Fellowship 
(SURF) program, which brings in about 130-150 students each summer to 
work with NIST researchers. In addition, NIST offers teacher training 
through the NIST Summer Institute for Middle School Science Teachers, a 
collaboration between NIST and local school districts. Teachers use 
their experiences at NIST to enhance their curriculum, with end goals 
of helping students acquire the necessary STEM skills to successfully 
compete in a global economy and explore opportunities in STEM fields.
    Also at NIST, education organizations have been eligible to 
participate in the Malcolm Baldrige National Quality Award process 
since 2001. In that period there have been eight education Baldrige 
Award Recipients--five were K-12 school systems and three were high 
education institutions. Additionally, the Baldrige Education Criteria 
for Performance Excellence are used by educational institutions for 
self-assessments and guidance.
    NOAA STEM education activities focus on connecting educators, 
students (K-12 through postgraduate). The programs include competitive 
national and regional education grants, the Ernest F. Hollings 
Scholarship Program, the Dr. Nancy Foster Scholarship Program and the 
Educational Partnership Program with Minority Serving Institutions.
    Through competitive educational grants, NOAA partners with 
organizations such as the American Meteorological Society and National 
Science Teachers Association to provide professional development for K-
12 teachers in atmospheric, climate and ocean sciences. These grants 
also support partnerships with organizations such as the National 
Aquarium in Baltimore and the Maryland Science Center to reach diverse 
audiences and promote STEM literacy.
    The Ernest F. Hollings Scholarship Program supports undergraduate 
training in oceanic and atmospheric science, research, technology, and 
education and fosters multidisciplinary training opportunities. In 
addition, the Educational Partnership Program partners with minority 
serving institutions to increase the number of undergraduate students, 
particularly from under-represented communities, who are trained and 
graduate in sciences directly related to NOAA's mission.
    The Dr. Nancy Foster Scholarship Program recognize outstanding 
graduate students in marine biology, oceanography, or maritime 
archaeology, particularly by women and minorities, and encourages 
independent graduate-level research by providing financial support, 
through a competitive grant process, of graduate studies in those 
fields.

    Mr. Ruppersberger. Again, whoever is going to contact my 
staff on the first issue. We have some programs we have been 
talking with the Gates Foundation for the other--I mean, the 
business community wants a workforce. And they will be willing 
to work with us when we put together the appropriate programs 
that are solid and have the curriculum that is necessary and 
proved by education components.
    And I have to leave. I am sorry, we have another hearing. 
Thank you for your testimony.
    Mr. Mollohan. Thank you, Mr. Ruppersberger.
    Mr. Ruppersberger gets to more hearings than any Member of 
the United States Congress. We appreciate his service on this 
committee.
    Mr. Secretary, let me reinforce Mr. Ruppersberger's 
comments about STEM education. We are all over that in this 
committee, and we are really going to do some things in some of 
the science accounts that will try to create some prototype 
programs for STEM and really get down to it. We are anxious for 
agencies, NSF, to come up here and say they have made some 
progress and actually tell us how to make the improvements that 
they say have not been made for 20 years.

                      COMMERCE REPORTS NOT TIMELY

    Mr. Secretary, I have in my hand a list of reports that the 
committee has directed the Department of Commerce to submit. 
Most of them are pretty small reports. Here is one, ``Census: 
Inspector General's Recommendations Regarding Implementation.'' 
I can only imagine, by the time we get that report, events will 
have overtaken the purpose of the report.
    We are going to take this really seriously if Commerce 
isn't, and we will reflect our seriousness about them in the 
2011 bill. If Commerce is responsive, as I am sure you want 
them to be, just not being there very long, that would be a 
really good thing, and that might be something you want to pay 
attention to.
    Secretary Locke. We are aware of it, and we are trying to 
get on top of it and trying to get these to you as soon as we 
can, sir.
    Mr. Mollohan. Well, your office has the responsibility to 
do this. If they can't do it, perhaps that should be looked at 
closely.

 NTIA--PUBLIC TELECOMMUNICATIONS FACILITIES, PLANNING AND CONSTRUCTION

    The National Telecommunications and Information 
Administration's PTFPC, Public Telecommunications Facilities 
and Planning and Construction, account, this administration has 
zeroed that account out.
    Secretary Locke. Yes.
    Mr. Mollohan. The last administration zeroed that account 
out. And I would hope that this administration would be 
sympathetic to the needs that the Public Telecommunications 
Facilities Planning Construction account address, and I am 
really surprised to see it zeroed out.
    Now, that is one of the places where we requested a report. 
We haven't received it. And let me start out with that. Why 
haven't we received that report?
    Secretary Locke. We are in the process of finalizing that 
report to your committee, sir.
    Mr. Mollohan. And who is working on it? What different 
levels of government and different entities are looking at that 
finalization of it?
    Secretary Locke. I can just tell you that it is simply 
within the administration.
    Mr. Mollohan. You can't tell me anything more than that? Or 
do you want me to tell you where it is?
    Secretary Locke. Well, it involves NTIA and other agencies 
within the administration that also have to review and comment 
on our drafts. And so it is a back-and-forth process.
    Mr. Mollohan. Is this at OMB right now?
    Secretary Locke. I cannot tell you if it is exactly at OMB, 
but I know that it is making the rounds.
    Mr. Mollohan. I would just encourage you to be more 
sympathetic to the professional comment than to the budgetary 
commenters on this, because our request went to the question 
of, what is the difference between the two accounts? There is 
some assertion that, gee, they are the same; they are 
overlapping. That is not our experience, and we are fairly 
experienced with this. And it probably would be disappointing 
to come back and have it initiated, defining the differences, 
the distinctions between the two programs, and having come back 
and say, there is no distinction between the two programs. It 
is really something that you might want to look at.
    Do you believe, are you familiar enough with these programs 
to make judgments about whether they duplicate each other or 
not?
    Secretary Locke. I am not personally familiar with these 
programs.
    Mr. Mollohan. For the record, would you submit a comment on 
that question, in addition to the letter we have asked, in 
response to my question are they duplicating?
    Secretary Locke. Sure.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T6756A.008
    
    [GRAPHIC] [TIFF OMITTED] T6756A.009
    
                    EDA--REGIONAL INNOVATION CLUSTER

    Mr. Mollohan. The administration has apparently announced a 
multi-agency funding opportunity to sport an Energy Regional 
Innovation Cluster. And our understanding is that there are 
three Commerce, Justice, Science agencies that are included in 
this initiative, and two of those agencies are within your 
Department. We don't know very much about this initiative, just 
what we have really read on the Department of Energy Web site. 
Could you describe the goals and the vision for this 
initiative?
    Secretary Locke. Let me see. I have some paperwork on 
those. I can try to find that.
    One of the projects that I am aware of dealing with the 
energy-efficient building technologies is a consortium or 
partnering of six agencies, including Commerce's Economic 
Development Administration. And it is our intent, within EDA, 
to provide $5 million toward what would be about a $129 million 
grant to accelerate the development or to help put together a 
regional innovation cluster focusing on these energy-building 
technologies. But it would involve Energy, I believe Department 
of Education, Small Business Administration. I can't remember.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T6756A.010
    
    [GRAPHIC] [TIFF OMITTED] T6756A.011
    
    [GRAPHIC] [TIFF OMITTED] T6756A.012
    
    [GRAPHIC] [TIFF OMITTED] T6756A.013
    
    Mr. Mollohan. What is the request in your agency, and how 
does it break down?
    Secretary Locke. $5 million.
    Mr. Mollohan. Total, from Department of Commerce?
    Secretary Locke. Right. That is, we would make that much 
money available for this if there is an entity which applies 
for it and is accepted.
    Mr. Mollohan. How does that break down? What agencies in 
the Commerce Department are going to be involved in this?
    Secretary Locke. Economic Development Administration.
    Mr. Mollohan. It is my information there were two agencies 
involved.
    Secretary Locke. I am not aware of that. We can get back to 
you.
    Mr. Mollohan. Okay.
    Secretary Locke. Also NIST. I am sorry.
    Mr. Mollohan. I wish we could follow up a little bit with 
this program. Just give me, what are the goals of this program?
    Secretary Locke. Well, the point of Regional Innovation 
Clusters is to really try to develop the strengths of 
communities, creating almost like research parks, the way 
that--Silicon Valleys or Route 128 corridor. And we are 
interested in----
    Mr. Mollohan. But how does $5 million--an Energy Regional 
Innovation Cluster? What is that?
    Secretary Locke. Focusing on new technologies and involving 
energy that might go for manufacturing new materials, building 
materials.
    Mr. Mollohan. What is the ``it'? Is this a grant program to 
a nonprofit, to an academic institution?
    Secretary Locke. It depends on the proposal that each 
regional applicant might put together. It could be a consortium 
of colleges, universities, economic development associations, 
research entities, nonprofit or for-profit. It really depends 
on the existing strengths of a particular region, what their 
assets are, what they would use this funding for to build out 
and complement. So it is really--just as the whole notion of 
Regional Innovation Clusters is to determine the strengths and 
look at the gaps of an area as they pursue whatever what their 
economic vision might be, whether it is in biomedical research; 
do they need more training? Do they need some infrastructure? 
Do they need some facilities? Do they need telecommunications 
assets, et cetera, et cetera? Or, for instance, it could be a 
Regional Innovation Cluster focusing on tourism and the 
different sets and skills and organizations and training that 
would be required for that.
    Mr. Mollohan. Well, we look forward to it.
    Secretary Locke. But this one is focusing on energy-
efficient building technologies, whether it is insulation, new 
materials, components, et cetera, et cetera.

                 NIST--NATIONAL INNOVATION MARKETPLACE

    Mr. Mollohan. We will look forward to additional 
information forthcoming on the program.
    The National Innovation Marketplace, in last week's NIST 
hearing, we discussed the National Innovation Marketplace. And 
we understand that is a new initiative in the Manufacturing 
Extension Partnership Program, and we have learned that EDA has 
a role in this initiative as well. Can you describe the goals 
and vision of the National Innovation Marketplace, and what is 
that?
    Secretary Locke. I would have to get back to you on that. I 
am sorry.
    [The information follows:]

                    National Innovation Marketplace

    The National Innovation Marketplace (NIM) involves the translation 
of emerging technologies into business applications, market 
opportunities, and the adoption of new products. It does so by allowing 
sellers, buyers, investors and distributors of new products and 
technologies in all industries to connect with each other through a 
web-based tool. The tool also connects manufacturers with sources of 
new technologies to improve their manufacturing processes or for 
adoption into new and improved products. EDA does not have a formal 
role in the NIM.

    Mr. Mollohan. Sure.

                     USPTO--DEPARTMENTAL OVERSIGHT

    Mr. Secretary, the United States Patent and Trademark 
Office, let's explore the funding difficulties associated with 
that, the budgeting difficulties associated with that.
    You know, we had a fiscal crisis with regard to USPTO in 
2009, and they had to come back to Congress as a result of the 
economic downturn and some other issues. Since Director Kappos 
will be testifying before this subcommittee at the end of 
March, it is not my intent to dwell too deeply into this 
subject matter. We have a high regard for him. We consider him 
to be really a straight shooter, and we look forward to his 
testimony before our committee.
    However, I would like to ask you a bit about the 
Department's role in oversighting USPTO. You know, there is an 
agreement out there someplace in space that USPTO will through 
some process have access to the funds that it--the fees that it 
generates to operate. I don't think, I hope that was never 
intended to preclude their submitting a requirements-based 
budget, but they haven't. We have required that this year. We 
look forward to that.
    I think that is a first step in understanding, what are 
their needs? Certainly, their needs aren't necessarily related 
in any budgetary sense to what their fees collections are. So 
it seems like a really bad budgeting process, and it has proved 
to be a very bad budgeting process; because they guess what 
their fees are going to be, we appropriate it, and then they 
are in excess of that or they are below that.
    When they are below that, it costs us. We get scored for 
that. It costs us a lot of money, which means that EDA doesn't 
get funded. They are shortchanged or somebody else is 
shortchanged. And it also means the USPTO probably doesn't have 
the money to run its operations.
    So we are looking for a process where, like every other 
agency, USPTO submits a budget request which reflects what 
their needs are. Hopefully the authorizers, which are 
considering this issue, will come up with a fee funding scheme 
that really works and we will be interested in seeing and 
inputting into that process.
    But it became evident during the crisis that the Commerce 
Department considered itself to have essentially no oversight 
responsibilities. It was a pass-through. The USPTO just passed 
through its budget. Has that changed?
    Secretary Locke. That is changing.
    And that is one of the unusual situations that the new 
management team at the Department of Commerce has come across, 
that USPTO for a long time has traditionally considered itself 
semi-autonomous from Commerce Department central management or 
even our budgeting processes.
    So we are reviewing a new requirements-based budgeting 
process for the USPTO. And David Kappos has been terrific in 
and is welcoming involvement of the top managers and the 
management of the Commerce Department, because, as you 
recalled, in the late summer, when the funding crisis arose, it 
was the people from the Department of Commerce that had to help 
intervene in that situation and help provide leadership to get 
them through that. And we very much appreciate the support that 
you and your committee provided in giving them temporary 
funding flexibility and relief, borrowing authority. In the 
end, it wasn't necessary, but it really demonstrated the 
shortcomings in terms of reporting and budgeting within the 
Department or the U.S. Patent and Trademark Office.
    So we are trying to get a handle on it, and Dave Kappos is 
doing a terrific job. We have a huge backlog. We also have some 
excess fees that are now being generated because of some of the 
management efficiencies and the reworking, the whole labor-
management cooperative processes that have been undertaken, as 
well as just applying paralegals to take care of things that 
are sitting out there that could be easily remedied, which we 
can then issue the patent, collect more fees and use that to 
replace people who are retiring.
    Because of the dire budget situation, with a lot of the 
retirements of the workforce, we don't have--we are really not 
able to fill those spaces. And so our goal of trying to get the 
approval or determination down to one year by year 2014 is in 
jeopardy unless we have access to all those fees. And we 
appreciate the willingness of you and your staff and the 
committee staff to work on that.
    That is why the President's 2011 budget assumes some 
additional fee-setting authority and other temporary fee 
provisions, along with updating our IT systems. I mean, here it 
is the agency that patents and protects innovation perhaps it 
is under-utilizing the very things that they approve that are 
out there that can help them do a more efficient job.
    So it is a very--we have a very comprehensive program that 
we have embarked upon to reduce that backlog and get the 
processing down to within a year.

                          NOAA CLIMATE SERVICE

    Mr. Mollohan. Okay. Well, we look forward to that. And 
perhaps this will be the year that we will, first of all, know 
what their budget requirements really are, and put in place a 
fee funding scheme that really works. And we look forward to 
working with you on that and the authorizers as well.
    NOAA Climate Service, Mr. Secretary. On February 8th, the 
first day the Federal Government closed as a result of the 
blizzard's aftermath, the Department of Commerce and the 
National Oceanic and Atmospheric Administration announced the 
intent to reprogram and create a NOAA Climate Service. The 
subcommittee will go into the details of the NOAA Climate 
Service with Dr. Lubchenco on the 17th of this month. But since 
the announcement was made jointly, I would like to ask you a 
few questions about the process.
    Why was the announcement made on the day that the Federal 
Government was closed?
    Secretary Locke. Well, that was already the date that had 
been planned. In fact, the employees were going to be convened 
in a big meeting at NOAA headquarters to receive that 
information. When the government closed down, we weren't sure 
how many people were coming to work and how many weren't. And 
it was primarily an announcement to the press and various 
stakeholders, so it was conducted by conference call. So we 
felt people would still be available whether they were at work 
or at home to participate in that.
    Mr. Mollohan. You know, I don't know who you briefed, but 
the Appropriations Committee wasn't briefed.
    Secretary Locke. I don't know who all was briefed. We were 
told that we had been informing people even weeks before of our 
intent to try to do this, and I don't know exactly how 
finalized a version of the reorganization people were informed 
of. But I do know that, in our meetings with NOAA, that they 
were indicating that they very much needed to, and wanted to, 
inform key Members of Congress, including the various 
appropriating committees. I do know that there was a lot of 
outreach to a lot of the staff to inform them of what was 
coming and what was being contemplated.
    Again, we do know that it is a work in progress, and we 
want to consult with the Members of Congress on the final 
design. There is no final design for this but really a concept, 
some tentative ideas on which people and which units would be 
moved from the various scattered offices within NOAA into a 
one-stop shop or one-roof climate service.
    Recognizing that, that is why, for instance, nothing would 
move until the beginning of the next fiscal year so that, 
depending on what the Members of Congress say, then we can line 
up with the next fiscal year.
    Mr. Mollohan. Is that the goal, one roof, one shop?
    Secretary Locke. Yes. We have so many functions data that 
is collected with respect to climate from, probably about over 
a dozen different line agencies or offices within NOAA.
    Mr. Mollohan. When you make that reference, are you talking 
about just within NOAA? Or are you talking about----
    Secretary Locke. We are just talking about the NOAA 
functions, making it easier and more convenient for 
stakeholders or members of the public or government officials 
to access whatever information we now collect with respect to 
climate.
    Mr. Mollohan. So you will have a discreet service, and 
folks will know that NOAA has stood up a climate service?
    Secretary Locke. Yes.
    Mr. Mollohan. What about other agencies or departments in 
the government? Are you coordinating this effort with them and 
to the extent----
    Secretary Locke. Yes. We coordinated this with the office 
of Mr. Holdren, of Science and Technology, the White House, and 
even the Department of Interior, because they also have a lot 
of collection and data regarding climate.
    Mr. Mollohan. You describe it as a concept, but you 
announce it as a program. What is next? Are you seeking an 
authorization?
    Secretary Locke. Yes. We need approval from the Congress 
for this reorganization.
    Mr. Mollohan. Do you have an authorization before an 
authorizing committee in the House of Representatives?
    Secretary Locke. We believe that we have the authority 
under the National Climate Act. But we certainly would welcome 
the input and the approval of the appropriating committees.
    Mr. Mollohan. Well, this is just an inquiry of what the 
status of it is and what you think you have to do to move 
forward. Are you going to seek a reprogramming, or are you 
going to submit and have an amended budget request up here for 
this purpose?
    Secretary Locke. It would be reprogramming, but not to take 
effect until the beginning of the next fiscal year to make it 
easier so that we are not having to amend existing budgets.
    Mr. Mollohan. Okay. Well, that is all right. We will follow 
up with it. Do you have a current package? Is it with the 
Department, or is it with OMB, to flesh out this concept?
    Secretary Locke. We have proposals. It has not been fully 
fleshed out. Still with consultation, even with the employees 
and the various labor groups. So we have a proposal, but it has 
not been finalized.

              ITA--TRADE COMPLIANCE--SUBSIDY INVESTIGATION

    Mr. Mollohan. Okay. Well, we are very interested in this, 
and so we look forward to working with you on it.
    Mr. Secretary, we are coming down to the----
    Secretary Locke. Mr. Chairman, because I know you have a 
great interest in this, and I want to make sure there is enough 
time if you want to follow up on it. I want to clarify my 
earlier statement regarding the International Trade 
Administration and the allegations about currency manipulation 
and how that ties in. The International Trade Administration is 
reviewing that allegation and will be making a determination 
whether or not to initiate an investigation of that particular 
allegation.
    Mr. Mollohan. You don't have an investigation ongoing at 
the time?
    Secretary Locke. That is not yet ongoing. They are still 
making determination as to whether or not to initiate such 
investigation. I want to make sure we are clear on that.
    [The information follows:]

                Trade Compliance--Subsidy Investigations

    Our determination on whether to investigate this allegation is not 
dependent upon whether an extension is requested in the case.

                    EDA--PUBLIC WORKS FUNDING LEVEL

    Mr. Mollohan. Thank you for that.
    Recently we had a hearing of the EDA grant program, 
Economic Development Administration's grant programs, Mr. 
Secretary, and we had five grantees from around the Nation 
sitting down there testifying, most of them very favorably, 
testifying about their experiences with EDA. And they provided 
ideas for improving the programs. It was very valuable 
testimony.
    We find that we have these interested stakeholders in these 
programs, and they come. And we have hearings, and it really is 
enlightening. We will go into these issues in depth with your 
fine Assistant Secretary Fernandez. And he is scheduled to 
testify next week, so we look forward to that. However, I would 
like to focus on a couple overarching issues with you today.
    The grantees were very appreciative of the Economic 
Adjustment Assistance program and its flexibility, but they 
also agreed to the person that the Public Works Funding should 
not be reduced to increase the Economic Adjustment Assistance, 
the EAA, funding levels.
    Now, every year, again, in the past administration--and I 
encourage you folks to sit down to distinguish yourself in some 
policy way from the past administration--the past 
administration tried to rob Peter to pay Paul in the same way 
you have; robbing Public Works in this manner to fund the 
Economic Adjustment Assistance. I had no problem with the 
Economic Adjustment Assistance. As a matter of fact, I am 
increasingly convinced that it provides the flexibility that 
you advertise when you come here and testify before the 
committee.
    On the other hand, I think you are going to find a lot of 
resistance to reducing, changing much the Public Works 
projects. And the interest in that remains very high out there 
in the stakeholder community, also in the congressional 
community here.
    So I guess what we ask is, why do you repeatedly propose to 
eliminate Public Works to fund this program? Because at some 
point, you are going to jeopardize--and people are going to----
    Secretary Locke. I understand that concern.
    Mr. Mollohan [continuing]. Not be very responsive to your 
EAA funding.
    Secretary Locke. I understand that concern.
    And as you noted, it is reduction of the Public Works Fund 
and transferring virtually all of that over to the Economic 
Assistance Program. Yes, the EAA program does have greater 
flexibility, and the EAA also funds infrastructure projects 
very similar to what the Public Works account also funds.
    Mr. Mollohan. Yes. But if you funded it that way, you would 
be funding less Public Works, right?
    Secretary Locke. There is that possibility that there could 
be actually less Public Works projects funded by merging it 
into the Economic Adjustment Assistance.
    Mr. Mollohan. It would be more than a possibility. I mean, 
it would actually have to happen because you are going to be 
siphoning off funds to the other activities. So almost by 
definition you would be funding less Public Works projects. And 
that is not something that is very attractive up here.
    Secretary Locke. Well, we are adding to the current funding 
within the Economic Adjustment Assistance account. And that 
does not necessarily--because the pie is now bigger--does not 
necessarily mean that we will fund less Public Works projects 
within this larger account.
    Mr. Mollohan. Well, then, let's just all fund it out of the 
Public Works account then.
    Secretary Locke. I understand that.
    Mr. Mollohan. And if flexibility is the issue, really, then 
why don't you give that flexibility to the Public Works 
accounts?
    Secretary Locke. That is a possibility, too.
    Mr. Mollohan. Okay. Well, we look forward to working with 
you. And I think that expresses our concern about this. It does 
not express an opposition, however, to the Economic Adjustment 
Assistance account. We are going to be looking at that and 
working with Assistant Secretary Fernandez. I look forward to 
working with him on it.
    Secretary Locke. He is a very, very----
    Mr. Mollohan. Impressive young man.
    Secretary Locke. Very, very impressive person.
    Mr. Mollohan. We have a couple other questions we are going 
to submit for the record for you. And thank you very much for 
your testimony here today. We appreciate your appearing, and we 
look forward to working with you, Mr. Secretary.
    The hearing is adjourned.

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                                         Wednesday, March 17, 2010.

 NOAA (NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION) FY2011 BUDGET 
                                OVERVIEW

                                WITNESS

DR. JANE LUBCHENCO, UNDER SECRETARY OF COMMERCE FOR OCEANS AND 
    ATMOSPHERE AND NOAA ADMINISTRATOR

                            Opening Remarks

    Mr. Mollohan. The hearing will come to order. Good morning, 
welcome.
    Today we will hear testimony from Dr. Lubchenco, NOAA 
Administrator and Under Secretary of Commerce for Oceans and 
Atmosphere. This is Dr. Lubchenco's first opportunity to 
testify before this Subcommittee.
    Welcome.
    Ms. Lubchenco. Thank you, Mr. Chairman.
    Mr. Mollohan. NOAA's fiscal year 2011 budget request 
includes $5.5 billion for NOAA, an increase of $808.6 million 
over the fiscal year 2010 enacted level, or a 17 percent 
increase.
    The majority of this increase or $678.6 million is 
attributable to the proposed restructure of the National Polar 
Orbiting Environmental Satellite System. NPOESS, a NOAA/DoD 
partnership with NASA playing a supporting role, has 
experienced technical and management challenges, cost overruns, 
and schedule slips, and the fiscal year 2010 Omnibus statement 
urged the Administrator to resolve these problems.
    In response, the Administration has proposed a new approach 
under which DoD and NOAA would each acquire satellites for 
their respective orbits that would continue to share data.
    The new approach will be referred to as the Joint Polar 
Satellite System. This a significant change designed to ensure 
continuity of critical climate data and we want to explore the 
reasons for the new approach as well as the proposed plan in 
some depth.
    There is also $155 million in increases for NOAA's other 
satellite programs, including $63.5 million for the 
Geostationary Orbiting Environmental Satellite, GOES-R, which 
had been delayed by a contract protest.
    We want to get a status update on these critical programs 
and explore the need for increases.
    NOAA is an agency with multiple missions and the proposed 
budget provides a variety of topics. Unfortunately, we simply 
do not have time to discuss them all.
    However, one of the more significant requests in the fiscal 
year 2011 budget is $54 million, an increase of $36.6 million 
to accelerate and enhance the implementation of a National 
Catch Share Program. Will this program ensure jobs for 
commercial and recreational fisherman and the profitability of 
coastal communities?
     We want to understand the elements of this program and why 
such a significant increase is needed now and we need to know 
why taxpayers should fund the cost of ensuring a sustainable 
resource for the benefit of private industry.
    And last but far from least, on February the 8th, 2010, the 
Department of Commerce and NOAA announced the intent to 
reorganize and create the National Climate Service. The 
programming request will not reach the Committee for some time, 
but we understand that the Agency hopes that the reorganization 
can begin in fiscal year 2011.
    We will ask you to share the details which you can convey 
and the reason for the timing of the announcement.
    The mission of the NOAA Climate Service is critically 
important. It is unfortunate that the process of announcing it 
has overshadowed the efforts to create it.
    Dr. Lubchenco, thank you for coming. I am going to ask 
Congressman Wolf, invite him to make opening statement, 
following which your written testimony will be made part of the 
record and we will invite you to present your oral testimony.
    Mr. Wolf.
    Mr. Wolf. Thank you, Mr. Chairman.
    Welcome to the Committee. I look forward to your testimony.
    Mr. Mollohan. Dr. Lubchenco.

                   Opening Statement by Dr. Lubchenco

    Ms. Lubchenco. Thank you.
    Members of the Committee, thank you very much for the 
leadership and the generous support that you have shown NOAA. 
It is greatly appreciated as we work to improve our products 
and services for the American people.
    As you know, on February 27th, the Pacific Ocean was 
impacted by a tsunami originating from an 8.8 magnitude 
earthquake off the coast of Chile. Fortunately, this tsunami 
was not as destructive as it could have been, but it provided a 
graphic illustration of how very far we have come in the past 
decade in making timely and accurate tsunami warnings and 
providing the public with information needed to make decisions.
    This event demonstrates that that continued investment in 
observations, modeling, research, and outreach is vital to 
saving lives and property.
    And our spring outlook announced just yesterday is intended 
to alert city and state emergency managers and citizens that 
over one-third of the contiguous United States has an above 
average flood risk in the coming weeks and months.
    The President's fiscal year 2011 budget request provides a 
solid foundation to continue to advance NOAA's mission and for 
meeting our most pressing needs.
    The request of $5.6 billion represents an $806 million 
increase over fiscal year 2011, as you noted, and addresses a 
set of priorities that will guide our actions in the coming 
year.
    I would like to highlight a couple of significant areas of 
progress over the last fiscal year.
    In the area of climate, we have continued to provide 
climate observations and analysis while engaging with our 
partners on how to strengthen our climate services.
    We have made important progress in rebuilding our 
fisheries, recovering protected species, and sustaining the 
livelihoods and communities they make.
    We introduced a draft Catch Share policy and are committed 
to improving fisheries enforcement and our relationship with 
the fishing communities and industries. And we made good 
progress in meeting the mandates of the Magnuson-Stevens Act 
and commissioning the NOAA ship Pisces which will support 
fishery research in the Gulf of Mexico and the southeast United 
States.
    NOAA was also fully engaged in the President's Interagency 
Ocean Policy Task Force. The release of a draft national ocean 
policy and a framework for coastal and marine special planning 
reflects the growing recognition that healthy oceans matter and 
that protecting and restoring critical habitat is essential.
    The fiscal year 2011 budget includes new investments to 
strengthen our science, foster innovation, rebuild and improve 
fisheries, and sustain and enhance satellite observations.
    NOAA has become a global leader in reporting on the state 
of the central climate variables and proposes to establish a 
new line office called the NOAA Climate Service.
    I want to thank the Committee for all the support that you 
have given us for improving NOAA climate services. The office 
will enable NOAA to better address the growing needs for 
climate services.
    NOAA's fiscal year 2011 request includes $435 million in 
support of the U.S. Global Change Research Program with $77 
million in increases for core climate services and 
observations.
    NOAA's satellites provide the data and information that are 
vital to every citizen in our nation.
    A funding increase of $678.6 million for a total of $1.1 
billion is requested to support the Administration decision to 
restructure the NPOESS Program and create within NOAA the Joint 
Polar Satellite System.
    NOAA is requesting an increase of $62.5 million for a total 
of $730 million to continue the development of the GOES-R 
Program to be prepared for launch near the end of 2015.
    The fiscal year 2011 budget also supports NOAA's 
responsibilities in transforming fisheries and protecting 
species. The budget includes an increase of $36.6 million to 
establish a National Catch Share Program. The program will 
provide a national framework to develop, manage, and improve 
Catch Share Programs in fisheries across the nation.
    This increase will also continue the transition of the 
Northeast Groundfish Multi-Species Fishery to sector management 
as well as support new voluntary Catch Share Programs in the 
Mid-Atlantic, Gulf of Mexico, and Pacific Coast regions.
    The fiscal year 2011 budget request also includes an 
increase of $10.4 million in the Community-Based Restoration 
Program. NOAA plans to increase fish passage and spawning and 
rearing habitats by implementing larger scale ecological 
restoration in target areas.
    We will continue supporting the Species Recovery Grant 
Program with a requested increase of $9.6 million. This will 
allow NOAA to provide grants to conduct priority recovery 
actions for threatened and endangered species, including 
restoring habitat, monitoring population trends, developing 
conservation plans, and educating the public.
    With a total request of $65 million, the Pacific Coast 
Salmon Recovery Grants Program will continue to leverage 
federal, state, and tribal resources in the Pacific Coast 
region to implement projects that restore and protect salmonid 
populations and their habitats.
    In fiscal year 2011, NOAA will continue to support its 
education programs and work to implement our new education 
strategic plan. A total of $20.8 million is requested for the 
NOAA Education Program.
    A recently released report from the National Academy of 
Sciences commends NOAA's commitment to education and provides 
recommendations for optimizing NOAA's investment in education.
    We plan to carefully review those recommendations and 
incorporate them as needed to maximize the effectiveness of our 
education programs.
    Overall, NOAA's fiscal year 2011 budget request reflects 
the commitment of the President and the Secretary to public 
safety, a healthy environment, sound science, underpinning 
decision making, and job creation.
    These resources are critical to the future success of 
meeting our needs in climate, fisheries, coasts, and oceans.
    And I look forward to working with you and I am happy to 
respond to any questions that the Committee may have.
    Thank you, Mr. Chairman.
    [The written statement of Dr. Jane Lubchenco, NOAA 
Administrator and Under Secretary of Commerce for Oceans and 
Atmosphere, follows:]

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   NATIONAL POLAR-ORBITING OPERATIONAL ENVIRONMENTAL SATELLITE SYSTEM

    Mr. Mollohan. Thank you, Doctor.
    Doctor, there have been some significant changes in the 
plans for Polar-orbiting Operational Environmental Satellites 
recently. I would like to begin with you by walking us through 
the problems with the management and implementation of the 
Polar-Orbiting Operational Environmental Satellite System and 
then we will discuss the proposed approach, budget request, and 
future plans.
    So, first of all, please describe the purpose for NPOESS.
    Ms. Lubchenco. The NPOESS or National Polar-orbiting 
Operational Environmental Satellite System was created in 1994. 
It was intended to provide information that is related to both 
weather and climate information, both critically important to 
the nation. It was set up as a collaboration between NOAA and 
the Department of Defense with NASA providing additional 
support.
    The original formulation had the program with a joint 
decision-making management structure, the EXCOM, the Executive 
Committee, that had representatives from each of the three 
agencies, NOAA, NASA, and DoD, and specifically Air Force, and 
that management structure was intended to--the program was set 
up with the intent of combining and putting together both 
civilian and military needs into a single program and taking 
advantage of the synergies to be derived from that.
    As you know, the program experienced very considerable cost 
overruns, 87 percent increase in costs through 2009, and 30 
percent of that growth in cost was after the restructuring 
incurred after the Nunn-McCurdy process.
    Mr. Mollohan. Before you get to that, just explain to the 
Committee how initially the program was funded, appropriations, 
and you mentioned the agencies, but what were the relative 
contributions of the agencies.
    Ms. Lubchenco. The budget was split 50/50, half to NOAA and 
half to Department of Defense.
    Mr. Mollohan. What was the original budget for the program?
    Ms. Lubchenco. The original budget, let me look at my notes 
here so that I am sure that I get it correct. What I have are 
NOAA's numbers. May I ask my staff behind me?
    Mr. Mollohan. You can submit that for the record. That is 
okay.
    [The information follows:]

    In 2005, Pre-Nunn-McCurdy, the NPOESS program Life Cycle 
Cost (LCC) was $8.4 billion. Of that amount, DoD would provide 
$4.354 billion, and NOAA would provide $4.048 billion.
    In June 2006, Post-Nunn-McCurdy, the NPOESS program LCC was 
increased to $12.516 billion. Of that amount, DoD would provide 
$6.265 billion, and NOAA would provide $6.251 billion.
    In 2009, the NPOESS program LCC was updated to reflect the 
July 2008 Office of the Secretary of Defense Cost Analysis 
Improvement Group (CAIG) cost estimate (including updated the 
operations and sustainment costs that had been omitted at 2006 
Nunn-McCurdy certification. The NPOESS program LCC increased to 
$13.951 billion. Of that amount, DoD would provide $6.983 
billion, and NOAA would provide $6,967 billion.
    On February 1, 2010, the NPOESS Program was restructured. 
DoD is still assessing its costs for implementing the early 
morning orbit and those costs are unknown at this time. The 
cost to implement JPSS, the NOAA portion for the afternoon 
orbit is $111.9 billion, of which $2.9 billion has already been 
spent.

    Mr. Mollohan. Describe the management structure in a little 
more detail, the process by which decisions were supposed to be 
made and just conceptually when you bring the Department of 
Defense in with a civilian activity, what was the interface? 
What were the rules of engagement, if you were, and who were to 
make final decisions in that process?
    Ms. Lubchenco. Mr. Chairman, the concept was that the EXCOM 
would make final decisions and the individuals who sat on the 
EXCOM from NOAA and from NASA had that authority. The 
individual who sat on the Committee from the Department of 
Defense did not have that authority.
    And so the Executive Committee would make decisions and the 
individual from Department of Defense would go back to DoD and 
in many cases, a decision that had been made jointly would be 
overruled.
    Mr. Mollohan. Was there one person? I guess your testimony 
is that there is one person who made a final decision with the 
Defense Department; is that correct?
    Ms. Lubchenco. In effect, there was often a dysfunctional 
relationship because there were different priorities and 
different requirements of the different agencies.
    And the contract was structured in a way that there was no 
direct immediate oversight which was an additional problem that 
has been identified by multiple GAO reports as well as the 
Independent Review Team report.
    Mr. Mollohan. Was there one decider, to use that word, who 
could make a decision for the overall program and, if so, who 
was that person?
    Ms. Lubchenco. There was no one tasked with that 
responsibility. In principle, the Executive Committee as 
supposed to be doing that. But in reality, it was unable to do 
so.
    Mr. Mollohan. Why?
    Ms. Lubchenco. Because the individual who sat on the EXCOM 
for the Department of Defense did not have decision-making 
authority.
    Mr. Mollohan. Okay. But it sounds like there is a big dog 
on the porch some place that maybe, I do not know, because of 
the amount of money they brought to the table or could in 
effect direct the path forward for the program and make 
decisions with regard to funding and process and contracting.
    Is that true and was that with the Department of Defense, 
the person you are alluding to?
    Ms. Lubchenco. Because this was well before my time, I have 
not seen this play out firsthand.
    Mr. Mollohan. No, I know you have not, but you are bound to 
have reviewed this.
    Ms. Lubchenco. We have.
    Mr. Mollohan. And the Committee is asking you to tell us 
who was the decision maker and because they had such a dominant 
role in the program and you are suggesting it is in the Defense 
Department, I am asking who it is. Who was it? What position 
was it?
    Ms. Lubchenco. Mr. Chairman, I do not know that.
    Mr. Mollohan. Was the program independently evaluated?
    Ms. Lubchenco. Yes, Mr. Chairman. There were nine GAO 
reports in--eight reports in nine years.
    And the NPOESS Program also constituted an Independent 
Review Team Chaired by Mr. Tom Young who was the former 
President and COO of Martin Marietta and a former Director of 
NASA Goddard Space Flight Center.
    That Independent Review Team echoed many of the findings of 
the GAO reports and it highlighted or, I think, concluded that 
there was an extraordinarily low probability of success of the 
program and that this should be of great concern to the nation 
because the continuity of both climate and weather information 
was at risk.
    Mr. Mollohan. Well, you have made some evaluations about 
moving forward with the current NPOESS Program. What would be 
the risk that the nation faces if we were to move forward with 
the current program?
    Ms. Lubchenco. It was explicitly because of that risk that 
we have paid special attention to how to put this program back 
on track because it is vital to the nation's interests.
    And I believe that the proposed restructuring announced by 
the Administration would, in fact, put that program on a path 
to success with a much higher probability of success than the 
former NPOESS Program.
    Mr. Mollohan. When did the Administration start reviewing 
the program and trying to resolve the problems in the civil and 
military weather climate systems and what was the result of 
that effort? When did it start and what was the result?
    Ms. Lubchenco. When I first assumed the position of 
Administrator, which was March 20th of last year, I almost 
immediately began conferring with the Secretary of Commerce, 
with the Office of Science and Technology Policy, with the 
Office of Management and Budget, with NASA, and with DoD to 
figure out what the problems were and what solutions might be.
    Shortly thereafter, I believe early in the summer, the 
Administration announced that it was going to take a 
comprehensive look at this program following on the review of 
the Independent Review Team and later in the summer set up a 
formal process for doing that review involving various offices 
of the White House, OMB, OSTP, and National Security Council. 
And so there were two parallel processes underway, the White 
House process and the joint interagency process of the three 
agencies, all wrestling with how can we fix this problem.
    It is not that others had not tried before, but we were 
determined to actually figure out--you know, the status quo was 
simply unacceptable.
    Mr. Mollohan. And what did you come up with?
    Ms. Lubchenco. In the President's budget that was announced 
in early February, part of that announcement was the 
Administration's decision to restructure the NPOESS Program by 
separating out the responsibility for acquisition for the 
satellites, giving DoD responsibility for acquisition for 
satellites and instruments that are relevant to the early 
morning orbit which is most critical for military needs.
    Mr. Mollohan. So Defense needs and----
    Ms. Lubchenco. Defense needs.
    Mr. Mollohan. Uh-huh.
    Ms. Lubchenco. And giving to NOAA responsibility for 
acquisition for the instruments and the satellites for the 
afternoon orbit which is most important for weather and climate 
information.
    NOAA would work closely with NASA to oversee and execute 
the acquisitions and all three agencies would continue to 
operate the ground system which that part of the former NPOESS 
Program was working well.
    So this proposal retains the elements that were working 
well----
    Mr. Mollohan. The ground system?
    Ms. Lubchenco. The ground system, and separates out the 
acquisition and the oversight for the satellites and the 
instruments for the two different orbits.
    Mr. Mollohan. So you are the Administrator. How do you feel 
about this new arrangement?
    Ms. Lubchenco. Mr. Chairman, I am really pleased that we 
have a solution that I believe is viable. This program is too 
important to not be on a path to success. And I think the 
situation was becoming intolerable and really inexcusable.
    That said, there was a pretty high hurdle to figuring out a 
solution. I am really pleased with the solution that we came up 
with and hope that you and the Committee and others in Congress 
agree that it is a good viable solution. I believe that it is.
    Mr. Mollohan. So Defense Department decisions are out of 
your critical path judgments and you are out of the Defense 
Department's critical path judgments?
    Ms. Lubchenco. That is correct.
    Mr. Mollohan. So you are going to be developing satellites 
and making decisions that serve you. Are there going to be any 
operational problems as a result of this new arrangement?
    Ms. Lubchenco. Let me first point out that much of the data 
that we acquire, that NOAA and NASA will acquire will be shared 
with DoD and conversely. So there is still sharing of 
information. It is the acquisition that is separated.
    And I believe there is always risk associated with any 
complex satellite programs. That comes with the territory. But 
I think the risk is much less substantial and much more 
manageable than with the current management structure, 
specifically because the program acquisition will be overseen 
by NASA. We have a good working relationship and track record 
with them for joint oversight of programs. There is much more 
immediate access to technical capability. We have a lot of 
assets to bring to the table.
    And the risk that exists, I believe, can be mitigated both 
by staying on top of the programs immediately and anticipating 
and dealing with problems, but also having adequate budget 
reserves to be able to deal in real time with any problems as 
they arise. And that is the way that we have typically dealt 
with our other satellite programs that we run jointly with 
NASA. So that is a good model for this newly-structured 
program.
    Mr. Mollohan. So there are no decisions that Defense can 
make that would impede your progress or time line? You know, 
they have got a couple of satellites on the ground, we 
understand, but that will not impede you? It will not affect 
you; is that correct?
    Ms. Lubchenco. The period of transition, fiscal year 2010, 
is a critical year. And the path to success assumes that the 
funds that the Department of Defense has in its budget for 
fiscal year 2010 will be spent for the needs for which they 
were intended.
    Mr. Mollohan. Is there a threat to that possibility?
    Ms. Lubchenco. I assume that there is a possible threat.
    Mr. Mollohan. I said that wrong, but is there a possibility 
that there is a threat to that?
    Ms. Lubchenco. Yes, sir, I think there is.
    Mr. Mollohan. Are you picking up any concerns or do you 
have concerns based on any information you are picking up?
    Ms. Lubchenco. We know that the program, that the success 
of the program depends on an effective transition. And if that 
transition does not go as anticipated, there may be very 
serious consequences with delay in the program or derailing of 
the program. And what is at risk is the continuity of the 
weather and climate information. And any further delays or 
insufficient budgeting could easily be quite problematic.
    Mr. Mollohan. What are you doing to head that off?
    Ms. Lubchenco. We are emphasizing how important this 
solution is, how likely it is to, or how it is a very 
significant improvement over the status quo. We have been 
working closely with the leadership at DoD, with the point 
person for acquisitions who has been working on this solution 
with us and who has indicated his commitment to seeing this 
through. So I believe that within DoD, there is interest in 
having this program succeed.
    Mr. Mollohan. Mr. Wolf.
    Mr. Wolf. How much money was wasted over the years, the 
fact that it was not successful?
    Ms. Lubchenco. The cost overruns, as I mentioned, were on 
the order of 85 percent.
    Mr. Wolf. Can you put that in dollars?
    Ms. Lubchenco. Yes, sir. The NPOESS Program was originally 
budgeted at $8.4 billion in 2004.
    Mr. Wolf. So how much of that do you think was wasted?
    Ms. Lubchenco. So I do not have that number, but I would be 
happy to get it to you. It is a very large number.
    Mr. Wolf. In the billions?
    Ms. Lubchenco. Yes, sir.
    Mr. Wolf. Do you think the failure was because of 
personality or do you think the failure was because of 
technology?
    Ms. Lubchenco. The Independent Review Team that was chaired 
by Tom Young said that there were a number of causes for the 
failure, that the Executive Committee, as I indicated, was 
inefficient and ineffective, that the different agencies have 
very different requirements and their priorities are not 
aligned, that there is no backup capability in this system, 
that the budget was insufficient to deal with a very complex 
program that this one is, and that there was insufficient 
government oversight of the contract.
    So the IRT and the GAO reviews highlighted multiple 
problems with the way the program was originally structured.
    Mr. Wolf. So it was less technology and more human factors 
that resulted in it?
    Ms. Lubchenco. Congressman, there is a lot of new 
technology that was being developed for the program and that is 
part of what creates the risk. And because it is new 
technology, because we are sort of pushing the envelope for new 
instruments, it is important to have adequate budgeting to 
account for the inevitable problems that might develop in those 
new instrument systems.
    Mr. Wolf. Are any of the people who were involved with the 
failure still there in the operation of it now? And you are not 
justifying this because you are new in town, so it is not that 
you have to be defensive. Are the people who were there 
involved in either agency or all three continuing to be, but 
just now there has been a divorce and a separation? But have 
you thought there should be some other people come in?
    Ms. Lubchenco. Congressman, I believe that the personnel 
that are still on board at NOAA are immensely capable and very, 
very good. I believe that our track record of other successful 
programs with NASA in partnership with NASA attest to our 
skills and our abilities to manage complex programs. I cannot 
evaluate the expertise of the individuals that were involved on 
the Department of Defense side because that is not something 
that I know.
    Mr. Wolf. Well, I will move on. I used to be on the 
Subcommittee years ago and this was a big issue. And then I 
left and now it is continuing to be.
    And it would seem to me that if the divorce, unless it was 
a no-fault divorce, but if the divorce was partially because of 
both sides, it would seem that you ought to have a clean 
approach and new people to come in to have the opportunity to 
sort of begin and not having started out with the failure.
    So if you have the same people that were there before, even 
though they may be wonderful people, maybe their expertise 
ought to be put in some other important program at NOAA. But 
maybe you ought to have just a new person or a new team to 
begin afresh so you are not kind of tied down with that.
    Maybe you can just let the staff know. I mean, give us a 
list of the personnel who are going to work on the program now 
and let us look and overlap and see how many were there for the 
last three years before this. And then the Committee can take a 
look at that judgment and see if the same people ought to stay.
    But when you look at the food banks are empty and there are 
a lot of problems in the country, the loss of billions of 
dollars, you know, that is a lot of money.
    Ms. Lubchenco. I agree, Congressman, which is why I made it 
one of my highest priorities to fix this program, because I 
think it was inexcusable and an embarrassment. And this is not 
the way we should be operating.

                            CLIMATE SERVICE

    Mr. Wolf. You have announced your intent to create a NOAA 
Climate Service. This was done absent any proposal in the 
fiscal year 2011 budget and absent any of the required 
notification to the Committee.
    We included funding in the fiscal year 2010 bill for the 
National Academy of Public Administration, NAPA, which 
generally does a pretty good job, to conduct an analysis of 
options for establishing a Climate Service.
    Is the review underway? What is the status of that?
    Ms. Lubchenco. Congressman, the announcement that we made 
on February 8th was an intention to create a new line office 
within NOAA called the NOAA Climate Service. That proposal is 
reorganizing existing assets.
    NOAA currently has a wealth of climate science and climate 
services that we provide already. They are distributed 
currently across many line offices within NOAA. They are in 
lots of different places. And this proposal is simply to pull 
all of those together and put them into a single line office.
    So it is reorganizing existing assets to be better 
positioned to be effective partners with other agencies, to 
provide services that we are being increasingly asked for more 
effectively, more efficiently, essentially to do our jobs more 
responsibly.
    Mr. Wolf. Just as a result of the NAPA review?
    Ms. Lubchenco. No. We announced the intent to reorganize. 
We intend to use the NAPA review to help us inform how that 
organization should be best accomplished.
    Mr. Wolf. So you will not do anything until the NAPA review 
is finished?
    Ms. Lubchenco. We anticipate that the NAPA review is going 
to be providing information to us on an ongoing basis. And as 
that information comes forward and interim reports or other 
things, we will fold that into our planning. So the NAPA review 
will be very, very helpful in guiding our understanding of the 
tradeoffs with a specific organizational design.
    Mr. Wolf. Now, you need the authorization of the 
authorizers to do this? Do you plan on asking for legislation?
    Ms. Lubchenco. My understanding is that what we have 
proposed, taking existing people from existing places and 
putting them in a different place is a reprogramming and----
    Mr. Wolf. Wouldn't that need the legislative----
    Ms. Lubchenco. The programming would require approval by 
the Department, by OMB, and by our Appropriations Committees.
    Mr. Wolf. How do the Authorizing Committees feel about 
that?
    Ms. Lubchenco. Obviously many of our Authorizing Committees 
are keenly interested in this and we intend to work closely 
with them as the NAPA report is being prepared to inform the 
way that we are thinking about designing this. So we fully 
anticipate working closely with all of the relevant Committees, 
both Appropriations and Authorization Committees.
    Mr. Wolf. So, therefore, you will continue to go ahead 
waiting on the reprogramming of approval by this Committee or 
by the authorizers or by both?
    Ms. Lubchenco. The formal approval that is required is by 
your Committee, but we would hope to work closely with the 
Authorizing Committees and have their blessing. Different 
Authorizing Committees have had different views of how this 
might be best structured and so this is a great opportunity for 
us to be in dialogue with all of them and to think about what 
type of organization would best meet the needs of the nation.

                     OFFICE OF ATMOSPHERIC RESEARCH

    Mr. Wolf. Your initial announcement, it appears that you 
have already developed a plan to establish the Climate Service 
mainly by breaking off pieces of the Office of Oceanic and 
Atmospheric Research.
    That office was established in its current form in 2005 
with the purpose to unify and to strengthen the role of science 
and research in NOAA's programs. And that organization resulted 
from the recommendations of a Research Review Team of prominent 
scientists.
    So why would the undoing of the last science reorganization 
at NOAA be a good idea at this time?
    Ms. Lubchenco. When that reorganization was done, the need 
for climate services was not as obvious as it is today. And 
what we have proposed is to take some offices, some labs, some 
offices from the Office of Oceanic and Atmospheric Research, 
some from other parts of NOAA. We have not made any decisions 
about how to organize those pieces together and that is what 
the NAPA report will inform, number one.
    Your question was asking more specifically about our 
existing Oceanic and Atmospheric Research line which the two 
goals that we had in mind with this restructuring were, one, to 
make climate services and science more effective and efficient, 
but, two, to strengthen science across NOAA. And OAR, the line 
Office for Oceanic and Atmospheric Research plays a vita role 
in strengthening the science.
    And it is my hope and plan to use this opportunity to 
reposition OAR to advance transformational science that is 
right at the forefront of innovation on key issues for NOAA. 
There is a lot more science that is done at NOAA, not just 
climate science, and there are a lot of places in NOAA where 
science exists.
    Mr. Wolf. Are there pieces of other federal agencies that 
ought to be in this if you were to do this?
    Ms. Lubchenco. There are other federal agencies that have 
responsibilities for delivering some kind of climate services 
and we are in dialogue with them. Many of them rely on what 
NOAA provides in terms of basic data, basic models, basic 
predictions. And so this organization is designed to better 
position us as partners to the other agencies so that they can 
do their climate job better and we can be more useful to them.

                           EDUCATION PROGRAM

    Mr. Wolf. Okay, Well, maybe we will talk to NAPA, too, at 
the time and see where they are.
    One other area is on the educational programs. According to 
the staff, they said you are only requesting $20.8 million for 
NOAA's education programs which is a reduction of over 60 
percent from the amount appropriated in fiscal year 2010.
    Every time you have a hearing, you always hear about the 
importance of the critical nature of the challenge that our 
country has with regard to science, the competition with regard 
to China, the competition with regard to India.
    Education is probably a key, so why would you have such a 
significant cut? When I think of the first question of the $4 
billion that has been lost going down the drain and then you 
think of we are falling behind as a nation in math and science 
and physics and chemistry and biology, why would you be looking 
for such a significant cut or is it not significant? Is it just 
different accounts or how is that?
    Ms. Lubchenco. Education is one of my highest priorities at 
NOAA. It is very critical to the national interests for all the 
reasons that you have just articulated. The request this year 
reflects readjustments from congressionally directed funding in 
earlier years. And----
    Mr. Wolf. Earmark, is that what you are calling that, 
congressionally what? How do you put that in congressional----
    Ms. Lubchenco. This is one of the Washington euphemisms, 
congressionally directed funds.
    Mr. Wolf. Is that diplomatic? You are really 
congressionally directed.
    Ms. Lubchenco. I had to learn a whole new language coming 
here.
    Mr. Wolf. So this is to correct the mistakes the Committee 
has made?
    Ms. Lubchenco. Not mistakes at all.
    Mr. Wolf. How about the Jason Project? I am just curious.
    Ms. Lubchenco. Could I just add one note to that? NOAA had 
requested that the National Academy of Sciences review our 
Education Program with the idea of providing us information 
with how to make it most strategic, most effective, most 
complementary to a lot of the other educational programs and 
science education programs that are out there.
    Just earlier this month, we received the report from the 
Academy study. It is highly complimentary of our efforts and it 
provides a large number of recommendations for improvement.
    It is my intention to utilize that report to rethink our 
Education Program and figure out what it should look like, how 
it should best serve the nation's needs.
    Mr. Wolf. Before you get into Jason, what are some of the 
things? What did the Science Foundation recommend? What did 
they say you should be doing you are not doing now?
    Ms. Lubchenco. They highlighted many of our current 
programs as being highly successful but not at scale, so to 
scale up some of the specific programs.
    I have not had a chance to read the report in depth because 
it just came out. And I am very much looking forward to doing 
that. I know that it highlighted the GLOBE Program, the Jason 
Program many of our competitive grants programs, our B-WET 
Program. There are our educational partnership programs. There 
are a whole slew of programs that we have.
    Mr. Wolf. Could I get a copy of their----
    Ms. Lubchenco. Absolutely.
    Mr. Wolf. What did they say about the Jason Program?
    Ms. Lubchenco. I do not recall specifically.
    Mr. Wolf. I had a discussion with Dr. Ballard.
    Ms. Lubchenco. I have, too.
    Mr. Wolf. And I was asked to introduce Dr. Ballard at a 
program in my district about four or five years ago. It was the 
night of the seventh game of the World Series. And they asked 
me to come and I said I would come. I had an anti-gambling 
group I was speaking to that night and I said I did not think 
anyone was going to show. But because of my respect, I will 
come.
    I went in. It was at Rachel Carson Intermediate School----
    Ms. Lubchenco. Uh-huh.
    Mr. Wolf [continuing]. In Fairfax County. And I will tell 
you, the auditorium, it was a gymnasium, was packed. And these 
kids really got into the program.
    And Ballard has a way of getting people interested who are 
not that interested and people who are interested, getting them 
very interested. So I would be anxious to see what the National 
Science Foundation feels.
    Do you know Dr. Ballard?
    Ms. Lubchenco. I know him quite well, Congressman, and I 
think he is a very gifted educator, explorer, scientist. And 
you are right. He really does generate a huge amount of 
interest and enthusiasm.
    Mr. Wolf. And we are neglecting the oceans, I think.
    Ms. Lubchenco. We are absolutely neglecting the oceans and 
the knowledge that school children and others have about 
oceans. Why they are important to us, what the opportunities 
are for keeping them healthy are not known to the extent that 
they need to be. So that is why our education programs are so 
important.
    I just recognize that the scale of the problem is so much 
larger than our ability to do everything, that we need to be 
strategic in what we are doing, which----
    Mr. Wolf. I agree. The last question I would ask you is one 
in that area. Is there a coordinating group in the government, 
because we are falling behind?
    The reality of it is America, if you look at the scores and 
you look at we used to be number one, now the competition is 
not only with China and India, but it is in Poland and Hungary 
and Romania and Bulgaria.
    I mean, during the 1980s, you would go to Romania and there 
was one little string and a lightbulb and now you go there and 
they are pulsating there. They are hungry, the competition.
    And I am not criticizing what you are doing. I think you 
want to readjust, but is there a coordinating group in--
different than an NPOESS coordinating group--but is there one 
in town that looks at every single program and is working with 
the Department of Education and working with you and working 
with NASA to make sure that everything--we have almost a man to 
the moon type approach to kind of change the dynamics of this?
    Ms. Lubchenco. Congressman, the Office of Science and 
Technology Policy in the White House has identified STEM, S-T-
E-M, science, technology, engineering, and math, so that is one 
of the other Washington-isms, has identified STEM education as 
one of their priorities and they are coordinating a dialogue 
across the different agencies, each of which has some 
responsibility for STEM education.
    So there is acknowledgement of the need for better 
coordination and more strategic movement in addressing the 
challenge.
    Mr. Wolf. Well, okay. Well, why don't you let us know about 
that and then if we could see a copy of the report.
    We put language in last year directing the National Science 
Foundation to do either a 90- or 120-day study of what works--
--
    Ms. Lubchenco. Uh-huh.
    Mr. Wolf [continuing]. Because I think once you have lost 
somebody by fifth or sixth grade, it is over. You almost never 
find somebody getting excited about science in twelfth grade or 
when they go to college majoring in English Literature 
transferring into physics. It does not happen.
    And so you might take a look at where the National Science 
Foundation is. They ought to be close to being finished. And so 
you ought to see. We just asked them what actually works, best 
practices, first through fifth, and I think there may be some 
helpful information there.
    Ms. Lubchenco. Congressman, NSF has really been the lead on 
STEM education and I am delighted to know of this study. I 
served on the National Science Board for ten years and so I am 
very familiar with the range of their programs and the quality. 
And I will definitely find this report. And each of the mission 
agencies has some responsibility. NASA has some. Department of 
Energy has some education. We have some. Other agencies do as 
well. And you have highlighted the importance of coordinating 
across those but drawing on the best practices, for example, 
from this NSF report. So I think that is exactly what is 
needed.
    Mr. Wolf. Well, thank you.
    Thank you, Mr. Chairman.
    Mr. Mollohan. Mr. Bonner

                      FISHERIES STOCK ASSESSMENTS

    Mr. Bonner. Thank you, Mr. Chairman.
    It is good to see you again.
    Ms. Lubchenco. Congressman.
    Mr. Bonner. I want to first of all thank you publicly for 
coming to Mobile back in January----
    Ms. Lubchenco. It was my pleasure.
    Mr. Bonner [continuing]. To help with the groundbreaking of 
the Disaster Response Center.
    Ms. Lubchenco. Uh-huh.
    Mr. Bonner. And we are looking forward to that continued 
partnership with NOAA.
    In full disclosure, I have a statement that my wonderful 
staff has prepared that has the questions that I am going to 
pose to you.
    Ms. Lubchenco. Okay.
    Mr. Bonner. But before I get there, I want to follow up on 
a conversation we had at that dedication because I told you I 
wanted to bring you back down. I hope, to help a community that 
is not only in my district in Alabama but many communities like 
it all along the Gulf Coast that is struggling today.
    And I want to take you, and I do not think you were there, 
but I would give anything if you could have been at our full 
Committee hearing yesterday where we had Secretary Geithner, we 
had Dr. Orszag with OMB, and we had Dr. Romer who were 
representing the Administration on the budget, on healthcare, 
on the challenging times that we are facing.
    One of our colleagues, Ms. Kaptur from Ohio, a member of 
the Majority, said probably as well as any colleagues I have 
heard say that there is a real disconnect between Washington, 
D.C. and America. There is disconnect between the 
Administration. Again, she is a Democrat and so she was 
speaking of the Obama Administration.
    But as a Republican, I would say there has been a 
disconnect that precedes this Administration and goes probably 
for decades, not just years. Presidents, Administrations, 
Congress, the American people are very frustrated and believe 
that their government is not on their side.
    Orange Beach, Alabama, which is a little beach community 
about 60 miles from where we were in Mobile in January, had at 
one time one of the largest charter fleets in the Gulf of 
Mexico. They have gone just in recent years from 140 boats down 
to 90 boats.
    And when I mention boats, I am talking about a business, 
family business, three or four or five generations, a million 
to maybe sometimes two and a half million dollar business that 
employs five or six people. And so with those that have gone 
out of business, those families have now been forced to find 
work elsewhere.
    Baldwin County, the unemployment rate in January of 2007 
was two percent. It is now over ten and a half percent. And 
this is one of the most prosperous counties economically in the 
State of Alabama. National Marine Fisheries has been involved 
as part of this problem, unfortunately.
    While I understand the final decision has not been made 
with regard to the length of the 2010 season, we have reason to 
believe that it will be shortened from the 65-day season for 
red snapper in 2009 to somewhere between 51 and 60 days.
    Last year, we heard that there was a contemplation of 
taking the fishing for red snapper from two fish down to one. I 
understand that is not going to happen and I am grateful for 
that.
    But now, Doctor, I want to speak to all of the people that 
work with you who are behind you and ask you this question. And 
you are not sworn in, so you cannot answer, but think about 
this.
    Would you pay $1,200 to take your family on a fishing trip 
to catch two fish? Most people would not.
    So we are talking about family businesses that are 
struggling in the worst economy since the Great Depression. 
And, again, I use this only as an aside to Marcy Kaptur's 
comments yesterday.
    The best I can tell in your written statement, and I do not 
hold you for that any more than you should hold me for the 
written statement I will give you in just a second from my 
staff, but there is some mention of commercial and recreational 
fishery products.
    Red snapper are not products to the men and women and their 
families whose lives have been turned upside down any more than 
we are talking about the flounder in Massachusetts or the 
salmon off the coast of Washington State and Alaska. These are 
not products. These are real issues that affect people at the 
very heart of their survivability.
    So here is my question. Red snapper has supported one of 
the most important fisheries in the entire country. Management 
restrictions started around 1990, thus the population has been 
restricted for some 20 years. Despite these restrictions, 
fishery dependent derived population estimates still consider 
the population severely overfished. The same condition was 
suggested in 1990.
    The overstock designation and the devastating reaction to 
it are based on an antiquated, at least in my view, antiquated 
data collection and analysis method dependent on actual fish 
takes that brings its validity into question.
    Recently this overfished stock condition has led to even 
greater cutbacks in the total allowable catch that has led to 
even greater hardship to both commercial and sports fishers.
    This year, the charter boat season, as I mentioned, upon 
which several communities in my district depend economically 
will again be shortened. We just do not know how long. And, 
again, as we believe, it will still be only two fish, 
thankfully not down to one.
    This despite the fact that my home state has done, I think, 
as much as any state in being actively progressive, 
aggressively proactive in establishing some 20,000 artificial 
reefs and there are more than 4,500 oil rigs in Texas and 
Louisiana that provide additional safety for the habitat.
    From a different base of knowledge and research using 
fishery independent surveys, the stock is clearly in better 
condition than predicted from most fishery dependent stock 
assessments and may be more in tune with what the fishers have 
adamantly been saying to me and to my colleagues. There is no 
shortage of red snapper. Many scientists locally are saying red 
snapper is at its highest stock ever.
    There is also a unique opportunity to compare past fishing 
independent surveys from over ten years ago with a present 
stock conditions based on a new fishery independent study. 
These studies would take advantage of a variety of technology 
to measure a fishery without taking from fishermen only.
    Such a new survey would not need any start-up time and 
would be directly comparable to a similar past survey. This 
approach of fishery independent research in my view would be 
more reliable, faster, and scientifically would bring some 
validity to evaluate the present stock condition and possible 
increases in population that have resulted from the 
restrictions over the past ten years.
    So the question. Why is there such a delay in funding this 
type of work and why have repeated attempts to fund this type 
of work been rejected? And then I have got two quick follow-up 
questions, but I will give you a chance to answer those first.
    Ms. Lubchenco. So, Congressman, let me simply start by 
saying that I am very concerned about the current status of 
many of our fisheries. And if you look nationwide, we are not 
in a good position. I think the number is over 60 stocks are 
currently overfished or undergoing overfishing. And I think the 
reality is that current fishery management has really not 
adequately controlled overfishing.
    Thousands of jobs have been lost as fisheries decline under 
the current system and many valuable fisheries face huge 
closures, including the ones that you were describing in your 
state. And that has very serious impacts on jobs, on 
communities, on lives and livelihoods, on recreational 
opportunities as well as the availability of seafood.
    So I agree that we are not in a good place right now. This 
is one of the reasons why I have been championing consideration 
of and transition to Catch Share programs for commercial 
fisheries, because I believe that they have a significantly 
better track record in improving fish and they work for 
fishermen as well as fish. And I think the changes in the 
commercial fishery in the Gulf of Mexico for red snapper are a 
strong testament to that.
    I also agree with you that we do not have adequate 
information on the number of fish that are out there, if you 
will, or on the activities of recreational fishermen. The data 
are not as current as we would like. They are not as robust as 
we would like.
    That said, we are required by law to use the best available 
information to make our decisions and it would be nice if we 
were in a better position and we had better data. I agree with 
the importance of acquiring those better data and funding those 
kinds of programs.
    The decisions that we make about what to fund and what not 
to fund have to take into account all of the different 
fisheries all around the nation. And we simply have inadequate 
resources to do justice to all of them.
    So it is not a good situation. I understand it has very 
serious consequences. Acquiring better fishery independent data 
is certainly appropriate. So, too, is having better information 
on what the activities are of recreational fishermen so that we 
can have more real-time information on what is being caught. 
And so there are sort of two data needs. One is the fish. One 
is the activities of the recreational fishing community.
    One of the things that I committed to doing, which I shared 
with you when we were together in Mobile, was establishing a 
much better relationship with recreational fishermen. And I 
have been systematically beginning to do that.
    We are convening a summit with recreational fishermen in 
April here in Washington, D.C. and we have been designing that 
summit in close collaboration with leadership from the 
recreational fishing community.
    And we intend to work with them to identify the highest 
priority areas and to have a much better understanding of the 
data we do have, what is the basis of making our decisions, but 
also how can we improve that and how can we work 
collaboratively together with them to do that.
    Mr. Bonner. Well, I appreciate the summit in April. And I 
appreciate your desire, stated desire to establish a better 
relationship with the recreational fishermen.
    The only thing I will ask you in closing is, I am going to 
extend to you the same invitation that I extended to Mr. 
Schwabb who was nice enough to come meet with me, the Assistant 
Administrator for Fisheries. We had a very good conversation. 
But I would welcome the chance to bring you back to my district 
and we will go out on a boat and we will do independent data 
research. And I am very sincere. I am not trying to make light 
of this.
    If the very people whose lives we are impacting the most, 
and it is not just the boat captains, it is the entire 
community, it is the restaurant and hotel people, it is the 
Chamber of Commerce, it is the thousands of people that come to 
these communities and fishing is a big part of their vacation, 
but if they could have a chance to visit with you and with your 
team and let you see what we have been talking about when we 
say we believe red snapper has returned and is now more 
abundant than ever, not that that is alone going to convince 
you or anyone else at NOAA or National Marine Fisheries that 
more should not be done in terms of balance, science, but I 
will be perfectly honest, I think it would make them feel that 
people in their government that are going to--you know, we have 
no control over hurricanes. I wish we did. We cannot keep them 
from coming. We have no control over tornadoes.
    We do not even have any control with the price of gas. So 
when fuel was $4.00 a gallon a couple summers ago and that was 
another economic factor that put some of these folks out of 
business, there are some things we have no control over, but we 
do have control over writing regulations and passing laws that 
put hard-working, God-fearing Americans out of business and 
make them bitter toward their government. And so I would love 
to get you back down and anyone you would like to bring for an 
independent day of science and research.
    And, again, I appreciate your coming down earlier.
     Ms. Lubchenco. I appreciate that offer, Congressman. And I 
really do believe that we have much work to do to be out on the 
shore, on the water, and interacting more with people whose 
lives and livelihoods are affected.
    Part of our challenge is keeping the eye on the long term 
as well as trying to figure out the solutions for the short 
term. And decisions that would preclude recovery of depleted 
fisheries are not going to be good for communities, for 
fishermen in the long term.
    We are trying to think creatively about how we can address 
the very real short-term economic challenges while not 
precluding recovery down the road and it is that tension. And I 
think that these are extraordinary times and we are looking for 
creative solutions to try to do that balancing.
     Mr. Bonner. Thank you.
    Thank you, Chairman.
     Mr. Mollohan. Thank you, Mr. Bonner.
    We have a vote. I plan to continue the hearing down to a 
point that we can all make our votes and then adjourn for----
    Mr. Ruppersberger. Mr. Chairman, I just made my vote.
    Mr. Mollohan. And adjourn for the remainder of three votes 
and then we will reassemble----
     Ms. Lubchenco. Okay.

                      JOINT POLAR SATELLITE SYSTEM

     Mr. Mollohan [continuing]. After the three votes are cast. 
Please describe the new approach. What are NOAA's 
responsibilities and what are DoD's in the Joint Polar 
Satellite System?
     Ms. Lubchenco. With the proposed restructuring of the 
Joint Polar Satellite System, NOAA would have responsibility 
essentially for the afternoon orbit. So NASA on behalf of NOAA 
would provide the acquisition management for the afternoon 
mission requirements. The Department of Defense would continue 
acquisition for the morning orbit assets and would need to 
transition the afternoon orbit instrument assets from DoD to 
NASA. So that is what would be done in fiscal year 2010 with 
those funds that were allocated for that.
    NOAA with assistance of NASA would continue procurement of 
an NPOESS Preparatory Project, or NPP-like spacecraft for the 
afternoon orbit. We do not yet have that spacecraft. We are 
examining options for acquiring that. It is a smaller bus than 
would have been the case under the old NPOESS Program.
    Mr. Mollohan. It could be a smaller bus or it is a smaller 
bus?
     Ms. Lubchenco. We believe that we do not need the huge bus 
that was part of the NPOESS Program, that a smaller bus is more 
appropriate and certainly a lot cheaper.
    And so we would continue procurement of those two 
spacecraft for the afternoon orbit and then support the launch 
readiness of the NPP, which is the NPOESS Preparatory Program, 
that is underway.
    So that is what the funds for fiscal year 2011 would go to, 
would be to those particular responsibilities. And then, of 
course, the ground system, as I mentioned before, we would 
continue to operate jointly. That is working well and we 
anticipate no changes with that.
    Mr. Mollohan. So DoD's responsibilities would continue to 
be the morning or would be the morning round?
     Ms. Lubchenco. That is correct. It would continue to have 
responsibility for the morning orbit and would share the data 
that would be appropriate from that that is not needed or that 
is appropriate to share for civilian purposes with us and then 
the converse.
    Mr. Mollohan. And what is DoD doing? Well, let me ask you 
this. What data from the different satellites will be shared or 
will data be shared from the different satellites, DoD, NOAA?
     Ms. Lubchenco. We would share all of our data. DoD would 
share data that is not of a classified nature essentially. So 
each of those satellites has multiple different instruments on 
it and some of the instruments are more relevant for weather 
than climate, for example. And so that is one of the purposes 
of having a joint ground system is that you can share those 
data and it is set up to do that.
    Mr. Mollohan. And I think you said earlier in your 
testimony that the ground system will be jointly managed?
    Ms. Lubchenco. NOAA manages it and NOAA is responsible for 
it, but it is a partnership that we all contribute to.
    Mr. Mollohan. Financially contribute to?
    Ms. Lubchenco. No. I can check on this, but I believe that 
NOAA has the financial responsibility for that.
    Mr. Mollohan. But DoD is benefitting from that?
    Ms. Lubchenco. I stand corrected. It is jointly funded.
    Mr. Mollohan. And would you submit for the record the 
share, how the joint funding is going to be shared?
    Ms. Lubchenco. I would be happy to do that, Chairman.
    [The information follows:]

    In the February 1, 2010 decision to restructure the NPOESS program, 
in addition to assigning NOAA the responsibility of providing the 
observation for the afternoon orbit, it also assigned NOAA the 
responsibility of fielding the ground system network.
    NOAA currently operates DoD's Defense Meteorological Satellite 
Program (DMSP) spacecraft on a reimbursable basis from the NOAA 
Satellite Operations Facility (NSOF). NOAA will continue this 
arrangement for the rest of the DMSP satellites and NOAA anticipates 
that DoD would provide funds to NOAA to continue operation of 
satellites implemented under the DoD portion of the restructured NPOESS 
program. NOAA's Office of Satellite Operations has provided the 
command, control, and communication for DMSP spacecraft from Suitland, 
Maryland since 1998 with Schriever Air Force Base in Colorado providing 
back-up support. NOAA will continue to operate the DMSP platforms in 
the morning orbit under the restructured NPOESS program. The new ground 
system offers the agencies the opportunity to make operations more 
efficient by transitioning to a single enterprise solution for multiple 
satellites.
    The JPSS budget will allow NOAA to continue development and 
fielding of the ground system in preparation for operations of the 
satellite on launch.

                  SATELLITE INTERNATIONAL PARTNERSHIPS

    Mr. Mollohan. International partners, how do they play in 
this?
    Ms. Lubchenco. We currently have a partnership with 
EUMETSAT which is the European Meteorological Satellite System 
for support of the mid-morning orbit. There is an early-morning 
orbit, mid-morning orbit, and an afternoon orbit. They 
currently have satellites that operate in that mid-morning 
orbit. And NOAA provides instruments for that orbit that are 
flown on this European satellite and then we share the data.
    So they provide the satellite, we provide the instruments, 
and everybody shares the data. That is currently what we do 
now. It is working very, very well. It is a great partnership. 
It saves us a lot of resources, a lot of money. And----
    Mr. Mollohan. Is that the extent of your international 
partnerships?
    Ms. Lubchenco. No. We have considerable joint satellite 
systems, some with Europe's Meteorological Satellite 
Organization or EUMETSAT, some with the Japanese. Another one, 
for example, that we share with EUMETSAT is the Jason Program. 
Jason is a satellite system that measures sea surface height. 
It has altimeters that are critically important to have 
continuity of climate information but also for a lot of 
forecasting and information about sea level rise. That program 
is, I believe, a 50/50 split between NOAA and EUMETSAT.
    And the funds that are requested in fiscal year 2011 are 
for Jason-3 and that satellite system builds on the earlier 
successes of Jason-1 and Jason-2 which again have been jointly 
operated with the Europeans.
    Mr. Mollohan. Are there international partnerships that you 
do not have that you are pursuing?
    Ms. Lubchenco. There are a number of partnerships that we 
are having exploratory conversations about. I am not as 
familiar with those, but I would be happy to get that 
information to you.
    Mr. Mollohan. The information that comes down from these 
partnership satellites, does that information all come down the 
same ground system and it is managed in the same way as the 
data that would be managed between you and DoD?
    Ms. Lubchenco. We have ground stations that have big 
satellite dishes. For example, in Fairbanks, Alaska, there is a 
ground system that captures data from the Polar-orbiting 
Satellites that are going around. It captures those data and 
then redistributes it to the relevant countries, the relevant 
agencies within the United States. And there are a number of 
ground systems like that for the different types of satellite 
systems.

                      JOINT POLAR SATELLITE SYSTEM

    Mr. Mollohan. Okay. I am not sure I totally understand 
that. But all the data that is coming down from the Joint Polar 
Satellite System, all the data that will be coming down from 
the Defense satellite once they get that worked out, that is 
coming down in a ground system that you are managing?
    Ms. Lubchenco. That is correct.
    Mr. Mollohan. And you are going to share that data in sort 
of arrangement with DoD. The information that is coming down 
from your partnerships like in the mid morning, is that coming 
down into the same system?
    Ms. Lubchenco. Yes, it is.
    Mr. Mollohan. What role does NASA play in the Joint Polar 
Satellite System?
    Ms. Lubchenco. The funds that are in NOAA's budget are 
contracted to NASA.
    Mr. Mollohan. NASA contributes no resources, no money?
    Ms. Lubchenco. That is correct. NASA does not have any for 
the JPSS System, NASA does not have any budget. They are our 
partner. They----
    Mr. Mollohan. Is that a reimbursable agreement? Is it a 
memorandum of understanding?
    Ms. Lubchenco. It is a reimbursable agreement. And it is 
the similar arrangement that we have for the GOES systems, for 
example. So they have the technical expertise, the experience 
in managing contracts, and they have primary responsibility for 
overseeing the acquisition, the testing of the instruments, the 
oversight of the contracts, et cetera. And they are very, very 
good at doing that and we have a great partnership with them.
    Mr. Mollohan. Well, because Defense is still reviewing 
this, correct? They are not at a point that they have made 
decisions of how they are going to go here. But will the Joint 
Polar Satellite System, will it include the same observations 
that were originally planned for the NPOESS afternoon orbit?
    Ms. Lubchenco. For the afternoon orbit, yes, it will, 
because those are our responsibilities. DoD has committed to 
providing the same information that it does for the morning 
orbit, but they have not yet decided exactly how they will be 
doing that because those decisions for them are a little bit 
down the road.
    Mr. Mollohan. With regard to the afternoon orbit and the--
--
    Ms. Lubchenco. Uh-huh.

                              JPSS SENSORS

    Mr. Mollohan. You are saying that you are going to have the 
same observations that were planned for NPOESS on the afternoon 
orbit under the JPSS System?
    Ms. Lubchenco. That is correct.
    Mr. Mollohan. What are those sensors?
    Ms. Lubchenco. There are a whole range of sensors. Let me 
look here. The JPSS would have the Visible/Infrared Imager/
Radiometer Suite, which is called VIIRS; the Cross Track 
Infrared Sounder, which is CrIS; the Advanced Technology 
Microwave Sounder, ATMS; the Ozone Mapping and Profiler Suite, 
OMPS; Clouds and Earth Radiant Energy System, CERES; the Earth 
Radiation Budget Satellite, ERBS; and the Total Solar and 
Spectral Irradiance Sensor, TSIS. So those are all instruments 
that were on NPOESS that now will be on JPSS.
    Mr. Mollohan. Okay. So whatever bus you are using, you 
decide to use, you will have the same instrumentation for the 
afternoon orbit as was planned for NPOESS?
    Ms. Lubchenco. That is correct.

                                JPSS BUS

    Mr. Mollohan. What are your plans with regard to the bus to 
be used? Has a decision been made with regard to that?
    Ms. Lubchenco. The decision has not yet been made. We are 
exploring options. We currently plan to acquire two buses that 
are roughly the size of NPP. That seems to be a good model. It 
has worked well for us. It is adequate. And so exactly from 
whom we would get them has not yet been decided. We are 
exploring what options are out there.
    Mr. Mollohan. So what are you calling these launches, the 
C-1, C-2, C-3 launches under NPOESS, and these launches are 
JPSS-1, 2, 3?
    Ms. Lubchenco. That is correct. So C-1 would become JPSS-1.

                           JPSS LAUNCH DATES

    Mr. Mollohan. And when is the estimated launch date for 
JPSS-1?
    Ms. Lubchenco. It would be fiscal year 2015.
    Mr. Mollohan. And how does that schedule compare and what 
about 2, launch of the second satellite?
    Ms. Lubchenco. The second is end of calendar year 2017.
    Mr. Mollohan. How do those dates compare with the NPOESS 
scheduled launches, C-1, C-?
    Ms. Lubchenco. The JPSS-1 is about six months later than 
the original NPOESS schedule, but that schedule was 
questionable. No one thought that was actually very realistic. 
And it is 18 months sooner than the NPOESS schedule we have 
adjusted. So we are better off.
    Mr. Mollohan. Okay. We are going to recess for these votes 
and we will be back after the third vote.
    Ms. Lubchenco. Okay.
    Mr. Mollohan. The hearing will stand in recess. Thank you.
    I think we ended on my trying to--the hearing will 
reconvene--on getting estimates of schedules. So will you 
review that again? When do you anticipate JPSS-1 ready for 
launch?
    Ms. Lubchenco. We anticipate JPSS-1 ready in fiscal year 
2015.
    Mr. Mollohan. And JPSS-2?
    Ms. Lubchenco. A couple years later, 2017.
    Mr. Mollohan. Okay. Will there be any data gaps with that 
schedule?
    Ms. Lubchenco. There should not be any loss in data. We 
should not have any data gaps if the transition goes as 
scheduled.
    And I just received during the break a memorandum from 
Department of Defense, from the Under Secretary of Defense for 
Acquisitions, Logistics and Technology who is the point person 
at DoD. And he issued this morning his decision memorandum 
which is his formal direction to the folks at DoD to do what 
they had committed to for the transition.
    So we had their word that they were going to be responsible 
for transitioning the afternoon assets to us and to be 
responsible for the morning orbit. Now his decision memorandum 
has been issued which is the order to actually do that. So that 
is very good news.

                            JPSS TRANSITION

    Mr. Mollohan. How will the transition from NPOESS to JPSS 
be handled? You alluded to a transition plan and team. If you 
would elaborate on that, please.
    Ms. Lubchenco. Yes, I would be happy to. We have laid out a 
transition plan that would ensure efficient and smooth handover 
of assets. There is a Government Transition Team that has been 
established. Those individuals have been named and they will 
immediately develop and execute this transition plan that we 
all agreed to.
    Part of that entails, for example, DoD transitioning its 
assets to NOAA, but it also means working with DoD and Northrop 
Grumman Aerospace Systems Procurement to transfer the work on 
the instruments and the ground systems to the NASA-led 
acquisition vehicles.

                     DOD APPROPRIATIONS FOR NPOESS

    Mr. Mollohan. The information you just got from DoD, did it 
speak to its intent with regard to its appropriations for 
NPOESS for fiscal year 2010?
    Ms. Lubchenco. Mr. Chairman, I have not read the entire 
memo. It is one of the PDFs that is on a screen that is too 
hard to read. So I have not read the entire thing.
    I believe it simply orders DoD to do the things that were 
in the transition plan. So DoD has committed to the funding 
that they have for fiscal year 2010.
    Mr. Mollohan. They committed to buying into the program?
    Ms. Lubchenco. That is correct.
    Mr. Mollohan. So that is their intention previously 
expressed?
    Ms. Lubchenco. That is correct.
    Mr. Mollohan. Whether it is in that memo or not, I think 
that is my information.
    Please describe the effect of the JPSS Program if the 
Defense Appropriations Committee here were to rescind some of 
those funds. And there is some expression and concern around 
that that might be a possibility.
    Ms. Lubchenco. There is expression of concern. Should that 
happen, I think there would be significant risk of a data gap. 
It is our hope that that will not happen because that would be 
quite serious. So we are hopeful.
    Mr. Mollohan. Would there be a delay? What would be the----
    Ms. Lubchenco. Yes. If the funds are rescinded, then the 
launch of JPSS-1 would be delayed probably by about six months 
and there would be very considerable risk of a data gap. In 
fact, that risk would be almost a certainty.

                          JPSS BUDGET IMPACTS

    Mr. Mollohan. Let me finish this line up. Please explain 
the effects of the JPSS decision on NOAA's budget for fiscal 
year 2011.
    Ms. Lubchenco. The fiscal year budget includes contingency 
funding, termination costs for the Northrop Grumman contract, 
and a cost estimate that is at or close to the 80 percent 
level. So this would ensure that lack of funding will not drive 
day-to-day decisions which has been a chronic problem with this 
program throughout.
    Mr. Mollohan. How has it impacted your request here? Your 
request has been increased by X number of dollars in order to 
support the JPSS approach.
    Ms. Lubchenco. Yes, Mr. Chairman. The request has been 
increased by almost $680 million. So the total request is a 
little over $6 billion. And that request essentially has the--
that is the total request, correct, yes--and that request 
includes this contingency funding, the termination cost, and--
--
    Mr. Mollohan. And would you please submit for the record an 
explanation of the effects of the JPSS decision on NOAA's 
budget for 2011?
    Ms. Lubchenco. I would be happy to.
    [The information follows:]

              Northrop Grumman Aerospace Systems Contract

    On February 1, 2010, the Administration announced NOAA and the 
Department of Defense (DoD) would no longer jointly procure the polar-
orbiting satellite system called NPOESS. NOAA and DoD are in a critical 
transition phase as each agency determines how the programs in each 
agency's respective orbit will be structured. NOAA is working closely 
with NASA to develop the Joint Polar Satellite System (JPSS) for the 
afternoon orbit, while DoD is analyzing its options for fulfilling its 
need for environmental data in the morning orbit.
    At this time, however, no final decision has been reached on the 
disposition of the NPOESS prime contract as a result of the 
Administration decision and ongoing transition. While it is possible 
the NPOESS prime contract, held by Northrop Grumman Aerospace Systems, 
could be terminated by DOD, it is also possible the contract could be 
transferred or modified. The FY 2011 budget includes funds to cover our 
termination liability should termination occur.
    Most importantly, NOAA is working closely with NASA and DoD to 
ensure there will be no gap in polar satellite coverage, particularly 
in the afternoon orbit, which is crucial for monitoring climate change 
and its many impacts.

    Mr. Mollohan. Given the mutual use of data by NOAA and DoD 
and their shared responsibilities for termination liabilities, 
don't DoD decisions still have the potential to increase your 
cost?
    Ms. Lubchenco. Yes, Mr. Chairman, they do. You know, what 
DoD decides to do in the out years still has the potential for 
affecting our costs.
    Mr. Mollohan. How?
    Ms. Lubchenco. It is in the process of conducting a 
requirements review and analysis of its alternatives. The 
termination liabilities are a particular concern for us. We are 
working with DoD to minimize those liabilities and we are still 
in the process of negotiations.
    Mr. Mollohan. When will the JPSS Program baseline be 
determined and what steps will be taken before then and how 
will that impact your 2012 budget request?
    Ms. Lubchenco. The program is going to be subject to 
independent review of the mission concepts, the organizational 
structure, the acquisition strategies, and the budget prior to 
program baselining.
    The goal is to include these findings and resultant 
strategies in the fiscal year 2012 budget. So the Transition 
Team will provide the date for this review, but the DoD 
architecture is needed before that can be finalized.
    Mr. Mollohan. Has the NOAA/NASA Transition Team membership 
been finalized and how is it going if it has?
    Ms. Lubchenco. The team has been formed. It is working 
together. I think we are off to a good start. And I think there 
is a solid basis from which to move forward. The recent 
decision memorandum from Dr. Carter, I think, is very good news 
and puts us in a good position.

                             SCATTEROMETER

    Mr. Mollohan. Okay. Mr. Schiff.
    Mr. Schiff. Thank you, Mr. Chairman.
    Last year, the Committee asked for a plan to develop a 
satellite-based scatterometer to monitor surface specter winds. 
That proposal was supposed to be included in the budget, but 
unfortunately it was not. This data is vital for forecasting 
the progression of hurricanes and other large storms. And our 
current source of such data, the QuikSCAT Satellite, lost an 
antenna in November ending its operational capability.
    Given the predictable demise of QuikSCAT and ongoing 
discussions with NASA and the Japanese Space Agency, I am a 
collaborating on a new mission.
    Why was this project not included in the fiscal year 2011 
proposal and what are your plans for obtaining high-quality 
surface specter wind data?
    Ms. Lubchenco. Congressman, the QuikSCAT Program was very, 
very useful and helpful. We currently have other satellite 
programs that can provide some comparable information for the 
coastlines of the U.S. So even though we have lost that 
satellite system, we can make up for those data in forecasting 
hurricanes along the coastline.
    What we have lost completely is the ability to do forecasts 
for ocean weather way out in the middle of the ocean away from 
the coastlines. And so replacing that satellite is an important 
thing for us to do. It was deemed less urgent than other needs 
and so it was a decision of tradeoffs because we currently have 
some capability to forecast hurricanes. QuikSCAT was not 
essential to that capacity. We still have that. And so we are 
anticipating studying what our options are for the future to 
replace what was lost with that system.
    Mr. Schiff. Is it your expectation at this point that this 
will be included in next year's budget? This is a yearly 
reprieve but not a cancellation of the effort?
    Ms. Lubchenco. It is probably too early to say at this 
point. We are looking at what the options are. And I would be 
happy to let you know as soon as we have made any decisions on 
that.

 CONSTELLATION OBSERVING SYSTEM FOR METEOROLOGY, IONOSPHERE AND CLIMATE

    Mr. Schiff. Thank you.
    And very quickly, I wanted to ask you, the budget 
submission in the case that NOAA is following up on, the 
successful COSMIC Radio Occultation Satellite Program with a 
new program COSMIC-2 to launch 12 small satellites to gather 
key weather and climate data, the new program is again a 
collaboration with Taiwan, meaning half the funding comes from 
Taiwan and about half the work will be done there.
    For several years now, American companies have expressed 
interest in providing this data on a commercial basis and claim 
they can do so at considerable savings.
    What would be the relative expense of procuring this data 
commercially as compared to under the current plan? When would 
the COSMIC-2 System be operational in providing data and how 
does that compare to when a commercial provider would become 
operational? And more generally, is NOAA pursuing opportunities 
to procure data from domestic commercial sources and help 
support the American commercial space industry?
    Ms. Lubchenco. Congressman, NOAA currently uses commercial 
satellite data to obtain crucial information on a number of 
different--for different types of information, ocean color, for 
example. Sea ice tracking and monitoring are examples.
    And so we fully recognize the value of the public/private 
partnerships that those kinds of arrangements entail.
    We have ongoing dialogue with companies that might be able 
to provide additional crucial environmental data sets beyond 
our existing Geostationary and Polar Orbiting Satellite 
Systems.
    In the last couple of years, NOAA has awarded a series of 
study contracts to get additional information from the private 
sector to examine possible ways to obtain additional high-
priority weather, climate, and space weather observations. And 
we are folding that into our planning for the future. So we are 
taking stock of what is out there.
    And COSMIC is one of those programs. COSMIC will provide 
important information for weather forecasting in an area where 
private sector cooperation will likely be very beneficial in 
the future.
    While it has been determined that a 50/50 funding 
partnership with Taiwan is currently the most economical on the 
short term to obtain those instruments, on the longer term, 
private sector cooperation will likely be a good option as we 
are interested in obtaining more of that type of information.
    Mr. Schiff. Can you just get back to the Committee with a 
comparison of what the commercial providers can do now in terms 
of the data you are looking for and what the relative cost 
would be?
    Ms. Lubchenco. Certainly. I would be happy to.
    Mr. Schiff. And whether they lack the capacity to give or 
if they have the capacity, whether the costs are greater or 
less than the partnership with Taiwan.
    Ms. Lubchenco. One of the issues, Congressman, is who has 
access to the data. And so I am just flagging that as a 
consideration that we have to fold into our thinking. Any 
contractual arrangements we would have, we would want to have 
the data be freely accessible and available. And that does not 
always fit in with the business plan of some companies.
    So that is one of the issues that we have to work through 
with them when we are talking about these kind of contractual 
arrangements. It is not just the money. It is how the data can 
be used is also important.
    Mr. Schiff. Thank you, Mr. Chairman.
    Mr. Mollohan. Mr. Wolf.
    Mr. Wolf. I will pass.
    Mr. Mollohan. Mr. Schiff, do you have any other questions?
    Mr. Schiff. No thank you.
    Mr. Mollohan. Okay.
    Mr. Wolf. Mr. Chairman, I have some questions I will just 
submit for the record.

                          RECREATIONAL FISHING

    Mr. Mollohan. Okay. You scared me there. I thought I gave 
you too much time.
    Recreational fishing contributes over 125 billion to the 
economy on an annual basis and supports over a million jobs. 
The recreational fishing community has expressed concerns with 
respect to NOAA programs, including Catch Shares and research. 
We heard that spoken to by Mr. Bonner here earlier this 
morning.
    This community also has concerns about the effect of the 
coastal and marine spatial planning framework. We will submit 
several questions for the record on these topics.

                            Closing Remarks

    We are at the twelve o'clock hour and members have other 
engagements. And you have kindly given up your time to be here 
this morning and I know you have a busy schedule likewise.
    So we will submit a number of other questions for the 
record other than this.
    Thank you for your excellent testimony here today and your 
excellent service. The kind of management you brought to NOAA 
is very impressive dealing with this NPOESS issue and getting 
this on the right track will earn you, I do not know, a legacy 
forever. And we look forward to working with you and your fine 
staff.
    Thank you very much, Dr. Lubchenco, for appearing here 
today.
    Ms. Lubchenco. Thank you, Mr. Chairman. I appreciate it.
    Mr. Mollohan. The hearing is adjourned.

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                                        Tuesday, February 23, 2010.

             NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY

                                WITNESS

DR. PATRICK GALLAGHER, DIRECTOR

                            Opening Remarks

    Mr. Mollohan. The hearing will come to order. Good 
afternoon.
    Today we will explore the fiscal 2011 budget request for 
the National Institute of Standards and Technology.
    NIST's critical role in measurement science and standards 
fosters innovation and encourages economic growth. The agency 
is a world leader in the physical sciences and technology.
    The total NIST request is $918.9 million, an increase of 
$62.3 million over the fiscal year 2010 enacted level of $856.6 
million, or just over seven percent.
    We will explore NIST's progress in awarding American 
Recovery and Reinvestment Act funds, including specific details 
on how the funds are being utilized and their importance in 
supporting NIST's mission while addressing National priorities.
    NIST received $580 million in ARRA funding, including $220 
million for research, competitive grants, additional research 
fellowships, and advanced research and measurement equipment 
and supplies: $180 million to address NIST's backlog of 
maintenance and renovation needs, and for the construction of 
new facilities and laboratories; and $180 million for the 
relatively new and well-received competitive construction grant 
program for research science buildings.
    I would like to acknowledge that this is Dr. Gallagher's 
first time testifying before this Subcommittee.
    I understand, Dr. Gallagher, that you have some practice 
with authorizing committees, however, so it is not exactly new 
territory for you.
    Welcome, and we look forward to your testimony. Your 
written statement will be made a part of the record. Following 
Mr. Wolf's opening statement, we will ask you to briefly 
summarize your written statement.
    Mr. Wolf.

                            Opening Remarks

    Mr. Wolf. Thank you, Mr. Chairman.
    Dr. Gallagher, we welcome you and look forward to hearing 
your testimony.
    And I yield back. Thanks, Mr. Chairman.
    Mr. Mollohan. Dr. Gallagher.

                   Opening Statement by Dr. Gallagher

    Mr. Gallagher. Well, thank you very much. It is a real 
pleasure to be here for my first hearing before this 
Subcommittee.
    And I want to thank you, Chairman Mollohan and Ranking 
Member Wolf and the other members of the Subcommittee, for 
allowing me to appear before you today to summarize the 
President's request for the National Institute of Standards and 
Technology for fiscal year 2011.
    I also want to take this opportunity to thank you for your 
continued support of NIST. This budget reflects, I hope you 
will agree, the important role that NIST plays into the 
President's Plan for Science and Innovation.
    The President's fiscal year 2011 budget request for NIST is 
$918.9 million. This is a 7.3 percent increase over the fiscal 
year 2010 appropriation for the agency.
    This budget maintains the President's commitment to double 
the NIST laboratory budget by 2017 and to increase funding for 
the Hollings Manufacturing Extension Partnership or MEP 
Program.
    The request for our Scientific and Technological Research 
Services account which funds NIST laboratory programs is $584.5 
million, an increase of $69.5 million above last year. This 
increase is focused on critical areas such as manufacturing, 
cyber security, standards for interoperable health records, 
Smart Grid, advanced photovoltaic research, and disaster 
resilient buildings.
    The request for our Industrial Technology Services or ITS 
account, which is comprised of the MEP Program and the 
Technology Innovation Program or TIP, is $209.6 million and 
includes increases of $4.6 million for MEP and $10 million for 
TIP. The request also includes $124.8 million for our 
Construction of Research Facilities account.
    So let me briefly summarize some of the initiatives in the 
request.
    In the laboratory initiatives, the standard for conformity 
assessment for interoperability and emerging technologies 
initiative covers the development of framework of documentary 
standards and conformity assessment requirements to enable 
interoperability and new technologies. This initiative 
specifically includes our efforts in Smart Grid and health IT.
    The scalable cyber security for emerging threats and 
technologies initiative will support the development of tools 
and standards necessary to enable a robust, usable, and 
accessible cyber security framework and will include a specific 
program of competitive grants to strengthen U.S. capabilities 
in cryptography.
    Our green manufacturing and construction initiative will 
provide for the development of tools to improve energy 
efficiency in manufacturing and construction and to benchmark 
and stimulate the utilization of sustainable materials in 
manufacturing.
    The innovations for 21st century U.S. manufacturing will 
accelerate the development and adoption of advanced 
manufacturing technologies, including nano manufacturing 
capability. This initiative is also in line with the 
President's framework for revitalizing American manufacturing.
    NIST's advanced solar technology initiative, consistent 
with the Administration's support for the development of 
alternative energy sources, will focus on bridging the current 
gap in measurement technology needed to develop both advanced 
technology of photovoltaics and to promote their commercial 
use.
    The disaster resilient buildings and infrastructure 
initiative will fund improved techniques, tools, and guidelines 
for evaluating and rehabilitating existing buildings based on 
analytical and experimental studies. It also supports efforts 
to work with national code organizations so that we can 
incorporate those tools and products into improved model codes.
    The nano material environment health and safety initiative 
builds on our current efforts to characterize nano materials 
and to begin developing the standards and reference materials 
framework, including measurement methods and instruments needed 
to support research and standards on nano material safety.
    For our biologic drugs initiative, we're working with 
industry stakeholders to develop a program to provide reference 
materials and tools to control the manufacturing of biologic 
drugs and to support their eventual regulation. This initiative 
will include funds for grants to stimulate advances in these 
new measurement technologies.
    The Strategic and Emerging Research Initiatives fund, or 
SERI, is a Director's discretionary research account, enabling 
the NIST Director to respond quickly to critical research 
needs. The NIST NRC Postdoctoral Research Associateships 
program initiative will enable NIST to support up to 23 
additional new postdoctoral associateships per year through 
this highly competitive program.
    Our request for MEP this year is the second year of 
proposed increases to the program. This is consistent with the 
trajectory for the program that was outlined in the America 
COMPETES Act. This initiative will enable the program to expand 
its suite of business growth services, which we call Next 
Generation MEP services, to promote the acceleration of new 
technology, to promote green and sustainable manufacturing, and 
to open up new markets for U.S. small- and mid-size 
manufacturers.
    The requested increase for the TIP Program will support new 
competitions and cover any remaining commitments from previous 
competitions in areas of critical national need like civil 
infrastructure, advanced manufacturing, energy, healthcare, or 
green chemistry.
    Our Construction of Research Facilities request reflects 
three major goals for the agency. First, to fund the repairs 
and maintenance of our existing building systems, second, to 
renovate a dangerously obsolete Building 1 at our Boulder 
campus, and, finally, to begin detailed planning for the most 
cost-effective way for a future renovation at our aging general 
purpose laboratories in Gaithersburg.
    Mr. Chairman, this request reflects the Administration's 
recognition of the important role that NIST plays in innovation 
and our impact on the future of manufacturing and hopefully of 
moving this Nation from recession to recovery.
    I am looking forward to working with this Committee and 
look forward to answering any questions you have.
    [The written statement of Dr. Patrick D. Gallagher, 
Director of the National Institute of Standards and Technology, 
follows:]

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                 AMERICAN RECOVERY AND REINVESTMENT ACT

    Mr. Mollohan. Thank you, Dr. Gallagher.
    In the American Recovery and Reinvestment Act NIST received 
a total of $580 million. We are interested in knowing what you 
did with it, how many jobs it preserved or created. So let us 
just start with how much funding has been obligated to date.
    Mr. Gallagher. The total amount of funding for Recovery Act 
varies according to the different programs. Where we have the 
most progress in obligations is through our grants programs.
    Mr. Mollohan. Uh-huh.
    Mr. Gallagher. We have announced awards for all of our 
construction grants.
    Mr. Mollohan. Well, may I? Excuse me for interrupting you.
    Mr. Gallagher. Yes.
    Mr. Mollohan. Let me start at the top. You had $580 million 
in the Recovery, right? This is a total, a top line number, how 
much----
    Mr. Gallagher. You want me to break that out? Yes, let me 
break it down because there were a number of pieces to it.
    Of the $580 million that NIST received, $360 million was in 
our Construction of Research Facility accounts. Of that $360 
million, half of it, $180 million, was for internal NIST 
construction. The other half was for the competitive 
construction grants program.
    In the construction grants program, a third of that funding 
was awarded rather quickly based on proposals that had been 
received but were unfunded from the prior year.
    Mr. Mollohan. Uh-huh.
    Mr. Gallagher. The remaining two-thirds was funded under a 
new competition and those awards have all been announced.
    In the internal NIST construction, this is done through 
design and then build contracts. The design contracts have all 
been awarded and we are now moving into the construction 
contracts. Those contracts will be moving out between now and 
the middle of the summer which just reflects the two-phase 
process that occurs under construction.
    Mr. Mollohan. So $360 million for construction, it is out, 
and construction will begin when the construction season 
starts, I assume?
    Mr. Gallagher. That is correct.
    Mr. Mollohan. Okay.
    Mr. Gallagher. The remaining $220 million was in our 
laboratory base account, the so-called STRS line for NIST, and 
that was broken into a number of distinct programs. A little 
over half of that, approximately $110 million, was for the 
purchase of high-end equipment needed for NIST research. We 
focused that specifically on large items of equipment. So that 
was good from a management perspective because it gave us a 
finite number of items to move, but it also complicates it 
because large contracts move a little slower than lots of small 
contracts.
    We have awarded approximately 16 of those and the balance 
of those are pending with a very heavy season of awards 
anticipated through this spring and summer. In terms of 
equipment received, there is not a lot yet. Three or four items 
have been installed and are underway.
    Mr. Mollohan. How much of that equipment is purchased in 
the United States from United States manufacturers, if you 
know?
    Mr. Gallagher. My understanding is that almost all of it 
is. I only know of one exception that, because of a Trade Act 
issue, a foreign registered company was allowed to compete and 
I think obtained the contract. But everything else to date has 
been American-manufactured equipment.
    Mr. Mollohan. Uh-huh.
    Mr. Gallagher. There are some details that go with whether 
we can restrict competition to U.S. companies or not, but we 
have done everything we know to promote U.S. manufacturers in 
this by identifying the nature of the equipment, make sure that 
it is the kind of equipment that we could buy from U.S. 
manufacturers.
    Mr. Mollohan. Uh-huh.
    Mr. Gallagher. After the $110 million, there are a number 
of programs that are various grants and contract programs. 
There is a $35 million research grants program that was to 
support areas of research and that support NIST work and those 
are all announced.
    We announced last week a fellowship program which will 
support positions not just postdoctoral or graduate student but 
all the way up to senior scientists at both our Gaithersburg 
and Boulder facilities.
    There is also a $22 million expansion of the NIST NRC 
Postdoctoral Research Associateships postdoc program in the 
Recovery Act that, in fact, we are also expanding in our 2011 
request. Those positions are underway and are brought in as 
term appointments to NIST.
    Mr. Mollohan. So those are postdocs that would be working 
in with NIST as an agency?
    Mr. Gallagher. That is correct.
    In the research grants program, we were trying to have 
programs that would both bring people to work at NIST and 
provide grants to universities so they could fund students and 
postdocs at their institutions. So we tried to have both 
aspects of the program.
    We also had a series of research contracts to support 
particularly our efforts in cyber security, health IT, and 
Smart Grid and about half of those have been obligated and are 
underway. The other half are in progress.
    Mr. Mollohan. Just because the efficacy of the stimulus 
program has been so questioned, can you translate your 
expenditure into jobs? Have you done that computation? You may 
not have. And if you have not, that is fine. If you have, we 
would like to have the benefit of your knowledge on that.
    Mr. Gallagher. Well, you know, the Recovery Act, the part 
of the Recovery Act that NIST saw was very much in the 
investment side. So as you see, a lot of our spending is 
according to our anticipated profile, but it really peaks this 
year, not in the prior year.
    We are required, as are all Recovery Act recipients, to 
report job creation through the recovery.gov web site.
    Mr. Mollohan. Can you do that here today or would you like 
to submit that for the record?
    Mr. Gallagher. Well, yes. The numbers that come up, though, 
I can share those numbers. What we have so far is 115 jobs 
created, funded by the Recovery Act recipient-based reports.
    But I want to point out that, one, there is this generic 
undercounting problem that everybody talks about which is just 
the limitation of doing the recipient-based reporting which is 
that, for example, when you buy equipment, we do not look at 
the jobs that are created in the supply chain of that 
manufacturer and so forth.
    And specifically at NIST, there is an under-reporting 
because these are postdocs that are hiring under term 
appointments, and they are excluded from the count. So there is 
already another 53 positions where we have hired people, 
provided jobs, but they are not part of the job tally.
    Mr. Mollohan. Uh-huh. What about the construction jobs?
    Mr. Gallagher. Well, in the----
    Mr. Mollohan. They are prospective as you are looking at 
them? That would happen when the construction starts?
    Mr. Gallagher. Both the construction grant recipients and 
the internal construction have recipient reporting requirements 
for them to report. But most of the jobs will come with the 
construction phase, so we are not reporting many of those yet.
    Mr. Mollohan. So that is 360 million out of your 
expenditure?
    Mr. Gallagher. That is correct.
    Mr. Mollohan. So they will hit, I assume, when that starts 
and that is in the summer?
    Mr. Gallagher. Yes. They are fairly labor intensive as all 
construction projects. So as soon as we let those construction 
projects, we typically are breaking ground pretty quickly. So I 
anticipate the recipient reporting to follow that pretty 
quickly.
    Mr. Mollohan. Thank you, Dr. Gallagher.
    Mr. Wolf.

                      MANUFACTURING FOCUS AT NIST

    Mr. Wolf. Thank you.
    Mr. Chairman, I have a number of questions and maybe we 
will get to them in the second round.
    The manufacturing base of our country is eroding pretty 
rapidly. If you get on a train in Washington and take it up to 
New York, close your book and do not buy a newspaper and just 
look off to the right and the left, you will see factories are 
in decay. The windows are broken. There is graffiti on the 
walls. The weeds are growing out of the buildings.
    And you are coming right up to the industrial heartland of 
the nation. You actually go through my old neighborhood and we 
had the largest General Electric switch gear plant, I think, in 
the world and it is gone. There is nothing there. When the wind 
blows, the weeds just tumble and kind of go through the 
buildings now.
    There is the sign over the Delaware River from Trenton, New 
Jersey to Pennsylvania that says ``Trenton Makes and the World 
Takes''. Trenton does not make anything anymore that I know of. 
I think American Standard has since pulled out of Trenton.
    And much of the funding are you doing that really deals 
with manufacturing and bringing about a renaissance in this 
nation with regard to creating jobs--not just a job because you 
are constructing a building out at NIST that lasts for one 
year--but a job that lasts for a long period of time?
    So I guess the question is, do you agree that manufacturing 
is in the tank and we are really in a very difficult situation? 
Secondly, what of the funding that you have has been used to 
really create jobs in the private sector?
    Mr. Gallagher. Well, thank you very much for that question.
    I share your passion and your observation on the state of 
manufacturing in the United States. I happen to believe that 
this country needs a very strong production and manufacturing 
capability to be viable. And there are a number of reasons why 
I think it is so essential for us to build that.
    The NIST programs themselves focus on manufacturing in a 
couple of different ways. And, in fact, the types of programs 
that NIST has authorized within the agency make it somewhat 
unique among federal agencies.
    In the NIST laboratory program, our request for fiscal year 
2011 has an unprecedented focus on manufacturing. And the 
motivation here is to use a research and development agency 
like NIST to both address barriers that manufacturers are 
facing and to give them a competitive advantage when they are 
looking at foreign competition.
    And so the examples of that would be, for example, in terms 
of giving them advantages would be looking at Smart Grid or 
Health IT where you are looking at a new set of technologies 
and if you are going to manufacture devices and products in 
that space, rapidly having consensus on what interfaces those 
components have to have and doing it very quickly advantages 
U.S. manufacturers.
    So in the case of Smart Grid, as we quickly deploy these 
interoperability standards, we can have U.S. manufacturers 
developing Smart Grid appliances and components and Smart 
meters. And because we are the first mover, we give our 
manufacturers a competitive advantage.
    The other area is that we want to take advantage of the 
fact that U.S. manufacturers are in proximity to one of the 
strongest R&D activities in the world. And so giving them 
access, accelerated access to how to incorporate technology 
into their manufacturing process to improve productivity or 
efficiency or to create new products and services is something 
that those programs are focused at.
    And then if you look at the MEP Program, we are working 
with small and mid-size manufacturers very directly on sort of 
a needs basis to give them the business services and growth 
services they need to support on a case-by-case basis what they 
do.
    All that being said, I think that these are necessary 
things to have to happen, that we have to put U.S. 
manufacturers in the strongest position possible to compete. I 
think there are more pieces to the puzzle than the technology 
pieces that NIST is looking at.
    And I know within the Commerce Department, we are very 
focused on looking at this issue to see rather holistically all 
of the issues in terms of both trade and export controls and 
looking at the technology issues that NIST does and rapid 
access to intellectual property and so forth so that we can try 
to do everything we can to support American manufacturing.

                               SMART GRID

    Mr. Wolf. But can you attribute any of the current funding, 
and I know it is too soon, that will lead to actually creating 
manufacturing jobs?
    Mr. Gallagher. Well, in the case of Smart Grid, I am aware 
of an economic analysis that was sponsored last year, it was 
published in the Wall Street Journal, that projected over 
200,000 new jobs in Smart Grid-related fields by the end of 
2011, which I found to be a very impressive, somewhat 
astonishing number.
    But when they broke it out and you saw that it was both in 
appliances and new appliance capabilities, it was in Smart 
Grids, it was in installers that would have to be installing 
these, it was in terms of network support to make these things 
happen, and then on the bulk power side looking at the upgrades 
to our switch gear and power distribution systems, and then 
including the renewable energy, so it is one of these 
infrastructures that enables a very broad spectrum of new 
technologies. And the job creation potential is quite large.

                 JOB EXPANSION IN CHINA INSTEAD OF U.S.

    Mr. Wolf. And I guess you are right. I just was reading the 
old book out by John Meacham, Franklin and Winston, whereby 
they from almost zero got up and running and built a fleet of 
ships and airplanes and manufactured and did things in order to 
win World War II, almost coming from nothing.
    And it seems that today there is something missing. Why do 
you think jobs are expanding in China, and not in the United 
States?
    And I was very disturbed. There was an ABC report last week 
that in the area of wind, there were a large number of turbines 
and equipment that were being made in China that were being 
funded through a Texas company. There were 55 jobs in Texas and 
thousands in China. But why do you think they are able to 
compete or do so well in China or India and not here?
    Mr. Gallagher. Well, I think, you know, we have all heard 
sort of what I call the simple argument, that it was labor cost 
driven and it is cheaper to manufacture things where the labor 
is cheaper.
    What I find interesting is that if you look at some of the 
manufacturers that are moving overseas now, they are not in 
areas that are strictly advantaged by labor costs. So advanced 
photovoltaics are being manufactured in China even though that 
was an American invention of photovoltaic technology. And the 
U.S. has lost market share rapidly in photovoltaic 
manufacturing.
    Photovoltaics are an energy intensive and capital intensive 
manufacturing. And so companies are making these siting 
decisions not strictly on labor, but on a set of other issues.
    Mr. Wolf. What are those other issues?
    Mr. Gallagher. I am not sure we know them all, but the ones 
that I am worried about are, you know, there is going to be a 
total sort of cost environment that they are in. Maybe these 
sites are more aggressive at making regulatory and cost 
decisions that simply put product manufacturers that have very 
rapid product cycles in an environment where it is just more 
predictable from a business sense. We sometimes hear that from 
business leaders.
    The other one that I am quite interested in is that many of 
the Asian markets have been much more systematic at building 
integrated supply chains so that when you start moving into a 
semiconductor type technology like photovoltaics, they have the 
assemblers, they have the device manufacturers, and they have 
simply paid more attention to the supply chain.
    And I think that is what is driving a lot of the current 
discussion here in terms of regional and innovation type 
clusters so that we try to have the symbiotic relationship that 
occurs between manufacturers and their supply chain.

                        JOB REPATRIATION PROGRAM

    Mr. Wolf. But are we looking at that, and not to just be 
critical of this Administration, but the previous 
Administration allowed jobs to go offshore? And I just wonder 
if there is not more that we can do from a practical point of 
view.
    I would love to see any Administration put together what I 
will call a repatriation program whereby we repatriate jobs, 
not New Jersey competing with Pennsylvania or Pennsylvania 
competing with West Virginia, but to compete for jobs with 
China and India and Bangladesh and Mexico.
    And I do not know that you are the right person, that you 
are the right agency, but somehow it seems that there ought to 
be a model put together, and the Department of Commerce has 
been asleep at the switch, both in this Administration and--let 
me just stress again in the interest of bipartisanship--in the 
previous Administration, but to almost put together a model.
    How do you repatriate jobs back? I would sense that if you 
are an American company, you would certainly rather have your 
location, your plant manufacturing in a rural area in the 
United States, perhaps to look to see how you can bring some 
companies back from China that are American companies, giving 
them a significant tax break, perhaps relocate in an area, for 
instance, in south side Virginia, in Martinsville, where there 
is an unemployment rate at 20 percent.
    So clearly you would not have to pay the people as high of 
a wage as you pay them if they were going to be relocated to 
Gaithersburg, where you have high property taxes in Montgomery 
County, for example. You would not have the commute, the 
transportation.
    But would it not make sense to put together kind of a 
model? I think the research and the development is very 
important. And when I was on this Committee before, we always 
funded NIST at a very high rate. So I am not questioning what 
NIST does.
    I know NIST standards, building standards perhaps have been 
involved in Haiti with regard to the earthquake and if you read 
today's paper of the number of earthquake zones. So I think 
everything you do is good, but to really put together kind of a 
comprehensive way and, therefore, make an effort.
    Now, my sense is I do not see this Administration doing it. 
I did not see the previous Administration doing it. And there 
are probably more lawyers on K Street working for the Chinese 
than there are working for other people.
    Would that not make sense to kind of do, to look at a model 
and see----
    Mr. Gallagher. I----
    Mr. Wolf [continuing]. Some of those companies, to bring 
them back home?
    Mr. Gallagher. I would love to work with you on this. I 
think that the only way we are going to tackle the 
manufacturing problem is to look at it very holistically and 
look at the systematics and make sure that it is not going to 
be one technology or just a tax issue or just--it is going to 
have to be a whole package because we are seeing companies 
making these decisions for reasons other than the simple ones 
that we thought we understood.
    Mr. Wolf. Well, maybe, at an appropriate time, working with 
the Chairman, we could put together a model, particularly with 
regard to this Committee having Commerce and NIST and NSF, 
together and do it on a kind of a ``forced march'' whereby you 
could promote this to come back in 180 days as to what is the 
model to repatriate.
    If every American company were to return to the United 
States, what would that mean in terms of jobs? How many jobs 
would there be and what would we have to do? So if you could 
come on by and we could sit down and pick your brains and see--
--
    Mr. Gallagher. I would love to.
    Mr. Wolf [continuing]. If we could offer something.
    Mr. Gallagher. I would love to.

                             CYBER SECURITY

    Mr. Wolf. On the cyber security issue, what country is the 
most aggressive with regard to cyber attacks?
    Mr. Gallagher. Well, I do not have access to the detailed 
data, but it is----
    Mr. Mollohan. Access to the details.
    Mr. Gallagher. I was going to say what I read would put 
China and former Soviet Union, those countries sort of near the 
top of the list, but that is from my reading of the papers.
    Mr. Wolf. Well, I would think you would know, though. Do 
you work with the FBI and talk to their people? I mean, but is 
it not China from what you know as well as what you read----
    Mr. Gallagher. That is correct.
    Mr. Wolf [continuing]. In the paper? Okay. I just wanted to 
get that out. Can you describe for the Committee the economic 
impact that results from cyber crime and the potential for 
economic loss and the disruption that could come from future 
attacks? How vulnerable are we and are we becoming more or less 
vulnerable? I think I know the answers, but I want to hear from 
an expert.
    Mr. Gallagher. Well, you know, the risk we face in cyber 
security is based on the utility of cyber. So as we become more 
dependent on it for e-commerce, which has had great benefits, 
as we become more dependent on it for delivering public goods 
and services, as we become more sensitive to failures of the 
same infrastructure, so the increased risk we face is also a 
byproduct of the increased benefits we incur from information 
technology.
    The magnitude of the risk is enormous. The estimates I have 
seen are billions of dollars lost in cyber crime.
    Mr. Wolf. Three billion or seven----
    Mr. Gallagher. Billions. I do not----
    Mr. Wolf. But I am asking three billion or seventy-five 
billion?
    Mr. Gallagher. I do not know.
    Mr. Wolf. Could you see what you could----
    Mr. Gallagher. Yes, we could look into it.
    [The information follows:]

                             Cybersecurity

    There have been many estimates of the economic impact of cyber 
attacks to U.S. businesses and citizens. However, estimates are largely 
based on anecdotal evidence, so there is no consensus in estimates of 
impact. A 2007 GAO report, GAO-07-705, ``Cybercrime: Public and Private 
Entities Face Challenges in Addressing Cyber Threats,'' confirmed the 
lack of consensus and explained the difficulties in precisely 
determining impact. The GAO report did cite a 2005 FBI survey that 
estimated U.S. organizations' loss from computer crime at over $67 
billion. Other, more recent surveys have estimated the U.S. impact in 
the hundreds of billions of dollars a year.

    Mr. Wolf. Go ahead and finish there.
    Mr. Gallagher. Well, what I was going to say is I think 
that what makes this a real challenge is that this is a new and 
rapidly evolving technology and you cannot think about the 
solutions as static patch the holes.
    These systems are evolving and they are sitting in a threat 
environment that is extremely dynamic. And so I think the 
solution to this is not can we just worry about the border 
security, if you will, in computer systems, but how do you have 
real robust defense in depth?
    The problem we really face right now is that the bad guys 
can have lots of failures and just have one success and they 
are done and they win. We can have lots of successes and one 
failure and we lose. And so it is very asymmetric.
    I think what you really want to do is have a lot of defense 
in depth. You also want to make security usable. If we turn 
computer systems into Fort Knox, we lose all of the benefit 
that these technologies have for us. We want to try to automate 
as much as possible how these systems respond to environments 
so that the security is sort of built in.
    One of the things at NIST that we are really focused on is 
how do you measure the security performance of a system. And 
the reality is today what we do is we propose controls and you 
really assess by an audit how many controls you have in place. 
It is a very primitive form of measurement.
    The question is, can we actually look at IT system behavior 
and actually do what we are supposed to do at NIST which is to 
get some very meaningful measurement tools so that system 
operators can say this is how well my system is performing? And 
if the threat environment changes, this is what I have to do to 
adjust.
    Mr. Wolf. Well, thank you very much.
    Thank you, Mr. Chairman.
    Mr. Mollohan. Thank you, Mr. Wolf.
    Mr. Bonner.

                          JOB CREATION AT NIST

    Mr. Bonner. Thank you, Mr. Chairman.
    Dr. Gallagher, listening to you, to your opening testimony 
and listening to you respond to the Chairman and Ranking 
Member, I told you when you introduced yourself that I do not 
think you are going to get grilled today and there was a lot of 
hard questions, but just listening to your response to Chairman 
Mollohan that the 115 new jobs that have been created, are 
those in your estimation all federal government jobs or are any 
of those in the private sector?
    Mr. Gallagher. No. At NIST, the 115 jobs that we count are 
all private sector jobs that are being created. At NIST, the 
only jobs that are the federal sector in our tally are these 
two-year term appointments for the postdocs. That is really the 
only----
    Mr. Bonner. That would be the 53 positions?
    Mr. Gallagher. That is correct.

          MANUFACTURING BASE AND NIST'S ROLE IN RE-ENERGIZING

    Mr. Bonner. And then you also mentioned in answering Mr. 
Wolf's questions about the importance of re-energizing the 
manufacturing base in this country.
    Could you tell us a little bit more specifically about what 
NIST's role could be in that?
    And the reason, I am not trying to lay a trap for you, I 
have got a county that has got 20 percent unemployment. I would 
venture a guess with no disrespect to the people in that county 
that if I went home this weekend and said NIST has received 
$500 million last year in the stimulus and got the President 
asking for a 7.3 percent increase, most of the Social Security 
recipients this year will not get any increase in their gold 
and most state legislators are struggling just to keep level 
funding or will see significant cuts.
    So my question is really based on how can I convey to one 
of my constituents or any of our constituents that are here 
that an investment in NIST is an investment in a better life 
for them individually or for the life of our country?
    Mr. Gallagher. Well, I think the short answer to that is 
that, and it goes to the heart of the whole innovation 
discussion, that if we are making these justifications for 
these public investments in R&D, we have to translate this into 
economic activity for the country. So the proof is really do we 
generate meaningful jobs and economic activity.
    In terms of what NIST can do to support that, as I said, 
there are a couple of aspects to that. One thing we know is 
that our research intensive manufacturers do much better than 
low intensity R&D. So if you look at just how well certain 
manufacturing sectors have done, those that are R&D intensive 
have really done fairly well in the United States. It is the 
ones that are not.
    And so it is a plan forward in terms of how we identify 
sectors. And that is why this R&D investment is very important.
    The other aspect in terms of an approach and maybe one with 
Ranking Member Wolf we can talk about is the federal government 
does not alone work with manufacturers. The states and local 
governments play an enormous role and we see that in every 
siting decision that is made.
    One of the approaches I would like to explore is whether we 
can use the federal involvement as a mechanism for tying 
together what is happening in different regions and states 
across the country. If we can quickly disseminate best 
practices and identify those areas that really do it well and 
can shed those things that are not effective, we might be able 
to help everybody by sort of leveraging these precious 
resources and making sure they are maximally beneficial.
    And that is a little bit what the MEP Program tried to do 
20 years ago which was to take the various extension 
partnership programs, identify those practices that worked 
really well, and use the federal part to basically act as a 
network.

                    MANUFACTURERS AND STATES' ROLES

    Mr. Bonner. Do you have a breakdown or could you get us a 
breakdown of what the individual 50 states do in terms of their 
own contribution because I think that is an interesting point 
here today? You have got New York, Maryland, Pennsylvania, West 
Virginia, Virginia, and Alabama, and my colleague from Alabama 
might know what we invest. It is probably not near as much as 
it should be, but I would like to know what other states are 
doing as well so that when our state legislators and governors 
come up to us asking for help at the federal level, we can turn 
around and ask for help from investment from the state?
    Mr. Gallagher. Okay. I would be happy to share what we do 
know. What I am afraid of is that we will be impartial as well. 
And I think that really does point to a problem that we should 
be looking at this broad spectrum of programs, what happens in 
universities, what is happening in the technical colleges and 
community colleges, what is happening in technology parks, what 
is happening with the manufacturing extension centers, and what 
mixes appear to be proper. What sort of conditions have to be 
in place so that you do start to bring jobs back in and create 
an attractive environment for manufacturers.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T6756A.178
    
    [GRAPHIC] [TIFF OMITTED] T6756A.179
    
                     OVERSEAS COUNTERPARTS OF NIST

    Mr. Bonner. And then the last question that I have got is, 
I always like to look at the map of the world behind the 
Chairman because if you think about the investment of $918 
million in our country this year, assuming this goes through, 
what would China--what is the Chinese counterpart to NIST? What 
is the European counterpart to NIST or the Japanese? And what 
are their countries investing in this?
    Mr. Gallagher. I do not have those numbers off the top of 
my head. We tend to have to aggregate those because there tends 
to be no exact counterpart to each agency in the other 
countries.
    But we do know that in some of the technology areas, it is 
not uncommon in other countries for the federal government, if 
you will, in those countries to play a very direct role in 
industrial policy and conditions. And so you are going to see 
very large and significant investments in China and Europe in 
setting the conditions for their manufacturers.
    And I do not think our diversity is a disadvantage. I just 
think we have to harness it better. So, you know, the trick is 
let us not disadvantage ourselves by the fact that we do not 
have a central planning, but we can certainly pull what we know 
about those numbers and be happy to share that with you.

    National Measurement Institute (NMI) International Counterparts

    Arguably, NIST is the predominant National Metrology Institute 
(NMI) in the world. Most U.S. trading partners have a National 
Metrology Institute (NMI) of their own, which provide services to their 
economies analogous to those that NIST provides to the U.S. economy. 
These foreign NMIs range in size/scope from the Physikalisch-Technische 
Bundesanstalt (PTB, Germany), which is the second largest NMI in the 
world, to very small NMIs, with a handful of employees, who just 
provide limited traceability to the internatinal unit of measurements 
(the SI) via a few calibration services. Among the principal 
counterparts of NIST are: NRC-CNRC (Canada), NIM (China), CENAM 
(Mexico), NMIJ (Japan), PTB (Germany), NPL (UK), KRISS (South Korea), 
LNE (France), VSL (The Netherlands), CMS/ITRI (Taiwan) and INMETRO 
(Brazil).

    Mr. Bonner. Thank you, Dr. Gallagher.
    Thank you, Chairman.
    Mr. Mollohan. Thank you, Mr. Bonner.
    Mr. Aderholt.

                       MANUFACTURING OF TEXTILES

    Mr. Aderholt. Thank you, Dr. Gallagher, for being here 
today.
    One thing that NIST has been helpful in the past as with, 
of course, a lot regarding the manufacturing we have already 
talked here today, one of the areas that has been hit hard by 
not only the recession but also through overseas competition 
has been the textile aspect of manufacturing.
    And just if you could tell us a little bit about what NIST 
is doing to ensure that the textile industry that remains in 
America does stay strong and tries to make sure that what we 
have now does not leave. So if you could share some of those 
thoughts with us.
    Mr. Gallagher. Yes. I hate to tell you that the NIST 
intramural efforts in textile manufacturing were largely 
terminated years ago. So there is actually very little that 
NIST is doing to support textile manufacturing right now, 
unless it is of a general manufacturing technology like sensors 
and various materials, calibration processes that textile 
manufacturers would have to have access to.
    So we support their basic measurement needs, but we do not 
have a focused sector-based program anymore in textile. We used 
to, but not anymore in textile manufacturing.
    One interesting note, one area where that seems poised to 
change is in nano manufacturing. It appears that some of the 
high through-put manufacturing technologies that are being 
looked at have a lot of similarities with textile 
manufacturing. And it may very well be that we will be looking 
at nano materials in textiles as an approach in a very advanced 
manufacturing sector.
    Mr. Aderholt. What about as far as the National Textile 
Center? What relation do you have with that?
    Mr. Gallagher. I do not know. I am not aware of a specific 
relationship with that program.
    Mr. Aderholt. If you could check on that and----
    Mr. Gallagher. I would be happy to.
    [The information follows:]

                        National Textile Center

    At this time, NIST does not have a direct relationship with the 
National Textile Center (NTC). However, NIST does have scientific 
collaborations with researchers at Cornell who are affiliated with NTC 
as well as others at the University of Delaware and Purdue, who are 
studying body armor and conducting research on high-strength fibers.

    Mr. Aderholt [continuing]. Get back with us. That is all I 
have.
    Mr. Mollohan. Thank you, Mr. Aderholt.
    Mr. Ruppersberger.

                        CYBER SECURITY INCREASE

    Mr. Ruppersberger. Yeah. Dr. Gallagher, thank you for being 
here.
    I know we had some conversations about cyber security in 
your role. This is an appropriations hearing, so the first 
thing I want to ask you about is the issue of cyber security in 
the role that you play. And I know you work very closely with 
NSA, but we also have challenges with the Homeland Security 
also.
    And I think in your budget that you have asked for a $10 
million increase considering the cyber security threat. Because 
of the role I have on Intelligence, you know, we see that it is 
a very serious issue. It is one of the most serious issues 
involving our national security and not only national security 
but in the commercial area and the threats that are happening.
    Where do you see this ten million going and do you feel 
that that is significant based on what your role is going to be 
coordinating with NSA and also the Department of Homeland 
Security?
    Mr. Gallagher. Great. Thank you very much.
    Yes. The $10 million increase has two very distinct 
components for NIST. One of them is to strengthen certain 
research activities needed to develop stronger cyber security 
standards for federal systems and that does include advanced 
automation of configuration management of computer systems. It 
includes multi-factor authentications so we know that the 
authorized user is the person doing the work. And there is a 
set of very specific test beds that are needed to look at how 
to test security performance in financial systems, for example. 
There are a number of very specific research programs.
    The one new component to this program is that approximately 
$4 million of this we envision as a grants program to U.S. 
universities to develop core competency in cryptography. And 
that is very important because cryptography, of course, is the 
mathematical science that tells us how to encrypt and protect 
information.
    A lot of cryptography work in the United States is not 
supported by the open science agencies. And, therefore, when we 
have an international competition in developing new encryption 
standards, we find that the participation is predominantly 
foreign.
    Mr. Ruppersberger. And what open agencies do not really 
participate?
    Mr. Gallagher. Well, it is just that branch of mathematics 
is just not covered to any large extent by National Science 
Foundation or DOE or NSF. So because NIST has a core competency 
and we have strong ties with the academic community, we feel we 
have a stewardship role to make sure that there is a strong 
core competency in open cryptography work in U.S. universities.
    Mr. Ruppersberger. You also have a role in working with 
small business; is that correct?
    Mr. Gallagher. Yes, we do.

            CYBER SECURITY AND NIST'S ROLE IN PRIVATE SECTOR

    Mr. Ruppersberger. And, unfortunately, from what we know, 
you could have a senior citizen in North Dakota who has a 
computer and communicates with her community bank. And that 
community bank then communicates with, say, Bank of America. 
And the bad guys could really get in through that one weak link 
and go through the community bank and probably be in a position 
if they knew what they were doing to maybe shut down some ATM 
systems for Bank of America.
    This is a threat that I do not think the public even 
understands where we are.
    And, again, in dealing, why cyber security is so difficult 
and, yet, it is so important because we are constantly getting 
attacked on a regular basis, what would you see your role? What 
would you recommend we do to involve so many--I mean, small 
businesses are about 80 percent of what we really do in this 
country, working with small business. What would your role be 
and what would you recommend?
    Mr. Gallagher. Well, I think it is an outstanding question 
because, you know, we tend to focus on the federal systems 
because it is the information we are charged to protect and, 
yet, 80 percent of the infrastructure is in the private sector. 
And vulnerability in the private sector can affect all of us.
    I know that I can barely configure my computer. They are 
highly flexible. And I know my mom and dad certainly cannot. So 
one of the questions is that how do you provide support to 
individuals and the small businesses to provide these sort of 
security enhancements?
    One of them is that we have to extend the standards 
framework. In other words, the description of how to provide 
meaningful cyber security in depth that we have done for the 
federal sector and promulgate that effectively to the private 
sector internationally, how we configure machines and how they 
are set up and how they operate.
    But the other one was a particular focus of this initiative 
which is to increase the automation of these systems. What we 
want to be able to do is have software and operating systems 
that can be dynamically configured so that we can adjust the 
way they are set up to minimize risk and, frankly, not have a 
single point of failure in the system where once you are 
inside, you are inside and you can do anything, that there is 
really a defense.
    Mr. Ruppersberger. Well, you know that is really a massive 
undertaking because the weakest link of any individual and 
whether the bad guys are other countries, whether they are al-
Qaeda, whether they are hackers just who want to do a lot of 
mischief, whatever, and you cannot start over, though, the 
internet. I mean, we have it and we are going to be moving 
forward.

                   CYBER SECURITY AND OTHER AGENCIES

    Let me ask you this. You might not want to answer this 
question because it might be too advanced at this point or it 
might be better to talk about this from a--they are classified 
or whatever. But we know that NSA does an outstanding job. Some 
of what they do, they are the best in the world in what they 
do. And thank goodness for the United States' national security 
they do that, whether it is helping in cyber security, whether 
it is helping with war fighter, whether it is identifying, you 
know, terrorists throughout the world.
    But they have developed a lot of software in dealing with 
the issue of cyber security. And, you know, their 
responsibility is in the military and intelligence area where 
Homeland Security has the rest of the internet basically and 
including the .gov.
    And it seems to me that we really need to focus on one 
system because so much research and development has been done. 
And I would hope that we would be in a position to recommend to 
Homeland Security that they need to learn and to work with, you 
know, NSA as far as developing their system to protect our 
homeland, basically, from the cyber security issue. They are 
way far behind NSA, there have not been investments. And I 
think it is important that maybe, and this is very well 
respected, and you will have input in this issue about making 
sure that we have some type of compatibility where NSA is, and 
we can grow from NSA. Unfortunately in this country in law 
enforcement and a lot of places we have turf battles and we 
cannot afford turf battles here. Do you have any opinion or any 
comments you might like to make on what I just said?
    Mr. Gallagher. Yes, I think there are a couple of quick 
comments. One is, you know, in the cyber security space there 
are going to be multiple agencies participating. And it is 
important that they are all playing effectively, and we are not 
needlessly duplicating effort. And as I shared with you before 
we are working very hard on doing that.
    There is one area in particular where NIST and NSA have a 
particularly close relationship because they actually were 
charged with the same thing. NIST is responsible for developing 
the security standards to protect federal information 
technology systems with the exception of Title 50 agencies, or 
the intelligence community. And NSA was given that 
responsibility over the intelligence community. So NIST and NSA 
together are responsible for developing basically the standards 
and protocols that are needed to protect IT systems. What we 
have done very effectively is work closely so that those two 
approaches are completely harmonized. And so there really is no 
daylight between the way we are approaching this. And at the 
technical level there is a very strong collaborative 
relationship between the two.
    NIST will be able to interact in a way with industry and 
with private sector in a way that NSA probably will not, and so 
it is very important to have both of those capabilities there.

                       HOMELAND SECURITY AND NSA

    Mr. Ruppersberger. But my question goes further about 
Homeland Security, because that concerns me where they are at 
this point. And that they work closely with NSA, work closely 
with NIST to make sure that we have a standard approach and 
that we do not not use the research and development monies, 
millions of dollars that have been used to develop our 
cybersecurity system.
    Mr. Gallagher. Yes. We believe that it is imperative to 
have an effective DHS to partner with because they carry out 
roles that nobody else can. And there is very intense 
discussion internally about hammering out a very specific 
understanding between NIST, NSA, and DHS so we have a very 
clear roadmap of how to work effectively together.
    Mr. Ruppersberger. You know, an example of where this has 
not occurred, and because this Committee does the funding for 
FBI, is their communications system. To this day it is still 
not working, when in fact you have communications systems like 
CINSA that have a communications system that works well. And 
why we had to go out and develop other contractors and systems 
when it is right there in front of us? We need to learn from 
those mistakes when it comes to the issue of cybersecurity. 
Cybersecurity is going to cost this country and other countries 
throughout the world billions of dollars. And there is a lot 
out there that we have to deal with.
    So I think you all are doing a good job. I think you keep 
working with NSA, and I think we can do a lot more in the 
collaboration and working with Homeland Security.
    Mr. Gallagher. Thank you, and I look forward to working 
with you on this.
    Mr. Ruppersberger. Sure.
    Mr. Mollohan. Thank you, Mr. Ruppersberger. Mr. Serrano.

                          9/11 REPORT UPDATES

    Mr. Serrano. Thank you, Mr. Chairman. Is there anything 
that you can update us on in terms of your report, the agency's 
report after 9/11? I know that there were recommendations made, 
and findings about the structural setup in those buildings. Now 
we are rebuilding. And so how much of what you said has been 
included in any new plans? And lastly, that tragedy, and sight 
of that plane coming into that building, those planes, almost 
makes you feel that there was nothing that could have been done 
to prevent that tragedy. Am I correct in saying that? Not 
prevent the tragedy, you know, the attack, but what happened 
afterwards? Or was this now in the study suggesting that in 
fact the damage could have been less?
    Mr. Gallagher. I want to thank you for the question. Our 
job was to take this enormous national tragedy and try to learn 
from it. Specifically, to try to prevent a similar reoccurrence 
from ever occurring. And so the technical study that was 
underdone, which was the most advanced study of a building 
failure ever attempted, ever done, has actually led to some 
very important conclusions about how we can strengthen our 
codes and our approach to building structures to improve them 
in a number of ways. One is to make them resilient to the type 
of fire that actually caused the failure and the collapse. And 
so the adhesion of the fire protectant to the steel was 
something that was a weakness in that building and led to the 
ultimate structural failure of the buildings. And so some of 
the new codes that have now been adopted address improved 
fireproofing technologies and bonding to the steel. The other 
lessons we have learned----
    Mr. Serrano. Adopting locally or nationally, now?
    Mr. Gallagher. These are international.
    Mr. Serrano. International?
    Mr. Gallagher. International. So the International Building 
Code has adopted twenty-three specific recommendations already 
from that study. And these now become the basis, these are 
model regulations that all local and state communities adopt as 
the basis for construction. So it includes improvements in sort 
of fire performance, that we talked about. It also includes 
performance in the ability to evacuate. We learned a lot about 
how important it was to be able to rapidly evacuate large 
skyscrapers. That includes new standards for the width of 
firewalls. It includes something that we were all taught as 
kids. You never get into an elevator when there is a fire. But 
in fact, one of the lessons we learned is that we can build 
fireproof elevators. And in fact, now they will be part of new 
construction and you will be told to evacuate using the 
elevator because it decreases the time to evacuate. And also 
improvements on how the buildings perform for the first 
responders. So making sure that the infrastructure in that 
building is resistant, and functions, and is in places that are 
hardened so that first responders can assume command and 
control over a damaged building and get people out safely.
    I hope we never see a tragedy like that again. But we will 
have learned some lessons that will make new buildings 
constructed under these codes much more resilient against 
tragedies.

                    9/11 AND BUILDING DESIGN FAILURE

    Mr. Serrano. Thank you. Now, my understanding, if I recall 
that day, the buildings sort of crumbled. And it was the 
tragedy that it was. My understanding also was that even though 
that was so tragic, had they fallen this way the surrounding 
area and many more people involved than what indeed happened. 
First of all, is that true? And second of all, were those 
buildings built for unfortunately a situation like that to kind 
of collapse rather than tilt over? Or is that uncontrollable?
    Mr. Gallagher. Yes, I do not want to hesitate to guess 
whether that was a design failure mode for that building. I do 
not think that the designers were designing in the progressive 
failure mode. What happened was a progressive failure when the 
structural steel weakened to a point.
    Mr. Serrano. Right.
    Mr. Gallagher. And the weight simply caused a progressive 
failure that in this case led to a very vertical pancaking 
motion.
    Mr. Serrano. Right.
    Mr. Gallagher. My impression has always been that if it had 
occurred differently it would have been more catastrophic 
because it would have affected nearby buildings more.
    Mr. Serrano. Right. My understanding was that at any given 
time in those days in that area there was, like, 50,000 people, 
I heard was the figure. Which seems large, but not if you know 
New York. It seems there are that many people in a subway car 
at times, you know. So, it was from your study, from this 
study, that these international regulations were adapted?
    Mr. Gallagher. Correct. Yes, by both the International 
Building Codes and also by the National Fire Protection Agency. 
So the code organizations are adopting key findings that were a 
result of this study.
    Mr. Serrano. Did any countries, anybody resist that? Or is 
that just accepted?
    Mr. Gallagher. I am not aware of any----
    Mr. Serrano. Yes.
    Mr. Gallagher [continuing]. Resistance.

                   9/11 AND NIST'S ROLE IN REBUILDING

    Mr. Serrano. Now, what further role does your agency play 
in supervising, overseeing, consulting once we start to 
rebuild, or once the rebuilding has started in Lower Manhattan?
    Mr. Gallagher. Well I think in fact we have worked very 
closely with the Port Authority, and with other organizations 
in New York. The predominant mode that NIST comes into is as a 
technical agency offering assistance. So when we are looking at 
improving codes, eventually localities have to take these model 
codes and adopt them to their own circumstances. And if we can 
provide assistance we do so. I know there has been ongoing 
discussion with those authorities in New York. We do similar 
work in other areas. I want to point out as well, the fiscal 
year 2011 request, it does include this initiative in resilient 
buildings and structures. It is a generic version of this, 
which is that we want to make sure that we collect failure 
information about buildings, no matter what caused the failure. 
If it was an attack, if it was fire, if it was an earthquake, 
if it was wind. Because it is in studying those failures, in 
some ways the world is your laboratory. We want to understand 
what went wrong so we can learn from that and figure out how to 
make sure it does not happen again. And so part of that FY 2011 
initiative is to create a national failures database system 
where we will start to collect systematically this information 
from across the country. So we can look at that, decide which 
ones we need to go investigate further because we think there 
are important lessons to learn.

                      COMMAND CENTERS IN BUILDINGS

    Mr. Serrano. All right, one further part. You said 
something about a command center, setting up a command center. 
What did you mean? What is it that you are after? To accomplish 
what?
    Mr. Gallagher. As I understand it, fire in large 
structures, the World Trade Center would be an example, that 
part of the building design is to create command centers, or 
basically hardened centers where first responders can assess 
the condition to a building. It basically is access to the fire 
alarm, fire suppression systems. Can communicate with different 
floors, can access emergency operation of elevators, things of 
that type. And you want to make sure that those capabilities 
are not lost easily when the building is harmed. So this had to 
do with looking at redundancy, improving redundancy of these 
systems against what happens if the power fails, or what 
happens if a particular part of the building is affected. Do we 
lose all of these capabilities or not? Can we still talk to 
other parts of the building? Can we still control key systems 
in the building?

          9/11 RECOMMENDATIONS AND IMPLEMENTATION IN NEW YORK

    Mr. Serrano. Okay. And my last point is, and so now what 
you recommended and what has been accepted is true for any new 
construction, for instance, in New York City? Not just the 
replacement of what is happening in Lower Manhattan. Any new 
building going up in New York, and there are a lot going up all 
of a sudden, have to meet these new standards?
    Mr. Gallagher. Well what happens is these ideas have been 
adopted by the international code organizations. Those are in 
essence, they have no regulatory authority. Those are what are 
called model codes.
    Mr. Serrano. Right.
    Mr. Gallagher. What happens is, the City of New York and 
various others would basically, through their permitting 
process, adopt certain codes as being the ones in force for 
that area. So as these codes are basically adopted locally they 
tend to point to these model codes.
    Mr. Serrano. So it is a guide, it is a guide, and I imagine 
New York has been pretty good at following that guide?
    Mr. Gallagher. They have been leaders in this.
    Mr. Serrano. Okay. Thank you so much. Thank you, Mr. 
Chairman.
    Mr. Mollohan. Thank you, Mr. Serrano. Mr. Fattah.

                 AMERICAN RECOVERY AND REINVESTMENT ACT

    Mr. Fattah. Thank you, Mr. Chairman. Let me dispose of the 
obvious, but it needs to be said. One is that our Chairman has 
really led the effort to secure a great deal of additional 
funding for NIST in the Stimulus and Recovery Act, that is some 
$500-plus million in a whole range of activity areas. In 
disaster preparedness, as you were just discussing, and a 
number of other areas that you have made significant progress. 
So I want to publicly thank the Chairman for his leadership in 
that regard. And I want to say that it is obvious that in terms 
of your leadership, now you were formerly the Deputy Director?
    Mr. Gallagher. That is correct.
    Mr. Fattah. And now you are in charge?
    Mr. Gallagher. That is correct.
    Mr. Fattah. So, and that is obvious because you got 
educated in the greatest State in the Union, Pennsylvania, and 
got your doctorate at University of Pittsburgh. Thank you, Mr. 
Chairman.
    Mr. Gallagher. It is worse than that. Both of my parents 
are from Pennsylvania.
    Mr. Serrano. That makes you a Phillies fan?
    Mr. Fattah. No.
    Mr. Gallagher. My father is from Philadelphia and my mother 
is from Pittsburgh.
    Mr. Fattah. Yeah, he has got the whole state in balance, 
right? But so I want to thank you for your leadership of the 
agency, and congratulate you on your appointment. We have in 
the Philadelphia area some 1,300 manufacturers who against 
significant odds are doing well, working hard, and involving 
all manner of activity. Penn Fish and Tackle, Mr. Chairman, is 
making salt water fishing reels in the heart of my district. 
They make a world class fishing reel, sells for over $1,000 a 
pop. And they have only one competitor in the world, and they 
are over in the Pacific Rim.

                           SCIENCE EDUCATION

    But we have a lot of challenges in manufacturing, I know 
that. And at the heart of it is, I think, the dearth of 
educational attainment in the hard sciences by unfortunately 
Americans of every stripe are doing less and less and less. If 
you talk about, you know, our doctoral programs, you know, at 
Carnegie Mellon, I mean, anywhere you want to go in the hard 
sciences, I mean, you would be hard pressed to find, 
particularly to find American citizens who are pursuing 
terminal degrees in the disciplines that we, you know, whether 
nanotechnology, computer information science, so on, and so on.
    So I am very interested in the world of the agency. And I 
know you are doing a lot of work in the STEM area. You have got 
some postdoctoral students involved. I would like to learn more 
about that.

                    PHARMACEUTICAL INDUSTRY AND NIST

    On a different point, in the Philadelphia area we have a 
significant attachment to pharmaceutical related, because we 
have about 42 percent of the pharmaceutical manufacturers in 
the country headquartered right there in the Philadelphia area. 
So I know you are doing work on biologic drugs. And these are 
very promising drugs. And the work that you are doing is going 
to both increase the effectiveness but also the efficiency of 
moving these drugs to the market. And so I am also interested 
in my staff learning more about your request in that area, and 
to make sure that we can align our priorities in ways to be 
beneficial.
    So I want to thank you for your presentation. And I look 
forward to finding ways in which we can partner to make sure 
that notwithstanding the other forty-nine states, that 
Pennsylvania gets more than its fair share whatever resources 
in technology and assistance that you can provide. And since 
you have this home state connection I know you will not have a 
problem being biased in your application of the resources of 
the agency. Thank you.
    Mr. Wolf. They are the number one manufacturer of cheese 
steaks and hoagies.
    Mr. Mollohan. Yes, they are also to be envied the way they 
finance technology development. Their Ben Franklin Program is 
outstanding, so really. Much like Virginia is to be commended 
for their investment.
    Mr. Fattah. Mr. Chairman, as a state legislator I created 
the Ben Franklin Technology Program.
    Mr. Mollohan. Did you?
    Mr. Fattah. Yes, thank you.
    Mr. Mollohan. Well, I would like to talk with you about how 
you did that.
    Mr. Serrano. I had nothing to do with any of this. Just for 
the record.

                 COMPETITIVE CONSTRUCTION GRANT PROGRAM

    Mr. Mollohan. Thank you. Dr. Gallagher, in the stimulus 
package there was $180 million to address backlog of 
maintenance and renovation projects, and for the construction 
of new facilities and laboratories. And $180 million for the 
Competitive Construction Grant Program for science research. 
Would you first explain the purposes behind the, how NIST has 
implemented the Competitive Construction Grant Program, and how 
it relates to how to value science and how you might advocate 
for it based on that?
    Mr. Gallagher. Yes, I would be happy to. I think one of the 
striking things about the Competitive Grants Program is this is 
meeting an unmet need in the research community. The proposal 
pressure has been very high. The interest has been 
extraordinary and the caliber of proposals has been very, very 
high. I think that reflects both the fact that facilities play 
a key enabling role for research, and the fact that there has 
not been a dedicated federal program looking at this type of 
funding since the late nineties. I believe the NSF had a 
program that was terminated at that time.
    We are very pleased with what we are seeing evaluating 
proposals. The way we established the program beginning in 2008 
with the much smaller program that we had at first, was that 
this was to look at research facilities in areas of interest to 
the Commerce agencies. So it really gave wide latitude to the 
proposers to propose research facilities as long as they could 
address an alignment with the mission focus of one of the 
Commerce agencies. That is why you, when you look at the 
programs you will see NIST-type measurement programs, 
nanotechnology, materials. You also see oceanography, ocean 
sensors, and NOAA-type programs, and that reflects that change.
    I believe you and I had a brief discussion about this a 
while ago, one of the things that I would like to explore, and 
we have initiated some internal discussions, is whether, if it 
is not a specifically authorized program at NIST, but if we 
could tie it more closely to the NIST mission, the NIST focus, 
then I think we could explore whether this makes sense to make 
part of the request. I think there are a lot of different ways 
we could do that. The need, the unmet need is so high that 
looking at the construction related activities, for example, we 
talked about as a bridge to what is happening, let us say, in 
technology or research in a given region or university or 
cluster, I think there is a chance to bring this program into 
stronger synergy with what we are trying to accomplish, either 
in a technology promotion agenda, or developing certain 
research capabilities where we have a key interest. We have 
talked about cyber security in the case of manufacturing.
    So I think it is not much of a limitation, but I think it 
can be brought in as part of a portfolio where not only does it 
build a building, but it builds a building that addresses and 
fits into a broader context. I would actually enjoy working 
with you to discuss that further.
    Mr. Mollohan. Well, let us do that. We want to make it as 
relevant as possible, and as competitive as possible as far as 
that is concerned. How many applications were received in the 
2009 competition?
    Mr. Gallagher. Which 2009?
    Mr. Mollohan. Fiscal year 2009.
    Mr. Gallagher. So in----
    Mr. Mollohan. Is there more than one?
    Mr. Gallagher. Well, what happened in 2009 is we had the--
--
    Mr. Mollohan. Oh, you had the ARRA.
    Mr. Gallagher. ARRA, and then we had the $180 million.
    Mr. Mollohan. Yes.
    Mr. Gallagher. So if I recall we had something like 170 
proposals that came in and--167--and we were able to fund four.
    Mr. Mollohan. And so this year you are really folding a lot 
of the 2009 money into the 2010 competition?
    Mr. Gallagher. Well, what happened, that is, so what 
happened when the Recovery Act came is we had had all of these 
proposals received, and only funding----
    Mr. Mollohan. From 2008.
    Mr. Gallagher. From 2008.
    Mr. Mollohan. So you put a lot of money----
    Mr. Gallagher. So there was a decision made about what 
would be a responsible amount to make available to look at 
unfunded but highly meritorious proposals and then compete the 
balance.
    Mr. Mollohan. Good.
    Mr. Gallagher. We have another competition with the 2010 
that will be announced imminently. So----
    Mr. Mollohan. And then that will include some 2009 funding 
as I understand?
    Mr. Gallagher. That is correct.
    [The information follows:]

     NIST has received 384 applications for the competitive 
construction grant program since the inception of the program and has 
awared 19 grants. The breakdown of applications and grants per 
competition are:

------------------------------------------------------------------------
                                             Number of       Number of
               Competition                 Applications       Grants
------------------------------------------------------------------------
FY 2008 (FY 2008 funds).................              93               3
FY 2009 (ARRA funds)....................             167             16*
FY 2010 (FY 2009 & FY 2010 funds).......             124      None yet**
------------------------------------------------------------------------
* 4 grants (@$55.537 M) awarded July 2009 using unfunded meritorious FY
  2009 applications and 12 grants ($123.517 M) awarded January 2010
  using new FY 2009 ARRA applications.
** Application deadline was April 26, 2010; applications currently under
  review and grants are expected to be awarded in September 2010.

     The American Recovery and Reinvestment Act of 2009 (ARRA) 
(Public Law 111-5) appropriated $180 million to NIST ``for a 
competitive construction grant program for research science buildings. 
Additional information on the program was provided on page 418 of the 
Conference Report to accopany House Report 111-16 (Feb. 12, 2009): ``. 
. . $180,000,000 shall be for the competitive construction grant 
program for research science buildings, including fiscal year 2008 and 
2009 competitions. Consistent with the Conference Report language NIST 
announced an ARRA competition in FY 2009 with available funding of $180 
million with up to $60 million available for unfunded FY 2008 
meritorious applications and approximately $120 million available for 
new applications under a new FY 2009 ARRA competition.
     The FY 2009 ARRA Construction Grant Program Competition 
was a top priority. Therefore, the decision was made to defer holding a 
separate competition for the Omnibus Appropriations Act, 2009 (Public 
Law 111-8) appropriated funds of $30 million until FY 2010. When NIST 
received an additional $20 million in appropriated funds under the 
Consolidated Appropriations Act, 2010 (Public Law 111-117), the 
decision was made to combine the funding and hold a single competition 
with available funding of $50 million.

    Mr. Mollohan. Give us an example of an award winner in that 
contest.
    Mr. Gallagher. Well, the University of Pittsburgh, 
actually, was one award winner where they are looking at 
developing----
    Mr. Mollohan. Wait a minute, Dr. Gallagher.
    Mr. Gallagher. Yes?
    Mr. Mollohan. Pitt won one of these?
    Mr. Gallagher. They did.
    Mr. Mollohan. Pitt, that is----
    Mr. Gallagher. Pitt won one, yes they did.
    Mr. Mollohan. Oh my God.
    Mr. Gallagher. That is why I stay out of the decisions. I 
have nothing to do with them until----
    Mr. Mollohan. Well, that is because it is a great 
university. What else about that one?
    Mr. Gallagher. Well it is interesting, it is a proposal to 
develop state of the art nanoscience centers.
    Mr. Mollohan. By the way, Pitt beat West Virginia 
University in double overtime in basketball. This is about two 
weeks ago, I would say. We are not forgetting that, yet. So go 
ahead.
    Mr. Gallagher. Yes, it has been fun to watch that because 
they were not that good when I was there. The University of 
Pittsburgh grant is a $15 million grant. Interestingly, there 
was an article in Science middle of last month that highlighted 
some of the projects that have been funded through the NIST 
Construction Grant Program. As I said, since there was no other 
federal program like this that provided, construction funding 
like this, what you often had were situations where very 
thoughtful designs and approaches have been put together, cost 
sharing had been started to be assembled, and yet they simply 
could not get it over to the point where it became a viable 
project. A number of these really have that characteristic and 
the Pitt program is certainly one of those.
    A counterexample is in Maine, I believe, there is a 
facility to look at nanocomposites and energy technology. So 
for example, advanced windmills, and looking at advanced 
materials laboratory and advanced composites to basically 
generate new composites, looking at ocean sensor technology. So 
it is really quite diverse in both energy, environment, 
oceanography, and advanced materials.
    Mr. Mollohan. So it turns out the program you think works? 
It has a----
    Mr. Gallagher. Yes.
    Mr. Mollohan. So you basically support it. Did you make 
that a part of your request to OMB?
    Mr. Gallagher. It was not part of our request to OMB.
    Mr. Mollohan. You did not push it up to OMB?
    Mr. Gallagher. That is correct partly because we were still 
in the middle of the Recovery Act. We had so much that we were 
managing. What I have done is raise to OMB the prospect of 
whether this becomes part of our request in the next cycle. So 
it just, it was just a phasing.
    Mr. Mollohan. So your----
    Mr. Gallagher. But we have raised the question.
    Mr. Mollohan. So you are asking for permission to make it a 
part of your request in the next cycle?
    Mr. Gallagher. Yes, that is correct. So, and one of the 
questions is, does it mean that we look at the attributes of 
that program and, as I said, tighten it to bring it into 
alignment? There was not really time to have those discussions 
as we were starting the new administration.

                             STEM EDUCATION

    Mr. Mollohan. We had several I consider really good 
hearings with regard to education, science and math education, 
STEM education, here earlier in the year before we had the big 
snow. I would just like to hear you talk a little bit about 
STEM education. The budget requests an additional $3.4 million 
for strengthening STEM education through the NIST NRC 
postdoctoral research associates program. Talk about that, and 
how you think that contributes to STEM education, if you will, 
for the Committee, and justify the request?
    Mr. Gallagher. Okay. So the efforts at NIST in STEM are 
interesting to me because it is not generally thought of as a 
primary mission focus of NIST in terms of education. But in 
fact it does play an important role. I tend to think of the 
NIST role in STEM as having two distinct characteristics. One 
is, we are a national laboratory and I believe have an 
obligation, as do all national laboratories, to provide this 
unique experience and make it available to the country as part 
of developing meaningful STEM programs. And so that includes 
postdoctoral programs, of which the FY 2011 request includes an 
increase to bring the numbers back up, actually, to numbers we 
had a number of years ago. This is almost a correction for 
inflation type of request.
    Mr. Mollohan. How close does that get you to where they 
were?
    Mr. Gallagher. Well, we are authorized to carry 120 
positions. We are currently only, if you exclude Recovery Act, 
we really only have about forty that we can hire each year. So 
this increase that we requested adds another twenty-three, I 
believe. So it is still only between sixty and sixty-five total 
new positions each year.
    Mr. Mollohan. What was the high water? That was your 
authorization. What was the most you had on board?
    Mr. Gallagher. Well the highest will be under the Recovery 
Act, where we actually took advantage of that cap. So we funded 
everything under the Recovery Act, so.
    Mr. Mollohan. Okay.
    Mr. Gallagher. But we also have undergraduate programs that 
bring undergraduates, particularly in the summer, for an in 
depth research experience. We bring high school students at 
NIST. We have a weekend program that my own son participates 
in, which works with middle and elementary school kids to give 
them an experience in science. Those are programs that are 
designed basically to bring students to NIST. By the way, we 
also have a program for teachers, where we bring middle school 
teachers in the summer to work with NIST scientists to develop 
materials they can use in the classroom.
    But those programs are bound to have a more local effect. 
In other words, they are going to preferentially leverage what 
is nearby. There are also programs where you have to look what 
can we do at a national level to support STEM. And there are 
two distinct areas. One is in the Baldrige Program. The 
Baldrige is really no longer just a manufacturing program. It 
really is an organizational excellence program. It disseminates 
criteria that represent achieving organizational excellence. 
The two most rapidly growing areas, or sectors, that are using 
Baldrige criteria, and we see this in the awards program, are 
healthcare systems and school systems. And in fact, you know, 
some of the outcomes that some of these school systems have 
been able to achieve by focusing on their organizational 
performance are remarkable. And I think that is something we 
should continue to look at to see whether that program can be 
made more effective, or whether in fact, and this is under 
discussion, we can add a specific STEM component that really 
focuses on----
    Mr. Mollohan. Let me ask you, just hearing your testimony, 
not knowing a lot about this program, which I will follow up, 
and want to know a lot about this program, that you are, that 
NIST is involved in with regard to STEM. It sounds like it is a 
program that is local, it is limited in terms of scope. And it 
has no scaling potential or even intent. And so I ask if what I 
am saying is true, how does that help the nation better 
advance, systemically, STEM education across the country?
    Mr. Gallagher. Well I think, as I said, I think our STEM 
program has these two distinct components. One which is 
experiential, where it is about having a research experience at 
one of our labs. And those are very local. And I----
    Mr. Mollohan. Right, and that, in and of itself that is 
great. And the second?
    Mr. Gallagher. And the second one is really one where you 
can have a national impact, and that would be things like 
Baldrige which really is a national program.
    Mr. Mollohan. How would that have an impact on promoting 
STEM education in the country?
    Mr. Gallagher. Well what it does is, the idea that is being 
looked at in coordination with OSTP, with the Education 
Department, with NSF, is to develop the equivalent excellence 
criteria in STEM that we disseminate as best practices that are 
used by school systems as they develop their----
    Mr. Mollohan. So that you would actually look at all of the 
aspects of education?
    Mr. Gallagher. That is correct.
    Mr. Mollohan. Teacher preparation, materials, local boards 
of education, local superintendents, state education 
authorizations. Do you have such a plan developed and on paper? 
Or----
    Mr. Gallagher. Well, no. what we have right now developed 
is the current Baldrige program which does look holistically at 
school systems, but not specifically in STEM.
    Mr. Mollohan. Uh-huh.
    Mr. Gallagher. So the Baldrige criteria have brought in 
educational experts in terms of how we----
    Mr. Mollohan. There are so many people coming at this from 
so many different directions.
    Mr. Gallagher. Right.
    Mr. Mollohan. I mean, we are going to be looking at NSF and 
our funding in NSF. And now based on your testimony here we are 
going to look and see how NIST fits into all of that. And try 
to be helpful. So any direction you might have for us, or any 
of the collaboration you are conducting with NSF, or Education, 
or anybody else in regard to this, please make us the 
beneficiary of that before we mark up our bill.
    Mr. Gallagher. Will do.
    [The information follows:]

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    Mr. Mollohan. Because we want to help you actually do this, 
maybe get some prototypes out there in the country this year.
    Mr. Gallagher. Well let me, to that end let me mention one 
other area that we are exploring as well, which is technology 
in education. Where we have been asked to work with the 
Education Department in, how do you develop this as standards? 
How do you develop standards so that educational technology is 
meaningful when it is deployed, and covered by federal funding? 
So we are working with OSTP and the Department of Education to 
address the question of how does the Department of Education 
incorporate effective technology standards in their EdTech 
Program?

                    NATIONAL INNOVATION MARKETPLACE

    Mr. Mollohan. Yes. Thank you for that testimony. The 
National Innovation Marketplace, talk to us about that 
initiative. What is it? What role do you play in it? And what 
role are the other components of Commerce going to play in it, 
or other agencies?
    Mr. Gallagher. The National Innovation Marketplace is 
actually a specific service that is offered under this class of 
services that I call Next Generation MEP. This is basically, at 
the current level, a pilot program. It is being developed and 
offered through MEP. And basically what it does is it provides 
to small- and mid-size manufacturers a capability that large 
manufacturers already have, which is to allow them to look 
effectively at the range of technologies that are in the 
marketplace that might either be adopted by them to 
manufacture, in other words opening up new products and 
services, or that they can adopt in their manufacturing 
process. So you have heard about large companies that have gone 
into this market base model where they really go out and put 
ideas and needs that they have and look very broadly at where 
they can find these types of technology solutions. This is an 
approach that a small- and mid-size manufacturer simply cannot 
replicate. The idea is to give them access through this service 
to this marketplace of technology that they can explore.
    It is predominantly an effort through the MEP program as a 
service. It does not, as far as I know, have any distinct 
impact on other Commerce programs except through ITA and if 
there are some trade related aspects to the Innovation 
Marketplace.
    Mr. Mollohan. Was this an initiative stood up by MEP?
    Mr. Gallagher. Yes, it was. It is something that MEP had 
been exploring. You will see that it had some Vice Presidential 
involvement where they were looking and promoting this program 
as well.
    Mr. Mollohan. Yes, he was suggesting $45 million needed to 
expand it to the fifty states, and I think the request is for 
$5 million.
    Mr. Gallagher. Well, the question really becomes one of how 
rapidly you deploy this across the full network. Our approach 
through the increased profile we had for MEP was to start with 
this as a pilot program and to ramp it more gradually. I think 
what was being talked about at that time, which is not 
reflected in the request, was a more dramatic----
    Mr. Mollohan. But my question is, and I am not clear yet, 
was this a program stood up by MEP or adopted out there, stood 
up by somebody else? Or----
    Mr. Gallagher. Oh, this was by MEP.
    Mr. Mollohan. In what year did you do that?
    Mr. Gallagher. I do not recall. It is a fairly young 
program, but I do not recall exactly when it was started. We 
can certainly give you the information on that.
    [The information follows:]

                    National Innovation Marketplace

    The National Innovation Marketplace (NIM) was launched as a pilot 
effort in April 2009. The NIM connects innovation sellers, buyers, 
investors and distributors in all industries through an on-line web-
based tool that enables open innovation and connects manufacturers with 
sources of new technologies. The NIM involves the translation of 
emerging technologies into business applications, market opportunities, 
and the adoption of new products.

    Mr. Mollohan. We will be interested in learning more about 
that. Mr. Wolf.
    Mr. Wolf. Thank you, Mr. Chairman. I had seen figures 
before that I, were triggered when you said STEM, that the 
funding for STEM higher education grants is roughly about $700 
million and only $350 million was used in 2007.
    Mr. Gallagher. At NIST? No, I am sorry, I am not----
    Mr. Wolf. Government wide.
    Mr. Gallagher. Oh, government wide? Thank you.
    Mr. Wolf. And therefore, the execution takes place at 4:00 
tomorrow, I mean, what does that mean?
    Mr. Gallagher. I am not familiar with the numbers. I cannot 
even hazard a guess what that might mean.
    Mr. Wolf. Okay. Would you check and let the Committee know?
    Mr. Gallagher. Sure.
    Mr. Wolf. And by the time things, could you also just give 
my office a call and let me know?
    Mr. Gallagher. Sure.
    Mr. Wolf. Is anybody looking at that? One, do you agree 
with that number, or you just do not know if that number is 
accurate?
    Mr. Gallagher. I just do not know that number, I am sorry.
    Mr. Wolf. The staff person who gave it to me was wrong?
    Mr. Gallagher. I do not want to suggest that, it is 
probably right. But we will look into it.
    [The information follows:]

                             STEM Education

    NIST cannot speak to the experience of other Federal agencies. 
However, of the $11 million allocated to NIST specifically for STEM 
activities in FY 2009 (for the NRC postdoctoral programs and Middle 
School Science Teachers program), $11 million was spent on these 
programs. For the long run, the participation of science mission 
agencies, including NIST, in the NSTC Education Subcommittee, which 
meets monthly to exchange information and ideas, can do much to 
coordinate and complement Federal STEM education programs. The 
Subcommittee is currently addressing education and workforce policy 
issues and research and development efforts that focus on STEM 
education issues at the pre-K-12, undergraduate, graduate, postdoctoral 
and lifelong learning levels, as well as current and projected STEM 
workforce needs, trends and issues. The Subcommittee supports the 
President's STEM education goals, with active involvement in the 
meetings and topics by the Office of Science and Technology Policy.

    Mr. Wolf. If you could. And then if you could make an 
evaluation of why you think that that would be the case?
    Mr. Gallagher. Okay.
    Mr. Wolf. And how you could rectify that? Or if not you, 
but how we could rectify that? If $700 million is appropriated 
in these very difficult times we would hope that $700 million 
would be accessed.
    Mr. Gallagher. Was this in the Recovery Act, or----
    Mr. Wolf. No.
    Mr. Gallagher. No? Okay.
    Mr. Wolf. Everything did not begin and end with the 
Recovery Act.
    Mr. Gallagher. Right, I was just----
    Mr. Wolf. There used to be a Congress, people did things 
before the Recovery Act.
    Mr. Gallagher. Okay.

                 CYBER SECURITY AND INTERAGENCY EFFORTS

    Mr. Wolf. Back to cybersecurity, NIST is just one of the 
players in the interagency efforts. Who are the other players? 
What is NIST's unique role? And is your budget sufficient for 
you to play that role effectively? So, what are the other 
players? Two, what is your unique role? And is your budget 
sufficient?
    Mr. Gallagher. So quickly, it will not be an inclusive 
list, but the main players include NIST, the National Security 
Agency, Department of Defense, Homeland Security, White House.
    Mr. Wolf. Is there a Czar yet?
    Mr. Gallagher. There is. Howard Schmidt, in fact I am 
meeting with him right after we are done here.
    Mr. Wolf. Is he actually called a Czar? I hope they are not 
calling him that.
    Mr. Gallagher. No, they are not calling him a Czar.
    Mr. Wolf. And where is he based? In the National Security 
Council?
    Mr. Gallagher. It is in the National Security, and I 
believe it is co-chaired with the National Economic Council so 
that he is supposed to look at not just the security, but the 
context.
    Mr. Wolf. What is his background? He was with the FBI, was 
he not?
    Mr. Gallagher. I believe so. I do not recall his biography 
off the top of my head. So there is a number of players. The 
unique NIST role is the one defined by FISMA, which is that 
NIST develops the standards. And not just writing the standards 
but the testing infrastructure to make sure that we know how to 
protect federal information systems. And so in that context we 
work closely, that is why NSA and DHS figure very prominently 
in our relationships, because NSA has a similar responsibility 
for the information, the same information for the intelligence 
community agencies as we have for the rest of the federal 
government.
    Mr. Wolf. Do you work closely with them?
    Mr. Gallagher. Yes, we do. And also with the DHS, because 
DHS really has the operational responsibility. Once you have 
these standards in place, the US-CERT system, which was started 
at NIST and it is not at DHS, in terms of how do you monitor 
cybersecurity and look at attacks. That whole role is at DHS, 
and of course that has to inform the standards process. So 
those are, and the White House because these requirements are 
actually disseminated through OMB, through the Chief 
Information Officer at OMB, to the federal agencies. And so we 
work very closely, very actively, through the National Security 
Council and committees, through the CIO Council, through Vivek 
Kundra's office at OMB, and then strong bilateral ties as well 
with these key agencies.

                        CYBER SECURITY INCREASE

    Mr. Wolf. Is the $10 million increase enough to keep pace 
with----
    Mr. Gallagher. Well it is always, you know, one of the 
problems we face when you look at these multiple agencies, the 
NIST role is actually one of the smallest in terms of funding 
and effort. And you might argue when you look at this that it 
should be proportionately bigger so that it can cover that 
space. The way we do this, though, is we make sure that we 
define the role that can be done very well with our current 
funding level. The $10 million increase, as I said, is a 
balance between needing to grow this program pretty 
significantly and not basically doing an irresponsible increase 
where it is too much at once. And that is why we identified 
about $4 million of about $10 million to be through a grant 
program to universities. And I think that represents a good 
balance between expanding to universities some of these 
research activities that are critically important and expanding 
NIST efforts because our current funding level is about $28.9 
million for this activity.
    Mr. Wolf. What top two universities are doing research in 
this area?
    Mr. Gallagher. I would not be able to hazard a guess for 
you right now.
    Mr. Wolf. But you are giving grants?
    Mr. Gallagher. No, we have not done the grants yet. We 
would issue a competitive call for grants with this to one or 
more universities.

                CYBER SECURITY OF U.S. SYSTEMS OVERSEAS

    Mr. Wolf. Do you think there is a sensitivity to 
cybersecurity? My computer was stripped by the Chinese a couple 
of years ago. Seventeen other members of the House, and Foreign 
Affairs Committee. Members are still taking their blackberries 
to China and making telephone calls. And do you think there is 
a sensitivity now to this issue in government that has 
permeated everywhere?
    Mr. Gallagher. I think it is hard not to be sensitized to 
this now, between what we see happening these large scale 
attacks we read about in the newspapers almost every week.
    Mr. Wolf. Do you take your blackberry to China and use it 
in China?
    Mr. Gallagher. Well, it is interesting. I have. But what 
they basically do is they lobotomize it ahead of time so that 
it does not have anything on it. I take it. And if I come back 
then they basically lobotomize it again so that there is 
nothing on it. So I have----
    Mr. Wolf. I am told that may not be totally effective.
    Mr. Gallagher. Well it may not----
    Mr. Wolf. Remember Secretary Gutierrez? His laptop computer 
was compromised in China, Are there guidelines in NIST and in 
the Department of Commerce that tell you that if you are going 
to go to China or certain places----
    Mr. Gallagher. Yes, there are. Yes, there are. And we work 
with the NSA in terms of how we look at those systems and test 
them.
    Mr. Wolf. And so if somebody at the Food and Drug 
Administration is coming over to China they are certainly 
alerted that they have to be careful? There is a system in the 
government that lets everyone know that is going to go to these 
places that----
    Mr. Gallagher. That is my understanding.
    Mr. Wolf. Could you check and tell me what it is?
    Mr. Gallagher. Sure.
    [The information follows:]

                International Travel Security Protocols

    All Federal employees who travel internationally are required to 
complete a Department of Commerce-sponsored Foreign Travel Briefing 
once per year. There is specific information on travel to China within 
this briefing, including specific sensitivities to information 
technology security, as well as attention to measures to ensure 
personal security.

    Mr. Wolf. And how it works? I mean, if somebody in the meat 
inspection, or somebody in the Department of Commerce, how do 
they tell them? How do they alert them? What do they do?
    Mr. Gallagher. I can tell you at NIST that it is basically 
tied into the travel authorization process. So that if you are 
going to travel, and you submit your request, they can see 
where you are going and then there is basically a set of 
procedures that are put in place that you have to meet before 
you are allowed to go and when you complete your travel, 
immediately after, before you can use that technology.

                       CYBER ATTACKS AGAINST NIST

    Mr. Wolf. Has there ever been a cyberattack against NIST?
    Mr. Gallagher. I am sure there has.
    Mr. Wolf. Are you guessing, or are you certain?
    Mr. Gallagher. I would have to check, but I mean there are 
attacks against systems all the time. So I am certain there.
    Mr. Wolf. And most of the attacks come from?
    Mr. Gallagher. I do not know. I do not have that data?
    Mr. Wolf. Would you guess it would be China?
    Mr. Gallagher. It would not be a bad guess.
    Mr. Wolf. It is China and Russia. We all know. Why would 
you be reluctant just to say that? Could you tell us?
    Mr. Gallagher. Well I think when we are looking at the 
firewall data at the agency we are not seeing the country of 
origin, we are basically seeing the anomalous behavior that is 
attempting to gain access. So we see the evidence of an attack 
but at that level we are not seeing origin. Whereas other 
operational agencies are looking more systematically, US-CERT 
would be looking at----
    Mr. Wolf. But would the FBI not tell you that as you are 
doing this, ``This is what the process is. This is how they do 
it in China. This is what the Russia organized crime is 
doing.'' So you should be looking. I mean, do you not have to 
know all of that to be involved in----
    Mr. Gallagher. I do not know if system administrators need 
to have that type of information as they are responding to the 
actual attacks themselves.
    Mr. Wolf. But would it not give you a level of 
sophistication coming from X or Y or Z?
    Mr. Gallagher. It might, but I think----
    Mr. Wolf. Every cyberattack is not the same.
    Mr. Gallagher. I think the information comes in that way 
through what the vulnerabilities are. So we understand what 
different parts of the world do in terms of compromising 
systems and then the idea is through these vulnerability 
databases designing appropriate controls and fixes to----
    Mr. Wolf. Do you get a list of all the cyberattacks, since 
you have been giving this job of coming up with the technology 
and standards?
    Mr. Gallagher. We maintain a vulnerability database, that 
is correct.
    Mr. Wolf. Of every federal agency that is hit?
    Mr. Gallagher. I do not know, I do not want to misrepresent 
what is on that list. But it is the comprehensive vulnerability 
database that is used.
    Mr. Wolf. And who collects that?
    Mr. Gallagher. It is collected by NIST. But I think we, let 
me check and give you the details on how that program works.
    [The information follows:]

                    National Vulnerability Database

    The National Vulnerability Database (NVD) is the U.S. government 
repository of standards-based vulnerability management data for 
publicly known cyber vulnerabilities. This data, which is freely 
available to the public, enables automation of vulnerability 
management, security measurement, and security compliance verification. 
NVD includes databases of security checklists, security related 
software flaws, security misconfigurations, product names, and 
vulnerability impact metrics. NVD is a product of the NIST Computer 
Security Division and is sponsored by DHS's National Cyber Security 
Division. All of the software flaw vulnerabilities included in NVD are 
first identified in the Common Vulnerabilities and Exposures (CVE) 
dictionary. The CVE dictionary is compiled by cybersecurity analysts at 
The MITRE Corporation. As soon as the CVE analysts identify a new 
vulnerability, they document its basic characteristics and publish the 
information. The public and NIST's NVD get this information at the same 
time. NIST cybersecurity analysts perform additional analysis that 
provides a severity rating for each vulnerability, and these ratings 
are added to NVD to help federal agencies and other organizations 
understand the relative importance of each vulnerability so they can 
respond appropriately to prevent attacks.

                              TIP PROGRAM

    Mr. Wolf. The last question, you are requesting a $10 
million increase for the TIP program, that took over from the 
ATP program which phased out in 2008. How would you assess its 
performance? And is this one of your top priorities?
    Mr. Gallagher. The TIP program is young. It was created in 
2007. It is different from the ATP program in a couple of key 
ways, including who can participate. Universities are allowed 
to take lead roles. It also changed some of the evaluation 
criteria. Some of the business criteria that were looked at in 
the ATP program are no longer in the TIP program. My view on 
the TIP program has been that from the context of an innovation 
agenda where you are looking at not only R & D performance but 
how effective we are at turning this into commercial activity, 
there are a lot of good things to be said about TIP because it 
does bring together these cross-disciplinary teams of 
participants from industry, university, national labs, to work 
on focused problems.
    That being said, I do not believe that at this level of 
funding this is going to have an enormous national impact. And 
I think, the way I have been viewing this is that you have to 
consider this as a, as really a pilot and to see whether it is 
meaningful that we continue. So we are looking very carefully, 
what is the right way to measure whether this program is going 
to make the kind of impacts that we think are needed? And then 
take a hard look at it and decide whether it is worth 
continuing.
    Mr. Wolf. Thank you very much.
    Mr. Gallagher. Thank you very much.
    Mr. Wolf. Thank you, Mr. Chair.
    Mr. Mollohan. Thank you, Mr. Wolf. Let me follow up on the 
TIP program, because that is where I was going to end actually. 
It has been around a couple of years. If it is a pilot program, 
can you not assess it at this point?
    Mr. Gallagher. I do not believe so, The problem with 
commercialization is that you would like to assess it when you 
see whether the technology finally reached the market. And this 
is pre-competitive. These grants are focused on the pre-
competitive activity. So we are going to have to look at 
leading indicators. The first awards really went in early 2008. 
They are three to five year grants. So we are sort of entering 
the period now where we are beginning to see from the first 
award recipients what types of technologies and what types of 
outcomes they have been able to have in those programs. So I do 
not, I think we are at, now or the very near future is the time 
to take a look. I am not trying to push this down the road. I 
do not want to say that we already have all the information and 
we know because I do not think that is true.
    Mr. Mollohan. At its best, what could the program do as a 
prototype at this point? What would be the measurement that 
would say, ``Wow, this program is really worthwhile.''
    Dr. Gallagher. Well, I think it is a high risk, high pay 
off program. So the question is, did you take some big risks 
but have you got some big wins? Because that is what a program 
like that is designed to do. So I think we have to look at the 
technologies that are coming out of these proposals.
    Mr. Mollohan. Could you give us an example?
    Mr. Gallagher. Well in the first call for----
    Mr. Mollohan. Of the high risk, high reward?
    Mr. Gallagher. Well I think in the first call the focus was 
on developing advanced sensor technology to look at physical 
infrastructure, our roads and bridges. Clearly a national need. 
We have an aging infrastructure. And the question was, could 
you create a game changing technology that would allow you to 
detect incipient failure or maintenance problems in things like 
bridge or road surfaces before they failed? And can you do it 
in a very cost effective way? And some of the proposals were 
very clever, where you would seed a bridge with sensors and 
basically the vehicles driving over the bridge would be able to 
talk to the sensors and pick up the data or other type of 
remote sensing technologies that would detect this.
    This is not the kind of program where you are going to see 
a commercial home run in every proposal. But if we were to see 
something that was clearly identifying the types of 
technologies that, if it were commercialized, would make a big 
difference, that is really what this program was designed to 
do. Big, disruptive, high pay off, technology wins. And as I 
said, we are not going to be looking at this when it has gotten 
to the commercialization point. We are going to have to do it 
from a technology side where we take a look at these 
technologies that are being developed and then make a decision 
whether we think it is having that type of impact. And that is 
what the TIP program folks are looking at now, is how will we 
take a look at this?
    We have also been working with the authorization committees 
on the same question and I think we will be working with you on 
the same question, too, as we look at this program.
    Mr. Mollohan. Well, we want to follow up on that. Frank, do 
you have any more questions?
    Mr. Wolf. No.
    Mr. Mollohan. Thank you. Doctor, thank you very much for 
your testimony here today.
    Mr. Gallagher. Thank you.
    Mr. Mollohan. I learned a lot and appreciate your service. 
Thank you.
    Mr. Gallagher. I appreciate it. Thank you.
    Mr. Mollohan. Thank you.

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                                         Wednesday, March 10, 2010.

                  ECONOMIC DEVELOPMENT ADMINISTRATION

                                WITNESS

JOHN FERNANDEZ, ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC 
    DEVELOPMENT

                            Opening Remarks

    Mr. Mollohan. Good morning. Welcome, Mr. Fernandez. The 
hearing is called to order. We will hear testimony from 
Assistant Secretary of Commerce for Economic Development, John 
Fernandez, for the first time since his appointment in 
September, 2009. We look forward to working with you, John.
    The fiscal year 2011 request for the Economic Development 
Administration is $286.2 million, a 2.3 percent decrease from 
fiscal year 2010. This includes a $2.1 million increase in 
salaries and expenses, and a $9 million decrease in economic 
development assistance programs. The budget proposes 
significant changes within EDA programs, including an increase 
of $86 million in the Economic Adjustment Assistance Program, a 
corresponding decrease of $90.5 million in Public Works, and a 
decrease of $8.5 million in the global climate change 
mitigation initiative fund.
    EDA's mission is to create sustainable jobs. There is no 
other agency in the federal government with quite the same 
focus. From fiscal year 2004 to fiscal year 2008, EDA helped 
American communities create 350,000 higher skill, higher wage 
jobs at an average cost of $2,500 per job. EDA is very good at 
its mission, even with a reduced staffing level.
    In fiscal year 2008 Congress appropriated $500 million in 
disaster funding for EDA. In fiscal year 2009 Congress 
appropriated $150 million in American Recovery and Reinvestment 
Act funding for EDA, 98 percent of which is obligated. While 
there are some concerns with respect to the disaster funding, 
which we will discuss today, clearly EDA is filling a 
significant need in very short time frames with funding 
provided above the annual appropriation of close to $300 
million. That makes it all the more puzzling that the 
administration has proposed a reduction for EDA in fiscal year 
2011.
    In fact, instead of adding critical funding the 
administration wants to move funding from the Public Works 
program to the Economic Adjustment Assistance program. The 
rationale appears to be one of flexibility, but the net effect 
is a reduction in Public Works infrastructure project grants. 
Given the critical role these projects play in communities, and 
the fact that the demand for these projects remains constant, 
EDA should be at least maintaining, if not increasing, the 
Public Works funding level.
    This is not to value Public Works projects over EAA 
projects. According to EDA grantees that testified before this 
Subcommittee in February the two programs should not be in 
competition with each other for funding; both are vital to the 
success of regional economies. Indeed, rather than debating the 
relative merits of each program the administration and Congress 
can agree that helping communities overcome the recent economic 
downturn is exactly what EDA is designed to do and together 
should provide the funding level needed to do it.
    Mr. Mollohan. Thank you for coming, Mr. Fernandez. And 
following Mr. Wolf's opening statement we will ask you to 
submit your written statement for the record and proceed with 
your oral testimony. Mr. Wolf.

                            Opening Remarks

    Mr. Wolf. Thank you, Mr. Chairman. I want to welcome you to 
the Committee and look forward to hearing your testimony. I 
yield back, thanks.
    Mr. Mollohan. Thank you, Mr. Wolf. Mr. Fernandez.

           Opening Statement by Assistant Secretary Fernandez

    Mr. Fernandez. All right, thank you very much Mr. Chairman, 
and Ranking Member Wolf, members of the Committee. I have a 
very brief opening statement, and then I will really look 
forward to the exchange this morning.
    As you know, I have been involved in economic development 
for probably twenty years now at the street level. As a mayor, 
as a private investor, really working at that grass roots level 
to try and translate economic strategies into meaningful 
investments to grow, in my case, Bloomington's economy. Having 
that street level experience I can tell you that I have seen 
the good and the bad of the impacts of a changing, very 
competitive global economy. And there is a lot of things I do 
not know. But one thing I think I can say with absolutely 
certainty is that the world has changed. And as the only 
federal agency with economic development as our sole mission, 
EDA is poised to provide leadership with forward looking job 
creation strategies built around collaboration and innovation.
    EDA is a central part of the Obama administration's 
national strategy to build a stronger foundation for long term 
job creation and prosperity for American families. Our budget 
proposal for fiscal year 2011 reflects the importance of 
creating competitive, high performing, regional economies as 
the building blocks for that sustainable growth. As you noted, 
the President's budget proposal includes $246 million for our 
economic development investment programs. A key component of 
that long term strategy is to build these regional innovation 
clusters. This is part of the administration's place-based 
initiatives. In our budget we target $75 million towards 
planning and matching grants within our EDA system to help 
create these regional innovation clusters that can leverage the 
competitive strengths of various communities.
    And while it is not a specific budgetary program, the 
regional innovation clusters represents a really important 
framework, strategic framework, for how we target our overall 
programmatic investments. Consistent with our fiscal year 2010 
budget, EDA plans to continue to fully fund its network of 
economic development districts, university centers, and our 
research agenda. As you noted, we are proposing $16.5 million 
for our global climate change mitigation fund that will help 
EDA enhance our contribution to the expanding green economy.
    As I stated earlier, the world really has changed. And it 
is critically important, in my view, that EDA's limited 
resources are allocated within our programs in a way that align 
our investments with the emerging needs of the communities we 
serve. This is why in fiscal year 2011 our proposal shifts the 
majority of our program resources to the economic adjustment 
assistance program. We know that Public Works investments play 
a very important role in leveraging private investment and job 
creation. Yet we also know that in today's economic development 
challenges we need more flexibility, and the requirements of 
our communities go beyond just Public Works. Communities need 
more flexibility to develop strategic responses to the changing 
economy. These strategies include a broad mix of investments 
that address access to capital issues, work force training, 
retraining, systems for accelerating the commercialization of 
research and development, and establishing a strong 
entrepreneurial network. Together all of these elements, along 
with Public Works, help build the kind of ecosystem that is 
necessary today to support an innovation oriented, sustainable 
economic development strategy.
    So Mr. Chairman, and Ranking Member Wolf, members of the 
Committee, I certainly appreciate the opportunity to have a 
discussion today about our budget proposal. I firmly believe 
that EDA can continue to be a driver for growth in distressed 
areas across the country. And we certainly look forward to 
continuing our work with the Subcommittee and the Congress to 
ensure that these important programs and initiatives are 
resourced appropriately and implemented properly. So I thank 
you for your time today and I look forward to answering your 
questions.
    [The written statement of Assistant Secretary for Economic 
Development, John Fernandez, follows:]

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                             REORGANIZATION

    Mr. Mollohan. Thank you, Mr. Fernandez. Mr. Fernandez, last 
week the Committee was notified of a reorganization of EDA, and 
you spoke to it in your testimony. Elaborate on the purpose of 
this reorganization for the Committee?
    Mr. Fernandez. Yes. The reorg is designed, essentially, to 
streamline our programs, make it clear in terms of some of the 
responsibilities within EDA. And most importantly, to put a 
focus on particularly the Office of Innovation and 
Entrepreneurship as a way to focus EDA's investments around 
this critically important agency item for the Obama 
administration and the Department of Commerce. It is a budget 
neutral proposal, and we think it really helps align our 
organization properly for the challenges we face today.
    Mr. Mollohan. Elaborate on it. Streamline your programs? 
How does it do that?
    Mr. Fernandez. Well, as part of my work, Mr. Chairman, when 
I first came on board, I reached out to the EDA staff. Not just 
in Washington, but across the regional agency offices. And I 
asked them, what are some of the things we need to do to better 
serve their needs as well as headquarters' needs? And one of 
the top responses we got was the need to rebuild capacity 
within our Office of Regional Affairs, particularly around the 
subject matter expertise for our programs. So we have proposed 
within our reorg adding positions that are programs experts 
that can help serve in policy development but also guidance and 
implementation through, the programs we administer out in our 
regional offices.
    We have also cleaned up some of the minor organizational 
structure in regard to our external affairs. The way the 
organization is currently structured that office was referred 
to as the External Affairs and Executive Secretariat. And for 
most of our stakeholders they have no idea what that means. But 
when you refer to that division, which includes our legislative 
affairs, public affairs, congressional relations, External 
Affairs just is a cleaner structure for that.
    We also modified some of the structure within our Finance 
and Administration Office that I think makes it much clearer in 
terms of their programmatic focus.
    Mr. Mollohan. What does this reorganization mean to 
regional offices versus the home office?
    Mr. Fernandez. Most importantly, as I noted, it means that 
we are going to have better capacity to help them do their 
jobs.
    Mr. Mollohan. Well, by that I mean what is the flow of 
personnel? Is there any dramatic flow of personnel from 
headquarters out to the field, from the field to headquarters, 
an expansion of the field versus the headquarters?
    Mr. Fernandez. A good clarification is that, if you looked 
at the staffing levels of EDA since, really, the year 2000 we 
went, in total, from 255 employees to 175. And those reductions 
were felt within the headquarters offices as well as our 
regional offices. With the support that we received with the 
2010 budget, for which we are very grateful, we have additional 
resources now to try and rebuild the capacity of the agency. 
And as we are deploying those resources, we are doing a mix of 
investments in staffing in the Washington office to build that 
programmatic expertise that our regional offices have asked 
for. But also adding staff in the field offices as well. So I 
think the split is essentially twenty/eighteen, twenty here and 
eighteen in our regional offices.

                  ECONOMIC DEVELOPMENT REPRESENTATIVES

    Mr. Mollohan. The trend toward cutting the regional staff 
had dramatic impact in my state. As a matter of fact, we lost a 
state EDA representative. In the bill last year we spoke to 
that. Where are you in addressing additional personnel at the 
state level across the country?
    Mr. Fernandez. What we have done is we went to the regional 
directors and said, ``Here is the additional resources we 
believe are available. Here is what we think it means in terms 
of total full time equivalents. You tell us how you think you 
can best deploy them, and what you need the most.'' So most of 
those positions will be in what we call economic development 
representatives, or econ development specialists. It is really 
focused on the outreach that we provide within the regions and 
the states that each office serves.
    I might note that an important body of work that is going 
on right now within the agency is centered around how we do our 
business in terms of the process improvements. And that is 
being led by the leadership in our regional offices. And as 
part of that process we hope we can streamline, add efficiency, 
and hopefully be able to deploy even more resources towards 
that outreach function, which is critically important.
    In the budget there was language about exploring adding 
EDRs, if you will, to each state. We have analyzed what that 
would mean budgetarily. It would add approximately $4.4 
million, maybe $4.1 million, annually to our staff 
requirements. The up front costs would include a couple more 
millions dollars in terms of office set up, etcetera. But the 
way we are structured now is, we think, appropriate in terms of 
rather than trying to create an office in all fifty states, 
having these regional teams that can provide a broader range of 
services than one individual might be able to do in a 
particular state. And it is that team approach that we think 
provides a broader, better service.
    Mr. Mollohan. What kind of feedback are you getting, if any 
yet, on your team approach versus having a representative in, 
at least one in every state?
    Mr. Fernandez. Well, most of what I hear from stakeholders 
has to do with resources. I think we have received good 
feedback in terms of level of service. One of the challenges I 
think would occur, if you deployed a system where you would 
have representatives in every single state, or an office in 
every single state, that structure would not really align well 
with the resources we have. You would, I think, create a lot of 
expectation management issues. It is hard to justify having one 
person in one state that might get a grant one year, they may 
not the next year. So by having these teams we can really 
deploy a broader system, I think, to elevate the services that 
we are able to provide.
    Mr. Mollohan. I really did not understand what you just 
said. It would create an expectation, one person in one state 
getting a grant, and with the team----
    Mr. Fernandez. Well----
    Mr. Mollohan. What were you saying?
    Mr. Fernandez. Let me say it a different way. The costs 
associated with having a stand alone office with a person 
serving an entire state, the programmatic resources behind that 
just are not there. I mean, if we were in 1975 and EDA's budget 
was $6 billion, then that kind of system might make more sense. 
So I think aligning the organization structure to fit with the 
programmatic resources we have requires us to think about how 
we serve regions not individual states.
    Mr. Mollohan. Well, you are operating within the realities 
of a budget and I appreciate that. On the other hand, not 
having access to an EDR can be really difficult in getting 
advice and counsel to a state. States are very large entities. 
Mr. Wolf.

                            JOB REPATRIATION

    Mr. Wolf. Thank you, Mr. Chairman. Let me try to see if we 
can get you to agree to do something here. Maybe we could do it 
in Virginia and in West Virginia, and Pennsylvania, and Texas, 
if that were the case. Although Mr. Schiff, his district is 
very affluent and I do not think you really operate too much 
there, nor do you in my district, actually, too much. So I am 
thinking more in terms of the country than I am about my 
district. And I think, the other day I asked the Secretary 
about a repatriation program whereby we would repatriate jobs 
from other countries. Right now there is competition, and you 
are from Indiana; Elkhart, Indiana has an unemployment rate of 
what?
    Mr. Fernandez. Too high.
    Mr. Wolf. Too high. I even saw an article the other day 
that that program Feed the Children, which I have been, I have 
seen in African villages, was in Elkhart, Indiana giving out 
food. And so if we could repatriate jobs from other countries 
of American companies, and I asked the Secretary about it the 
other day. He had someone call, and I am not going to say who, 
and basically the answer was that the Department is not doing 
anything with regard to this. And I would like to see if we 
could get the administration to put together a team and contact 
and look at the top twenty-five companies, U.S. companies, not 
foreign companies but American companies, that are doing 
business in China, in India, in, such as call centers, in 
Bangladesh and Mexico, and put together a team, or maybe work 
with my Governor, and none of the jobs would come to my 
district, I understand that. But work with two Democratic 
governors and two Republican governors, because if you do it 
the whole country wide it gets dissipated. And see if we can 
try to repatriate. Ask some of these CEOs to bring back jobs 
that have left this country. American companies, because of 
whatever reason, have relocated.
    For instance, there was a company in Virginia, I spoke to 
them. They have repatriated a call center back from India. They 
wanted to be, the people were willing to work at a lower salary 
living down in the Blacksburg area. Perhaps their family is 
from Blacksburg, perhaps they went to Virginia Tech, perhaps 
they like hunting and fishing and do not want to live in a 
metropolitan area. But they were very pleased to be able to 
take what they had in India, move it back to the United States, 
pay a good salary. Maybe not as high as it would be if they 
were in downtown New York City, or downtown Washington.
    And so what I would like to ask you to do, if you could 
maybe take the Chairman's state of West Virginia. What is the 
unemployment rate in West Virginia?
    Mr. Mollohan. In northern West Virginia we are doing better 
than the nation.
    Mr. Wolf. Well, wherever it be.
    Mr. Fattah. We still need jobs, though.
    Mr. Wolf. It is jobs. Well I go back, I went back to my old 
neighborhood, and Mr. Fattah will know it. It is in southwest 
Philadelphia. When you take the train from Washington to New 
York you go right by my high school. We had the largest General 
Electric factory in the country, I believe it was, called the 
switch gear division. It is gone. It is at 70th and Elmwood, 
went to 67th. It is gone. It is over. It is an empty field now, 
and the tumbleweeds just blow. Nothing is there. And the old 
neighborhood is boarded up.
    And if you have ever been to Trenton, New Jersey, it is the 
capital of New Jersey. There is a bridge that goes from Trenton 
over to Pennsylvania that has a sign that says, ``Trenton 
makes, the world takes.'' Trenton is not making anything 
anymore. So what I would like to see us, rather than us just 
having a general question about, you know, you are going to go 
and look, I would like to ask you, John R. Fernandez, on behalf 
of this administration, to work with this Committee and 
perhaps, Mr. Rendell is a Democrat, the Democratic Governor, 
and find two Republican governors, Bob McDonnell from Virginia 
one of them, to see about repatriating jobs, bringing them back 
from other countries. I mean, that is low hanging fruit.
    In Martinsville, Virginia, which is not in my congressional 
district, the unemployment rate is 20 percent, 20 percent. 
There are many people there who would love to be in a call 
center, who would love to do these things. And so could I ask 
you officially if you could head up, and I know I am pushing a 
little bit, but to head up a program whereby working with some 
members up here you will contact the top twenty-five companies, 
so it will take a little bit of research. You are going to have 
to find companies. Intel is in India, Intel is in China. So 
Intel would be one, and twenty-four other companies that are 
American companies, that want to do business, love America, but 
for some reason have put their business outside as they have 
expanded. To give them an opportunity to do something to 
repatriate, to do a patriotic thing. And I think now American 
companies would like to return home. And to do it on an 
incentive basis rather than to say, ``If you do not do this we 
are going to attack you, condemn, and we are going to rip you 
apart.'' But put some incentives out and see if we could pick 
maybe four states that are in deep need and see if we could 
encourage, put together a team. And I think you would have to 
literally go around and meet with the twenty-five CEOs once we 
found out where their locations were. But to bring those jobs 
back to the United States, what do you think?
    And when I spoke to one of the people, and I am not going 
to say who, the other day, the Secretary had the person call 
me. Frankly, the administration is not doing anything in this 
area. And the previous administration did not do anything in 
this area. It is kind of a new concept, a new idea. Now, there 
may be ways that the Congress could give, later on give tax 
credits, or benefits, or something, or maybe the state could 
pass a law whereby there would be no taxation for five years, 
or something, to give an incentive. Or maybe a locality would, 
say Bloomington would say, ``We are going to give you free 
space.'' Or, ``We are going to give you some land that the EDA 
has that you can develop a call center.'' But could we actually 
do this to see if we could create some fundamental jobs so that 
Americans could have jobs, but yet not do it in a retaliatory 
method but in a positive, and incentive method? Does that make 
sense to you? Or----
    Mr. Fernandez. I can say a couple of things about that. 
First of all, we are working with some of the staff on the 
Senate side as well as within our Oversight Committee for 
reauthorization. And specifically there is a lot of discussion 
going on around the notion of onshoring, and looking at how we 
may incorporate an initiative within EDA's reauthorization to 
address the very issues you are raising. The proposal that was 
made by Senator Warner, and I believe it is----
    Mr. Wolf. Mark? Mark Warner from my state?
    Mr. Fernandez. Yes. Some of the language from his onshoring 
bill has been included in the reauthorization legislation that 
is working its way through the Senate. And in that legislation 
it creates an opportunity for the EDA to be a real partner with 
states and localities as they try and repatriate or recreate 
those technology jobs, manufacturing jobs in the very areas 
that you are discussing.
    Mr. Wolf. Well I think Senator Warner was responsible----
    Mr. Fernandez. He was.
    Mr. Wolf [continuing]. For bringing this company back to 
the State of Virginia from I believe it was India, if my memory 
is correct.
    Mr. Fernandez. And I can also make the point----
    Mr. Wolf. But could we do it, could you do a pilot now? 
Before we wait, I mean when is the reauthorization, and God 
bless it, and I think it is good, and I will talk to the 
Senator's office about this. But could we not, since Mark 
Warner has taken the leadership, could we not do something that 
you all go back to the Secretary and say, ``Here is an 
opportunity to create some jobs.'' You know, ``The Committee 
asked, I would like this responsibility.'' You were a mayor, 
you were a political official. You put together a team and 
maybe pick not the top twenty-five, the top five companies to 
do an inventory, American companies that are abroad, that are 
doing jobs that could be repatriated. So while we are waiting 
for the authorization, do you expect that to pass by the end of 
this year?
    Mr. Fernandez. I can only express my hope that it will.
    Mr. Wolf. Yeah but see, I notice that, that is good, but we 
cannot wait.
    Mr. Fernandez. And just to be clear----
    Mr. Wolf. I mean if you are out of a job, I mean, the 
country needs to create jobs. We need to create real jobs, 
where people get up in the morning, and go to work, and do 
things that make a difference for the country. And you all 
should be excited about it because the unemployment rate is 
increasing, it is not decreasing. And we are in record debt. 
Anne Applebaum did a piece the other day for the Washington 
Post saying we are going to be Greece. We are, if you want to 
see the future, it is Greece. And so if we could get you to 
commit today, this is a friendly question, that you are going 
to do this, or you will go back and talk to Secretary Locke to 
see, and maybe we could pick the states here, West Virginia, 
and Pennsylvania, and Virginia, and Texas. But poor areas of, I 
mean, we are not going to bring this to Houston because Houston 
is big, and glittery, and vibrant.
    But areas where, there are some communities, when I drive 
up to go to a football game at Penn State I go through little 
towns that are empty, they are boarded up. The steel mills have 
gone. The factories have closed down. Have you ever taken the 
train from Washington to New York?
    Mr. Fernandez. No.
    Mr. Wolf. If you ever do, get on the train and do not read 
your book. Just look to the right and the left. The factories 
are closed. The windows are broken. The graffiti is all over 
the walls. The trash is all, weeds are growing out of the 
buildings. This is the infrastructure. This would go through, I 
think, Mr. Fattah's district. And I think we have an 
opportunity in something that is not a partisan thing to see if 
we could refurbish, because those people that live in those 
areas, they want jobs. They want to get up in the morning. They 
want to go out and do something.
    So if we could get you to commit that you will see if you 
can get the Secretary to designate you as the person that will 
do this, to see if we could begin to repatriate now, and then 
in anticipation of the reauthorization. Could we get you? Or 
could you look at that and tell us if you----
    Mr. Fernandez. We are always interested in working on good 
ideas.
    Mr. Wolf. It is a good idea.
    Mr. Fernandez. And we are certainly willing to continue the 
dialogue and look for opportunities----
    Mr. Wolf. I do not want a dialogue. I----
    Mr. Fernandez. No, I understand. But I----
    Mr. Wolf [continuing]. Bad word. I just want to create 
jobs.
    Mr. Fernandez. We all do.
    Mr. Wolf. This country is sinking. We are sinking. We are 
sinking. We have $37 trillion of debt. We owe money to the 
Chinese. The Chinese are, are you Catholic? The Chinese have 
thirty-four Catholic bishops in jail. Are you Protestant? The 
Chinese have hundreds of Protestant pastors in jail. Are you 
Buddhist? The Chinese have plundered Tibet. Are you Muslim? 
They are persecuting the Uighurs. They are compromising this 
nation. So I do not want a dialogue. If it is a dialogue I 
withdraw the question. I just want to know, yes or no, will you 
take this back to the Secretary to ask to do this? Or if it is 
a discussion, forget it. I just want to know, will you go back 
and talk to him?
    Mr. Fernandez. I can put it on the table. I think there are 
many ways to address these issues, and we are working very hard 
on a daily basis to create jobs.
    Mr. Wolf. The jobs----
    Mr. Fernandez. I was in Martinsville two weeks ago. I 
understand. I may not have taken a train to New York, but I 
have been in many parts of the country, my own backyard and 
elsewhere, where I see the devastation, and I share that.
    Mr. Wolf. And therefore, and therefore what will we do? I 
mean, I, this is, I wanted to, will you then to go back to the 
Secretary and work with the governors?
    Mr. Fernandez. I can certainly talk to him about this 
proposal, absolutely.
    Mr. Wolf. Okay. And if you could let us know. And maybe fit 
the Governor of West Virginia, and the Governor of 
Pennsylvania, and the Governor of Virginia, I do not know, the 
Governor of Texas. But I know my State would like to 
participate and frankly these jobs are not going to go to my 
area. But I am tired of just seeing us lose all these jobs, and 
where Americans could do the jobs. And we could have a 
renaissance in this nation. And quite frankly, with all due 
respect, the previous administration did not do it, but you 
guys are not creating new jobs. A lot of that stuff went out, 
and it is just spend, spend. I am talking about low hanging 
fruit that we could get these jobs, bring them back. They could 
go to a Martinsville, they could go to West Virginia, they 
could go to parts of Pennsylvania, or they could go, and we 
could do something. Or at least we would know that these 
companies are not going to come back, or they will, and then 
see if there is an incentive package that you all would be able 
to give, or maybe we could do something in the tax code, to 
kind of give these companies an opportunity. So if you could do 
that and let the Committee know I would appreciate it.
    Mr. Fernandez. Sure.
    Mr. Wolf. Thank you.
    Mr. Mollohan. Thank you. Mr. Fattah.
    Mr. Fattah. Thank you, Mr. Chairman. And Mr. Mayor, it is 
good to see you.
    Mr. Fernandez. Thank you, I am glad to be here.
    Mr. Fattah. And in a new role, and I want to welcome you. I 
think you are doing an extraordinary job. And I share the 
passion of my colleague from Virginia in that, and, obviously 
the administration does. Because when you all took office, we 
were losing 700,000, 800,000 jobs a month. We have seen a major 
turnaround in the economy. Yesterday a year ago the stock 
market was at its lowest, 6,000. We have seen a major increase. 
But there is more work to be done, and I was happy to see the 
Senate act yesterday on a jobs initiative, but we have a lot of 
work to do. I think that the passion you hear from my colleague 
is shared. That as long as we have a significant number of 
Americans unemployed, as the President said, we have to keep 
working. It is good to see that the unemployment rate is 
stabilized, and starting this month we are going to be in the 
plus side of jobs, close to 100,000 each month for the rest of 
the year. But it is going to take us a while to turn this 
economy around from where we were. And the almost doubling of 
the national debt, when the President took office, when he was 
sworn in, the national debt was at around $11 trillion and 
growing, with a $1.2 trillion deficit.
    The country was headed off a cliff. So your team and this 
administration has done a good job. And I do not think this is 
a partisan issue that has been raised by my colleague. I think 
that there is room for us to work to try to bring jobs that 
have left the country back to America. Americans do create 
jobs. Every time we buy a car, you know, that is putting people 
to work. The question is, if we are going to buy cars that are 
made somewhere else, if we are going to buy a TV, or a washer 
and dryer, and it is made somewhere else then it creates a 
dynamic in which we are shifting our wealth other places. And 
in Indiana you built a great reputation for building these RVs 
that I love. And in my home city we have some 1,300 
manufacturers today who are doing an extraordinary job. We have 
Penn Fish and Tackle, they make saltwater fishing reels. They 
have no competitor in the U.S. They have one competitor 
overseas. We have CARDONE Industries with 3,000 employees 
making auto parts. And they have only one other competitor and 
they are in Mexico. But there are a lot of pressures on 
manufacturing jobs.
    So first of all I want to join with my colleague. I would 
be glad and interested, no matter what states are selected, to 
see whether somewhere in the Commerce Department, whether it is 
in EDA or somewhere else, if there is some effort to encourage 
American companies to have these jobs, all other things being 
equal, here. I think that American businesses have a lot of 
challenges. I mean, if they have a market in some other place, 
they have a responsibility to be a good corporate citizen 
there. But if they are selling 99 percent of their products in 
America, but yet making them somewhere else to improve their 
profit line, then I think that there is something off base 
about their calculation about where their long term interests 
are. So, I mean, I think we have to kind of walk through this 
and work on it.

                            PLANNING GRANTS

    But I want to ask you about EDA. Now so you had about a 1.7 
in applications. You did almost, close to $600 million in 
awards if you look at the whole package. But it seems as though 
the best place where you have almost funded everything that 
came in the door were the planning grants, well over some 400 
planning grants. And I would be interested if you could make 
some comment about the range of diversity, and give us some 
examples, of the kinds of planning awards that the Department 
made to help communities kind of figure out what their niches 
are and how they can exploit them to retain and create new 
jobs.
    Mr. Fernandez. Yes, absolutely. It is a good question 
because it blends into a broader discussion we are going to 
have today. The planning program within EDA's budget, the vast 
majority of those resources fund our network of economic 
development districts. Currently we have 383 districts that we 
fund throughout the country. We have pending, I think, three 
more applications for additional districts. These serve as 
regional, on the ground, economic development partners for our 
agency. That is one of the reasons why EDA works so well, we 
work through and with, as partners, a broad national network of 
economic development organizations.
    When you look at the requests for planning beyond the 
ongoing operational support for the economic development 
districts, it is not a large amount of money.
    Mr. Fattah. Mm-hmm.
    Mr. Fernandez. Many of our strategic economic development 
strategies are developed through our economic adjustment 
program. So for example, a very good example, is in Lorain 
County, Ohio where it has been in the news, a documentary about 
the last truck, that was related to that community.
    Mr. Wolf. The last what?
    Mr. Fernandez. Last truck. They had the plant closing. 
There were the changes at the Wright-Patterson Air Force Base.
    Mr. Fattah. Mm-hmm.
    Mr. Fernandez. And consequently, there was a very broad 
regional impact of the changes in the economy. EDA funded a 
strategic planning effort that is very regional. They just 
rolled out the results of that planning. And what they did is 
they took that step backwards, looked at the assets they have 
in the region in terms of workforce, in terms of kinds of 
businesses, and thought carefully about the commonalities there 
that we can position the region to go after in terms of new 
industries. And they identified aviation and a couple of other 
sectors that I do not recall off the top of my head. But that 
is a very good example of, I think, the unique role that EDA 
plays in working with communities; thinking through these 
strategic changes that they need to make to be competitive in a 
global economy.
    Mr. Fattah. Now you funded, outside of the planning area, 
you funded a $900,000 project in Danville, Virginia to look 
at----
    Mr. Fernandez. Yes.
    Mr. Fattah [continuing]. Is it technology-based 
enterprises?
    Mr. Fernandez. Yes, there is a commercialization center 
that we helped initiate, invest in, in that region that helps 
commercialize technology and ideas, and spin those out into new 
businesses to create jobs. And truly, the source of almost all 
of the net new growth in employment in our country are in these 
small and medium sized companies. And I think Kauffman did a 
study not too long ago, the Kauffman Foundation, and they found 
that almost all net new jobs were being created by companies 
that were five years old or less.
    Mr. Fattah. Right.
    Mr. Fernandez. And the point of that is that we work with 
communities to think about how they can strategically position 
themselves for sustainable economic growth----
    Mr. Fattah. Right.
    Mr. Fernandez [continuing]. Having a holistic approach here 
that looks at how are you supporting entrepreneurism and small 
business creation. Accelerating commercialization of research 
and technology. Those are all critically important to helping 
communities get on a glide path that is sustainable.
    Mr. Fattah. Well, you know, there was this debate that I 
recall about the fundamentals of our economy. It is great that 
we are making that investment and----
    Mr. Fernandez. Yes.

                       HUMAN CAPITAL DEVELOPMENT

    Mr. Fattah [continuing]. We have been working in 
Philadelphia focused on the same issue about the 
commercialization of nanotechnology and the like. And up in the 
other end of our State with Carnegie Mellon on robotics and 
biotech. But the fundamentals which you, it is not in your 
portfolio, but it concerns me and I just want to put it on the 
record. I mean, for the first time now we have crossed a 
rubicon in which the majority of the patents requested are now 
not by Americans or American companies. The underlying point of 
the new growth is on these cutting edge technologies and new 
products. And when we see, much smaller countries like South 
Korea out-producing us in terms of the numbers of engineers 
graduated, and we see much larger countries like China out-
producing us in the number of engineers, if you look down the 
road here, one of the real deficits in the country is in our 
human capital development. One of the things that the Chairman 
has been interested in is, we have a number of agencies under 
the jurisdiction of the Committee that are involved in science 
and technology and education, is to try to see where we can 
have an impact. Because, whether it is the manufacturers in 
Philadelphia or the advanced technology issues in Virginia, if 
we do not grow the intellectual infrastructure that would be 
the basis for, the new products, then the ability to grow new 
companies and put new products in the market, which even in 
manufacturing when we lost jobs overseas we usually lose them 
after we have exploited the product for a fairly long time and 
then move on; we will not even have that opportunity.
    So, you know, I just want to put that on the record. I 
thank you for your testimony and for your work, and I thank the 
Chairman. Thank you.
    Mr. Mollohan. Mr. Culberson.

                            DEFICIT SPENDING

    Mr. Culberson. Thank you, Mr. Chairman. Thank you for being 
with us today, Mr. Fernandez. A day that I am going to do my 
best to remind everybody of every chance I get is June 1st, 
because that is the day that the United States starts living on 
credit and charging everything that we do to our kids, sending 
them the bill. Because that is the day that, if you take the 
amount of money, fiscal year 2009 revenues, and just divide it 
by the amount of money we spend, and multiply that by 365, to 
obtain the number of days out of 365, you know, that that 
fraction represents, you can quickly see that we on June 1st 
have spent all the revenue that has come into the federal 
government. And from that day forward we as a nation are living 
on debt. And I, this is, I know, a concern to the members of 
this Committee. I particularly share Mr. Wolf's passion for 
making sure that we do not leave this inheritance to our kids. 
So as a fiscal conservative I am always looking for ways to try 
to consolidate and save money. And I note that the GAO has 
identified eight-six federal programs in ten federal agencies 
and various commissions that provide economic development 
funding. And one of these, of course, is the Economic 
Development Administration, created of course for a noble 
purpose. But in looking at your statute I see that you can make 
grants to economic development districts, Indian tribes, 
states, cities, or other political subdivisions, universities, 
public or private nonprofit organizations. And really the 
principal purpose of your agency is, you primarily issue grants 
for planning, in essence, largely, looking at your statute.
    Mr. Fernandez. The primary purpose of our agency----
    Mr. Culberson. Assistance, planning----
    Mr. Fernandez [continuing]. Is to create jobs and leverage 
private investment.
    Mr. Culberson. But as I read, when you read the statute 
your guidance is to provide technical assistance, cooperation, 
planning, promote investment. You may make grants to local 
governments for public infrastructure, for public works, public 
service. But the principal job it looks like you do is 
planning, coordinating, facilitating economic development. Is 
that right?
    Mr. Fernandez. The statute sets out a range of activities 
for EDA.
    Mr. Culberson. Right. That are focused and built around 
planning----
    Mr. Fernandez. You are correct, there are numerous 
divisions within other agencies that have an economic 
development element to them. But EDA is the sole agency whose 
sole mission is to help build and lead an economic development 
strategy for the entire country, across sectorial areas----
    Mr. Culberson. Sure, I understand. But you are focused on 
planning and technical assistance. And you do grants to local 
and state governments to build that infrastructure----
    Mr. Fernandez. If you look at our budget the vast majority 
of what we do is invest in our economic development programs, 
which tend to be direct investments whether it is in 
infrastructure, incubators, other kinds of strategic 
initiatives----
    Mr. Culberson. Okay.
    Mr. Fernandez [continuing]. That leverage private 
investment and create jobs.

                              JOB CREATION

    Mr. Culberson. So what percentage of your total amount of 
money you are appropriated each year do you estimate are spent 
on grants like that, that go directly into, that create jobs?
    Mr. Fernandez. I cannot tell you the percentage off the top 
of my head. But essentially it is around $190 million out of a 
total of $246 million.
    Mr. Culberson. So $190 million out of $246 million?
    Mr. Fernandez. Mm-hmm.
    Mr. Culberson. Okay. And those go to grant programs that 
build infrastructure, public works projects, etcetera, that are 
going to----
    Mr. Fernandez. Incubators, accelerators----
    Mr. Culberson. Okay.
    Mr. Fernandez [continuing]. Organizations that support 
economic development.
    Mr. Culberson. I cannot find where, you know the GAO has 
been unable to verify the numbers that you use for the numbers 
of jobs you allegedly create. What number of, how many jobs do 
you, does your agency claim to have created and what do you 
base that on?
    Mr. Fernandez. Well this----
    Mr. Culberson. I am trying to get a handle on what, if you 
all can give me an estimate and where the estimate comes from 
of how many----
    Mr. Fernandez. Well there are two different sets of 
estimates. One is based on what the grantees estimate. And I 
think that might have been the number that the Chairman alluded 
to earlier.
    Mr. Culberson. Which was what? If I could, if you would 
remind me what the Chairman, I am sorry, over what, 350,000 
jobs?
    Mr. Mollohan. 350,000 by the grantee estimates.
    Mr. Culberson. By the grantee estimates over----
    Mr. Fernandez. And he is trying to explain that to you.
    Mr. Culberson. Yes, sir?
    Mr. Fernandez. We have had a couple of different in depth 
looks at this very issue. One was a study that was conducted by 
Rutgers University. And then there was a follow up a couple of 
years ago by the private consulting firm Grant Thornton. They 
essentially verified that the estimates that we are using were 
pretty good.
    Mr. Culberson. And 350,000 jobs created over what period of 
time? period of time?
    Mr. Fernandez. I am not sure which period of time the 
Chairman is referring to.
    Mr. Culberson. And those are the estimates of the grantees?
    Mr. Fernandez. Our average, is approximately $5,000 per 
job, sometimes it bumps up. With the stimulus act if you look 
at the total of jobs that were saved or created, the cost per 
job was right around $4,600. We can talk about other agencies. 
I do not know them as well as I know EDA. But what I can say 
about EDA is that the strength of this agency has been built on 
three points. One is that it is built on partnerships with 
organizations, a national network of economic development 
organizations that develop bottom up strategies for building 
capacity in communities to support economic expansion. The 
second point is that there is no one size fits all solution 
here. So unlike a lot of agencies EDA has a substantial amount 
of flexibility within our programmatic investments to respond 
to creative solutions, unique solutions, that communities 
identify. And then the third point about EDA's strength is our 
return on investment. When you look at the cost per jobs that 
we invest, the leverage we get, when you look at the private 
investment that is leveraged per federal dollar. The return on 
investment for communities and for the country is very 
substantial and I think that is one of the reasons why over the 
years there has been strong bipartisan support for EDA.
    Mr. Culberson. I think flexibility is a very good point, 
and that is certainly true. I am surprised to see in your 
statute Title 42, Section 3151A that says that if a local 
project, Mr. Chairman, has actually saved money, if it is less 
expensive than originally planned, the money saved does not go 
back to the taxpayer. I am sorry to see that we do not save the 
money. It is actually respent somewhere else.
    I do see, though, the flexibility is a good point. I see a 
number of projects here in the State of Texas. Port of Beaumont 
navigation district, Seabrook, Texas Medical Center branch at 
Galveston building improvements, etcetera. But, you know, this, 
and no question I am confident you do good work. But at a time 
when we are literally approaching a financial cliff, the scale 
of the debt and the deficit are so tremendous and so terrifying 
that we need to look at places to save money, Mr. Chairman. I 
do think this is an agency where, as in any private business 
gets in trouble with debt they retrench and get back to their 
core mission. I bet we could probably save some money here, and 
maybe look at this, and we appreciate the work that you do, 
sir, but I am confident this is an agency where we could 
probably save some money and see it better, a little better 
targeted perhaps----
    Mr. Fernandez. We can agree to disagree.
    Mr. Culberson [continuing]. Elsewhere, and maybe in the 
form of tax cuts. Texans always prefer tax cuts to create jobs 
rather than federal grants, as a general rule. But we 
appreciate what you do, sir. Thank you very much.
    Mr. Fernandez. I appreciate that.

                   PUBLIC WORKS & EAA FUNDING LEVELS

    Mr. Mollohan. Thank you. Secretary Fernandez, I want to 
explore your request and our attitudes as expressed in previous 
appropriations. I am looking at your 2011 request and I am 
looking at our 2010 omnibus. You have flipped, virtually 
flipped the funding for Public Works and economic development 
assistance. I want to give you an opportunity here today to 
justify this request, particularly in light of our expressed 
attitudes about it in the past. Make your case.
    Mr. Fernandez. I will, and I appreciate that, Mr. Chairman. 
And I sincerely respect the views of the Committee. I mean, 
clearly this has been a discussion that precedes me and it is 
one that will probably continue. When we look at the 
President's proposal for EDA it is in the context of the entire 
budget. So we are very cognizant of the constraints, the fiscal 
constraints, concerns about the deficit. So you look at what 
EDA does in the context of the entire federal budget proposal 
that has been put forth by President Obama, for economic 
development, there are multiple agencies that have an impact on 
how we rebuild the economy. And what the President has made 
clear and we wholeheartedly support is the notion that while we 
have taken bold action with the support of the Congress and the 
administration to keep the country from falling off a cliff, as 
we move forward we really need to look at how we build a 
stronger foundation that positions America to be very 
competitive moving forward in this new economy, or changing 
economy. It is not really new.
    And the real pillars of that include unprecedented 
commitments to education. The workforce issues are paramount to 
having the capacity to compete in the global economy. 
Infrastructure is clearly a huge part of that system that we 
need to be able to build a strong economy. If you look at the 
overall budget proposal by the President, there is substantial 
investment in infrastructure. And then the third area is the 
area of research and development. And the President's budget 
includes significant increases in the federal government, 
investments in the research that is going to be a real driver 
of new ideas, new products, and commercialization.
    So it is in that context that we look at EDA's budget. So 
what does EDA do that----
    Mr. Mollohan. Other agencies having primary 
responsibilities for the R and D and primary responsibilities 
for the workforce development?
    Mr. Fernandez. Exactly.
    Mr. Mollohan. You are not suggesting EDA's, that that----
    Mr. Fernandez. No, I am just saying that----
    Mr. Mollohan [continuing]. Where their mission----
    Mr. Fernandez. Absolutely.
    Mr. Mollohan. So you are just putting it in the context----
    Mr. Fernandez. So if we put our request in the context of 
the overall budget, the unique thing that EDA provides that the 
other agencies do not is this flexibility to go in and address 
strategically, different needs in the community. If you look at 
demand for EDA in, year to date, fiscal year 2010 year to date 
for economic adjustment, we have received applications worth 
$222 million. Last year we had substantially more requests in 
EAA as a percentage of requests than any other program we have. 
And what we are hearing is that while infrastructure is very 
important, and that is a key implementation strategy in many 
communities, is the flexibility of economic adjustment to deal 
with issues like access to capital, developing the strategic 
plans that link workforce, innovation, existing employment to 
the clusters that we are trying to build. And it is that kind 
of flexibility that is available within the economic adjustment 
assistance, even though the majority of economic adjustment 
funds end up being construction projects. That is the area 
where we see just a significant amount of demand and that is 
the one area that EDA plays a very unique role that other 
agencies cannot fulfill.
    Mr. Mollohan. Well I mean, obviously that is a compelling 
case. If you can think about economic development in strategic 
terms that is very important, particularly if you can bring 
assets to bear that assist local areas in strategic thinking 
and strategic development, which equates in my experience to 
promoting economic diversification, that is a very powerful 
thing. And I am going to invite myself to have you come and 
explain where that is happening. I would like to see some real 
examples of that.
    You know, we have gotten EDA on task up in Weirton, West 
Virginia; when I was elected to Congress, there were 14,000 
steel workers working at Weirton Steel. They are definitely in 
transition. And the industry is definitely transitioned and it 
is a catastrophic economic event over time. It has been a 
process of attrition. But it has not taken forever. It has not 
been sudden, it has not been precipitous, but it has been real. 
And so they are in a period of rethinking strategically about 
how they reconstitute their economy.
    So I hear you talk about the EAA account in those terms, 
and the flexibility that it represents in those terms. I invite 
you to show me where that is happening, where you are really 
going in and partnering and engaging a community on those terms 
and having a result.
    You are here to testify and I am not here to preach. But 
one of the strengths of the Public Works program is that it is 
understood. It has demonstrably impacted, in a favorable way, 
all kinds of projects that have, in my district, promoted 
economic diversification. It has leveraged a tremendous amount 
of money, including conventional financing, to make deals work. 
So, the Public Works program has a constituency and it is out 
there, throughout our communities, but it is also here in 
Congress. People have experience with it.
    So when you talk about an EAA program you have a burden to 
prove. And I am certainly susceptible to the argument. But when 
it is put in the context of pitting EAA against Public Works, 
it is tough sledding for you. It is a heavy lift, I can tell 
you. Not that you are not convincing about the potential for 
EAA funding, but that has not been as adequately demonstrated, 
not to me. Conceptually it really sounds great, but the Public 
Works program has been demonstrated. So we need to visit on 
this and continue to talk about it. But just to come forward 
with a budget request that flips these two accounts year after 
year, I am not sure you are really going to get there in that 
way. We want to help you get there, but I am not sure we are 
going to get there in that way.

            GLOBAL CLIMATE CHANGE MITIGATION INCENTIVE FUND

    As we evolve the Economic Development Administration and 
its programs to help promote economic development, leverage 
economic development, and think about new priorities, I think 
about incentivizing public works projects, to become more 
environmentally sound. We initiated a program which we called 
the Global Climate Change Mitigation Incentive Fund. As 
originally conceived by the Congress that is exactly what that 
was, an incentivation fund. The original thinking was to think 
of it in the context of the Public Works account. And so as 
grantee applicants came forward they would see this incentive 
to incorporate environmental elements, maybe LEED certification 
in their project. And in addition to getting a regular EDA 
Public Works grant they would get an amount, supplementary 
amount, on top of that for this purpose. A reward, if you will, 
for trying to become environmentally friendly.
    I think in the first year the agency limited that to LEED 
criteria. I am actually interested in hearing how successful 
that was? Or was it, it was a little bit before your 
administration. But are you familiar with how successful or 
unsuccessful, and how did you measure that, if you did?
    Mr. Fernandez. I can attempt to do that, and I know enough 
to be dangerous. It is my understanding that as originally 
conceived the funds that were targeted for that fund were used 
as leverage to get some of our construction projects to adopt 
the sustainable development techniques.
    Mr. Mollohan. Just as I described.
    Mr. Fernandez. Exactly.
    Mr. Mollohan. So do you agree with my description of that?
    Mr. Fernandez. Yes.
    Mr. Mollohan. Okay.
    Mr. Fernandez. So often the investment made in 2008 for 
global climate change money in conjunction with a Public Works 
investment. I think it was very successful in terms of getting 
that leverage and adding that incentive.
    Mr. Mollohan. Can you cite cases for the record where that 
is true? I would like to have cases for the record where Public 
Works applications incorporated environmentally progressive 
building systems, techniques----
    Mr. Fernandez. We would be happy to provide you a complete 
list of the projects that were funded.
    Mr. Mollohan. Well no, no, no. I am not asking that, 
exactly. I am asking, a list of projects that were incentivized 
to be increasingly environmentally sensitive because of this 
account. In other words, an applicant came forward and had an 
application for a public works project. And said, ``Well gee,'' 
you know, ``if we get another $1 million we will,'' I do not 
know, ``put a green roof on.'' Or, you know, ``It will cost a 
little more, but we will do something with windows, or the 
positioning of the building.'' I do not know what. But you 
provide us with examples where this grant program did from the 
start incentivize environmentally sensitive projects. That is 
what I would like to focus on.
    Mr. Fernandez. We will work on putting that together for 
you.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T6756B.008
    
    [GRAPHIC] [TIFF OMITTED] T6756B.009
    
    Mr. Mollohan. Because that is the purpose, you know? And as 
your grantees look at that, that was, ``Okay, we will give you 
this money if you do something more to your building to be 
efficient.'' You know, energy efficiency, for example.
    Mr. Fernandez. Yes, and if I could just elaborate?
    Mr. Mollohan. I am sure there are examples out there.
    Mr. Fernandez. Yes. And if I could talk about it more 
broadly, too, is that, the goals behind that initiative in 
terms of encouraging that kind of building practice?
    Mr. Mollohan. Mm-hmm.
    Mr. Fernandez. Are goals that we have embedded in our new 
investment priorities across our programs. I have looked at the 
language from last year's budget that encouraged us to look 
beyond just LEED buildings at how we support other elements of 
expanding the green economy. And so we can target these 
resources, I think, appropriately to help grow the green 
economy in many communities. But also we can embed in the 
evaluation criteria that we apply to other Economic Development 
Administration investments the principles that were squarely 
behind the creation of the program. And we have done that in 
criteria that we have articulated for existing programs as 
well.
    Mr. Mollohan. Beyond just incentivizing construction 
techniques? Or building----
    Mr. Fernandez. The notion of ``sustainable development'' 
has evolved in the industry over the last few years as well. 
And as someone who used to develop projects, there was a time 
where LEED development was viewed as, ``Something that is going 
to be incredibly more expensive.''
    Mr. Mollohan. It was incredibly more, or it is incredibly 
more expensive.
    Mr. Fernandez. It was. But cost differential between 
sustainable practices and more traditional practices is 
shrinking. And the operational savings are shortening the 
timeline on return on investment. So you see a lot more 
buildings in the private sector and the public sector are 
coming forward and saying, ``Look, we are going to do this.''
    Mr. Mollohan. Without an incentive?
    Mr. Fernandez. Because the incentive is there in terms of 
reduced operating costs----
    Mr. Mollohan. Mm-hmm.
    Mr. Fernandez [continuing]. And broader benefits for the 
community, for their employees. There is a wealth of evidence 
that those kind of buildings have direct impacts on 
productivity and just the quality of the work coming out of 
these facilities.
    Mr. Mollohan. Mm-hmm.
    Mr. Fernandez. So that is shrinking. So if I understood the 
guidance in last year's budget, we were asked to look at how we 
can leverage these dollars to broaden the impact of the program 
beyond just LEED buildings, but look at renewable energy 
initiatives and other projects. And that is what we would like 
to do moving forward. While we can still continue to 
incentivize LEED buildings, I think there is a broader 
application that could have a big impact.
    Mr. Mollohan. Well if you are wanting to broaden the 
purposes, which again we are not unsympathetic to but we look 
forward to being convinced, then why are you at the same time 
reducing the funding request below the 2010 funding level? You 
came in with your request for 2010, for 2011, even though we 
increased the funding for $8 million.
    Mr. Fernandez. Well, as we noted earlier, the President has 
articulated a budget based on the fiscal constraints.
    Mr. Mollohan. So it is purely fiscal, a fiscal 
consideration?
    Mr. Fernandez. Yes, so, in light of the freeze on 
discretionary spending, the request we are making is at the 
same level for our programs that we made in 2010.
    Mr. Mollohan. Okay.
    Mr. Fernandez. And of course Congress appropriated 
additional resources to us in 2010. We are certainly 
appreciative of that. But our request is the same request we 
made in 2010.
    Mr. Mollohan. Okay, thank you. Mr. Ruppersberger.

                       PENN STATION IN BALTIMORE

    Mr. Ruppersberger. I come from local government for about 
eighteen years, a lot of economic development issues. Always 
you are looking for the federal government for ways to help, 
and whatever. And there are different grant issues that are out 
there. When you come to Congress you prioritize on certain 
major projects. And I am getting personal now, but there is 
Penn Station in Baltimore. And it is pretty bad, and yet there 
are people coming there all the time. And I am working with 
Congressman Cummings to try to revitalize that area, and using 
the station in Washington, D.C. as an example. We took a 
station, revitalized it, retrofitted it, put in stores, food 
banks, restaurants, whatever. And it is my understanding now 
that that project is making profit for Washington, D.C. because 
it is a place where people come.
    Now there is, when you, in this market a lot of the 
governments are distressed and they just cannot put money in 
that needs to be. What I am going to probably ask is someone 
from your Department contact my office. There is a major issue 
that has to be done, and maybe some federal grants. But what 
this does, it not only helps the area but it revitalizes a 
neighborhood. This is a very poor neighborhood, a lot of crime 
issues around the area. So I am making a request, basically, if 
you could get with my staff, Walter Gonzales here, when this 
hearing is over and talk about that issue.

               PROCESS FOR WORKING WITH LOCAL GOVERNMENT

    There are a lot of local governments in distress. Do you 
see that the ones that are successful working with you in 
getting funding are more aggressive themselves? You know, what 
is the process? Are you reaching out to different states? 
Because the key is jobs now, as we know. And the more that we 
deal and focus on the jobs issue the better. Are you 
coordinating with the stimulus package? Where are you in that 
regard?
    Mr. Fernandez. That is a good question. EDA operates, 
through this national network of local economic development 
organizations. We fund, 383 economic development districts that 
by the very structure of those organizations, include local 
representation from local government. They partner with them to 
develop the strategic and economic development plans for their 
area. And so, there is that direct connection between the local 
government, the districts, and the Economic Development 
Administration.
    In addition, through our economic development 
representatives, we engage in outreach efforts directly in 
communities. We would like to be perceived as being accessible. 
It may not always feel that way, and I certainly can appreciate 
that having been on the other side of the table not so long 
ago. There is a need for improvement, I am sure. But I think we 
do a pretty aggressive job in terms of our outreach and we try 
to be accessible.

                    COORDINATION WITH OTHER AGENCIES

    Mr. Ruppersberger. Do you coordinate with Small Business 
Administration, the Community Development Block Grants, those 
different----
    Mr. Fernandez. To some extent, yes. And I can tell you with 
this administration there is an absolute commitment to blowing 
up a lot of the silos. We are engaged in collaborative efforts 
with SBA. I am leaving this hearing to go meet with HUD. There 
are a number of agencies that are working together to look at 
how we can address community needs so that we can integrate the 
various kinds of federal resources we can bring to the table 
and make it easier, frankly, from the customer side of the 
table than them having to figure out how to get from agency A 
to B and C, and try to put all those things together. I think 
there is an opportunity to do things in a different way that 
can be very helpful.

                         AWARD FUNDING FORMULA

    Mr. Ruppersberger. My last question, because it is really 
about end game results. What formula do you think works? And 
what is your policy or philosophy as an agency to give money? 
You know, you have a lot of people that want money, they do not 
know how to get it. What are you looking for? And give me an 
example of a project where you got involved, where you made a 
difference?
    Mr. Fernandez. It is a good question. First of all the 
communities we work in by definition have to be distressed. I 
mean, that is----
    Mr. Ruppersberger. But is that point not, I mean it is so 
broad now, you are dealing with about 80 percent of the whole 
country?
    Mr. Fernandez. It is, that is true. So----
    Mr. Ruppersberger. You are probably going to have to relook 
at that formula, in today's world.
    Mr. Fernandez. It is a big part of the country. And 
hopefully it will shrink. But we look at the investments based 
on the level of collaboration, the amount of private sector 
jobs that are created, the leverage of investment from the 
private sector, how it is tied to the community's strategic 
thinking about where their growth is going to come from. We 
look at that entire package. One of the things we are working 
on, is developing a more quantitative system for evaluating 
projects to get a more even playing field and making it a lot 
more transparent.
    Mr. Ruppersberger. But what I need is an example now. Give 
me an example of what you are looking for, what is the 
quickest, the best way? When I am talking to our mayors, our 
county executives, or even our governors, from your perspective 
what works quickly? Because that is what people want to do, 
they want to move forward. And we need to work quickly in this 
market.
    Mr. Fernandez. Well, you know, if you are talking about a 
specific----
    Mr. Ruppersberger. A project, a specific project.
    Mr. Fernandez. I mean the----

                       PENN STATION IN BALTIMORE

    Mr. Ruppersberger. I will give you an example, the Penn 
Station thing.
    Mr. Fernandez. Yes. Well, that is a very important project 
and I believe in those kinds of projects. That is probably not 
a quick project. As we go out and----
    Mr. Ruppersberger. Well I know, I do not like to get 
personal in these hearings but I will. It has to do with 
removal of a certain pipe underground, to connect the parking 
lot over the train tracks, and whatever. And nothing is going 
to happen until that occurs. That would be a focus where I 
would look from a federal level to get involved. If that opens 
up the whole project might go.
    Mr. Fernandez. I understand. And we will get more 
information about that specific project. But, you know, what we 
have seen is that by working through this network----
    Mr. Ruppersberger. Give me an example. Answer my question 
with that. Is that not the type of project that you are looking 
at? That is not where your money is going to come from? You 
have to be more involved in certain formulas and rules? I mean, 
when you are talking jobs and business you have got to move 
more quickly now.
    Mr. Fernandez. Absolutely. And----
    Mr. Ruppersberger. So give me an example.
    Mr. Fernandez. And there is no shortage of examples.
    Mr. Ruppersberger. Okay.
    Mr. Fernandez. I was in a very small town in Minnesota 
where the main issue was expansion of a water plant in 
Nashwauk. It is a city with a population of nine hundred and 
some people. Clearly they do not have the resources in a town 
that size to make the kind of infrastructure investment that 
was needed, which enabled a $16 billion private sector 
investment creating 500 direct jobs in the steel industry. That 
was part of the strategic planning for that region----
    Mr. Ruppersberger. Okay.
    Mr. Fernandez [continuing]. In Minnesota they call it the 
Iron Ridge. And they were leveraging natural resources, 
leveraging workforce, and we were able to make an investment to 
meet that local need that they could not make but for us.
    Mr. Ruppersberger. Okay.
    Mr. Fernandez. And that is leveraging----
    Mr. Ruppersberger. And that is what I am looking for.
    Mr. Fernandez. And that is going to create immediately 
2,000 jobs just to build the facilities. So it is those kinds 
of projects. And what I was trying to say, not very 
articulately, is that by working through these local networks 
of economic development professionals, they have got great 
projects queued up.
    Mr. Ruppersberger. Mm-hmm.
    Mr. Fernandez. That is why last year when the Congress 
approved the Recovery Act, EDA was appropriated $150 million 
for Recovery Act projects. We were able to obligate 100 percent 
of our money within a year, a year ahead of schedule, because 
this network that we work with has many projects queued up, 
more than there are resources to fund. So it is that built-in 
pipeline of investments that are out there that we can fund and 
accelerate job creation in the near term, but do it in a way 
that is built on longer term strategies for----
    Mr. Ruppersberger. So it is fair to say that when it is the 
right project, that you can be extremely aggressive to make the 
project move forward?
    Mr. Fernandez. We can. We can. And I do not want to dismiss 
them, because there were some questions earlier. Sometimes it 
takes longer than it ought to. And I can tell you that we are 
very committed to evaluating how we do our review process to 
make sure that we are doing it as quickly as possible.
    Mr. Ruppersberger. We just voted on this budget while you 
were gone. Thank you for leaving the room.
    Mr. Mollohan. What did you do?
    Mr. Ruppersberger. Nothing, I am teasing.
    Mr. Mollohan. Mr. Wolf.

                                GAMBLING

    Mr. Wolf. Thank you, Mr. Chairman. I have a question, but 
before I do I want to make a comment. I am very disturbed to 
see the number of communities and states that are expanding 
gambling, that are seeking gambling, which brings crime, 
corruption, break down of the family, etcetera. Does any of EDA 
money ever, ever, ever, ever, ever go to any community to help 
them bring about economic development for expansion? Because if 
it is I am going to offer an amendment to prohibit that. But 
has it ever----
    Mr. Fernandez. I am not aware of any.
    Mr. Wolf. And you would never do that, would you?
    Mr. Fernandez. Well I personally would not put that on my 
priorities of economic development strategies, but that is just 
my personal opinion. I can check it. I do not know if there is 
a specific exclusion for that kind of investment or not. But I 
am not aware of any such investments.
    Mr. Wolf. I mean, I do not think we should do it. I mean, 
that does not create a job. That, I mean, the break down of the 
American values. I just had a letter the other day. I was the 
author of the National Commission on Gambling, and what it does 
to communities. I, frankly it has not been the greatest thing 
for the State of Indiana either, from a lot of people that I 
hear. Where it comes you get crime, you get corruption. Where 
we have kept it out of our state. Anyway, if you could let us 
know if it has been used or can be used I would appreciate it.
    [The information follows:]

                    Gambling Institution Investments

    EDA's authorizing statute, the Public Works and Economic 
Development Act of 1965, as amended, does not expressly exclude grant 
investments to gambling institutions.
    The American Recovery and Reinvestment Act (ARRA) included an 
express prohibition as follows:
                             limit on funds
    SEC. 1604. None of the funds appropriated or otherwise made 
available in this Act may be used by any State or local government, or 
any private entity, for any casino or other gambling establishment, 
aquarium, zoo, golf course, or swimming pool.
    In the past 20 years, EDA funded 4,734 construction projects 
totaling $5.5 billion. None of these projects funded casinos or 
gambling facilities. We would note that about a decade ago, EDA funded 
a community-wide well and water treatment system for a City located on 
an Indian reservation that included as part of its justification that 
the water treatment system for the City would also benefit a hotel 
associated with a casino in addition to other employers. One reason 
that EDA does not fund such projects is that they do not represent the 
kind of innovation-led economic development needed to transform the 
regional economy. EDA intends to establish an explicit prohibition 
against funding such projects in the Bureau's forthcoming FY 2010 
Operational Guidance and in future revisions to its regulations.

                 BEST PRACTICES FOR COMMUNITIES IN NEED

    The other question is, do you have a best practices for all 
the communities that are in need? Because some communities are 
so small they do not have the resources. Do you have a best 
practice to ensure a community that is going through this has a 
place to go to find out what has the best approach that has 
been used by others? Do you offer a best practices for 
communities?
    Mr. Fernandez. Not as well as we should. And part of our 
effort----
    Mr. Wolf. That is an honest answer, is it not?
    Mr. Fernandez. Well, our regional staff certainly have a 
wealth of experience that they can share, and they do with 
community representatives. What I would like to do as part of 
rebuilding the capacity of the agency is to build that kind of 
resource center. And it is really more of a virtual best 
practices system, but, I look at the history of EDA over forty-
five years as having a whole host of not just best practices 
but solutions. So that if I am in Bloomington, Indiana and I 
have got a particular issue, we have funded solutions for those 
kinds of issues before. We need to make that more accessible, 
and not just, ``Here is a best practices page of what they 
did.'' But, ``Here is a contact of the people that were 
involved,'' and to try and do some of that direct connection to 
help people accelerate their thinking about how to address 
particular issues. So that is something we do need to do 
better.
    Mr. Wolf. What is the unemployment rate in the Bloomington 
area? I remember, I saw that movie years ago, ``Breaking 
Away?'' Is that----
    Mr. Fernandez. ``Breaking Away'' I am embarrassed to say I 
do not know off the top of my head what it is in Bloomington. I 
can tell you that as a university community there was a time 
where people there perceived it to be recession proof. But 
because of the broader context of the shifting of manufacturing 
jobs in the region, the tight budget constraints, they are 
actually seeing layoffs in the universities and the public 
schools like every other community. So they have very similar 
challenges.
    Mr. Wolf. Yes, okay. I think that is pretty much it. If you 
could, after you check on that other thing, give us a call----
    Mr. Fernandez. Absolutely.
    Mr. Wolf [continuing]. A call on whether or not EDA would 
be willing to, and then what I will do is, I will talk to 
Senator Warner and see. I think he would join to see if maybe 
before, the authorization is a great idea and the language, and 
I think it is good that Mark is doing that. But to see if we 
can maybe deputize you, or the Secretary could deputize you to 
sort of have a little bit of a pilot to move ahead and see what 
we can do. But anyway, thank you for your testimony. I 
appreciate it.
    Mr. Fernandez. Thank you.
    Mr. Mollohan. Mr. Culberson.

                                GAMBLING

    Mr. Culberson. Thank you. Thank you, Mr. Chairman. The, in 
answer to Mr. Wolf's question, would you all be sure to check 
to make sure, so find out if any of the money that you all have 
sent to local or state government, or to business development, 
economic development, because the statute is very broad. I am 
looking at the language of the statute, Mr. Wolf, and there is 
no real restriction of any kind. The Secretary has got complete 
discretion to grant money to, for economic development, 
business development. And that would, what we are looking for 
is money that has been sent to, for example, infrastructure, to 
help build out infrastructure, roads into and out of a gambling 
area. So we are looking for direct or indirect would be very 
helpful.

             AMERICAN RECOVERY AND REINVESTMENT ACT & JOBS

    I also wanted to confirm, Mr. Fernandez, did you say your 
agency had received $150 million from the stimulus bill?
    Mr. Fernandez. That is correct.
    Mr. Culberson. And what, if I could, also the 350,000 jobs 
that the grantees tell you they have created with the funding 
that they have received, what independent outside verification 
or audits have there been of the 350,000 job claim that the 
grantees say they have created with the money?
    Mr. Fernandez. As I noted earlier, there is not technically 
an outside audit. We do our own follow up to evaluate whether 
or not the numbers are being met. We did commission a couple of 
outside studies to look at the methodology for calculating 
return on investment.
    Mr. Culberson. So you really cannot verify that number?
    Mr. Fernandez. I cannot verify it from the standpoint that 
we do not have an outside audit.

                NASH, TEXAS ECONOMIC DEVELOPMENT FUNDING

    Mr. Culberson. Okay. I note, Mr. Chairman, the wonders of 
Google, I spot one of the grants in Texas, Mr. Chairman, is a 
$2 million grant to, $1.875 million economic development 
assistance to the city of Nash, Texas to spur economic recovery 
by making infrastructure improvements to serve the Nash 
Business Park. And under the wonders of Google Earth, Mr. 
Chairman, I looked up, because I do not know where Nash, Texas 
is. This is downtown Nash, Texas. I want you to see this. It is 
literally a, it is two farm market roads and there is nothing 
there. So it is a, I just think it is important that we do all 
we can to really be sure that taxpayers are getting the value 
for their dollars. The Agency undoubtedly performs a lot of 
worthwhile work. But I am not, looking at this one I for the 
life of me cannot, $1.8 million is probably more money than 
Nash, Texas ever had in its entire existence. And I think this 
agency just bears some careful scrutiny. Thank you, Mr. 
Chairman.
    Mr. Mollohan. Well I hope that Nash, Texas has some maybe 
attention paid to it in the economic development, and hopefully 
the agency's efforts to help facilitate it will be appreciated 
at the local level.

                          REVOLVING LOAN FUNDS

    Capitalizing RLF funds, revolving loan funds, why are you 
not doing that?
    Mr. Fernandez. Recapitalizing, or making additional 
investments?
    Mr. Mollohan. Mm-hmm.
    Mr. Fernandez. I know that, it is my understanding, and I 
could be wrong with this, it would not be the first time, that 
the previous administration did not look favorably at that 
initiative. We certainly look at the role of RLFs as a very 
valuable tool to help address the critical access to capital 
issues that many small businesses face today. I think it is a 
program that can work well and we are not discouraging 
applications for that very purpose.
    Mr. Mollohan. You know, we have some concern expressed that 
RLFs are not being capitalized because of pulling back funding 
that might be available for that to fund the Energy Efficiency 
Building Systems Regional Innovation Cluster Initiative. Can 
you comment on that?
    Mr. Fernandez. Yes, I would be happy to because that is not 
accurate. The economic adjustment program is the--that is the 
pool of resources that we have to make investments in revolving 
loan funds, which, not to beat a dead horse, but that is one of 
the reasons why we like the idea of increasing support for it 
because that is a huge need.
    Mr. Mollohan. It is a huge need to recap a lot of these 
funds.
    Mr. Fernandez. And to address access to capital.
    Mr. Mollohan. Okay.
    Mr. Fernandez [continuing]. There was a question about what 
role does EDA have. I can tell you we did a $200,000 revolving 
loan fund investment in St. Louis. It is a little company 
called World Wide Technologies, which now today is a $3 billion 
company that--employs--1,200 employees.
    So I think these small investments can have tremendous 
impact, very direct return on investment, and do the kinds of 
work that people want.
    The Energy-RIC is a very exciting project. It grew out of 
President Obama's commitment to get interagency cooperation. 
And so there is a White House interagency team that headed up 
the effort to build this RIC proposal.
    The total package is probably going to be, north of $120 
million over a five-year period.
    The EDA's role in this, which goes back to the unique role 
that EDA plays in our federal system, is to help build, support 
around the cluster element of the energy investment. Our 
commitment was $5 million over a five-year period. Part of the 
funding is public works and part of it would be through 
economic adjustment.
    We have been able to identify resources to--through some of 
the deobligations that have occurred to fund that project 
without taking away the capacity to fund any of the current 
budget----
    Mr. Mollohan. Okay. Let me go back to the revolving loan 
funds. Are you recapitalizing them with funding?
    Mr. Fernandez. Across the board, no. Are we evaluating 
applications for those, I would have to look and see if we have 
had any specific requests. But we are certainly not saying no 
to the concept. I mean, they are evaluated in the context of 
other competitive grants.
    Mr. Mollohan. But you don't know. Have you recapitalized 
one or started one new?
    Mr. Fernandez. Last time I had I don't know. I mean----
    Mr. Mollohan. Well for the record, will you?
    Mr. Fernandez. Yes. I would be happy to. I know we did 
through our Recovery Act funds. But I am not sure about a 
regular EDA program.
    [The information follows:]

                          Revolving Loan Funds

    EDA is currently evaluating 6 applications for the Revolving Loan 
Program totaling $7.25M. 5 applications have been approved for 
recapitalization totaling $11.125M, and 2 applications are new RLFs 
totaling $1.8M.

                      REGIONAL INNOVATION CLUSTERS

    Mr. Mollohan. Okay. Well tell us what the Energy Regional 
Innovation Cluster is. What is that?
    Mr. Fernandez. It is a multi-agency investment program. EDA 
has been involved in the work of clusters for almost 20 years.
    Mr. Mollohan. Well let us really start. What is a cluster 
in the context of this initiative?
    Mr. Fernandez. It is a geographically-bound area. There is 
a regional component to it that integrates businesses, 
universities, education, all the elements of economic 
development around a particular industry so that there is 
complimentary activities, there is synergy, and it leverages--
--
    Mr. Mollohan. And this doesn't exist now? This is a 
concept. This is a new initiative, correct?
    Mr. Fernandez. The Energy-RIC itself is a new initiative. 
But Regional Innovation Clusters are not new. And we found that 
they are a----
    Mr. Mollohan. We being EDA?
    Mr. Fernandez. EDA.
    Mr. Mollohan. Where have you found that? I don't mean to 
interrupt you and if you need to elaborate.
    Mr. Fernandez. No, that is okay. There are a number of 
clusters that have evolved over time.
    Mr. Mollohan. Give us an example.
    Mr. Fernandez. In Bloomington, Indiana there is a strong 
life sciences partnership that is a cluster. In Seattle there 
is a bio-medical cluster.
    Mr. Mollohan. But what is it--okay, but what does 
``cluster'' mean? You know, we have a lot of coal mining in 
West Virginia, so would that be a cluster?
    Mr. Fernandez. It could be.
    Mr. Mollohan. Okay. Well what is----
    Mr. Fernandez. I mean, I am not trying to be facetious.
    Mr. Mollohan. What is a cluster? No, no, I know you are not 
being. What is a cluster?
    Mr. Fernandez. It is the combination of similarly focused 
businesses and institutions that are all linked into a 
particular industry.
    Mr. Mollohan. Okay.
    Mr. Fernandez. So you could have a cluster that is life 
sciences. You could have a cluster that is mineral resources.
    Mr. Mollohan. Okay. Well the word link suggests that there 
is a central facilitating activity. Is there?
    Mr. Fernandez. Yes.
    Mr. Mollohan. There is. And who supplies that function?
    Mr. Fernandez. Typically it is a public/private 
partnership; economic development organization that is able to 
align the strategies of the different participants in the 
cluster. Look for common areas of interest, whether it is 
workforce development, infrastructure development, broader 
policies that can help support that particular industry----
    Mr. Mollohan. Okay. So it is an identification of a core 
competency around some activity that is being promoted by a 
central facilitating group and being strategically managed in 
that way.
    Mr. Fernandez. Absolutely.
    Mr. Mollohan. The relationships between those entities that 
make up the partnership are strategically managed to further 
the prosperity and growth of the members of the cluster to have 
economic benefit throughout the defined region.
    Mr. Fernandez. Exactly. And it is having that deliberate 
strategy and coordination that helps accelerate the success of 
these clusters.
    Mr. Mollohan. Okay. So in one of your examples, give us an 
example. What is the facilitating group?
    Mr. Fernandez. In Bloomington it is the Life Sciences 
Partnership. It is a public/private entity with representations 
from the city, the university.
    Mr. Mollohan. So is that a non-profit?
    Mr. Fernandez. It is.
    Mr. Mollohan. Created in----
    Mr. Fernandez. Public non-profit.
    Mr. Mollohan. A public non-profit with the board of 
directors composed of people who are in the cluster----
    Mr. Fernandez. Who are in the industry, who are in the 
education.
    Mr. Mollohan. With an executive director who has been hired 
to facilitate that.
    Mr. Fernandez. Coordinate that, yes.

                   ENERGY REGIONAL INNOVATION CLUSTER

    Mr. Mollohan. So if we are talking about a energy regional 
innovation cluster, is that proposing one additional focusing 
on energy, one additional cluster? And it is going to be 
concentrated on energy. Energy is going to be the core 
competencies you are going to try to work on out of that 
cluster and probably innovation.
    Mr. Fernandez. In this one, Mr. Chairman, specifically it 
is to build a cluster around building technologies, 
efficiencies, and materials and design of actual buildings. So 
it is narrowly focused on that area of the economy.
    And the reason that this is being proposed is that, as I 
noted earlier, we believe there is a lot of empirical evidence 
outside of EDA that suggests that where you have this kind of 
deliberate formation of a cluster, it accelerates the business 
success of the individual companies and organizations that are 
aligned within that cluster. It has an impact on wages. It has 
an impact on the overall economy.
    So the goal here is to say, and this is part of what the 
President is very aggressively speaking about in terms of 
blowing up silos, we are going to make an investment through 
the Energy Department to leverage research and development 
around energy building systems.
    If we can bring with that commitment of the Energy 
Department's funds, additional resources from EDA, from SBA, 
from Labor, from others to actually form a cluster as part of 
that energy investment, we have an opportunity to really 
amplify those dollars in a way that is going to have a broader, 
regional impact on the economy where that energy investment 
will be made.
    So it is an opportunity to truly leverage multiple federal 
dollars in a way that amplify each other. And we think we will 
have even greater success than they might have if it was done 
individually.
    Mr. Mollohan. What economic funding levels? What funding 
levels is EDA expected to contribute to this initiative?
    Mr. Fernandez. We have a commitment of $5 million or five 
years.
    Mr. Mollohan. Not for each of five years, a total of $5 
million.
    Mr. Fernandez. And, again, and this is one of the 
challenges in talking about something like this is that it is a 
competitive grant process. We don't know exactly what proposals 
will look like.
    Mr. Mollohan. That is a pretty specific request. I mean, 
and you are talking about environmental efficiency and 
building. I mean----
    Mr. Fernandez. Yes. But it----
    Mr. Mollohan [continuing]. I am sure it narrows it down to 
several grantees. It almost sounds like a subtle administrative 
earmark.
    Mr. Fernandez. Well it is a competitive grant.
    Mr. Mollohan. Well I understand. But how many people can-- 
how many entities are out there that can compete for this?
    Mr. Fernandez. I think there has been tremendous interest. 
I don't know exactly how many. I know we hosted, along with the 
other partners, sort of a pre-application conference here in 
Washington and had a webcast of it. And there was a strong 
interest.
    But how the EDA's investments may--we have made a 
commitment of up to. But we don't know what those individual 
applications are going to look like.
    One applicant may have already a strong public/private 
partnership entity that can serve that coordinating role. They 
may not want or need resources to build that kind of 
organizations, others might. Infrastructure may not be an 
important part of a particular applicant's investment.
    So, the way our commitment has been articulated, it is up 
to, but we don't know exactly whether we will get a request for 
the full amount, or half that amount, or what. But we will 
soon.
    Mr. Mollohan. So if your--I'm sorry, your 2011 funding 
request you would expect a million, million and a half, two 
million dollars of that request to go to this initiative. You 
know, it is five million over five years.
    Mr. Fernandez. We are looking at using funds that were 
deobligated to fund this initiative. So it won't come out of 
the 2010 budget nor the 2011 budget.
    Mr. Mollohan. Okay. Will that require reprogramming?
    Mr. Fernandez. Probably not. I don't think so.
    Mr. Mollohan. Mr. Wolf.
    Mr. Wolf. No, I'm fine.

                            DISASTER FUNDING

    Mr. Mollohan. In June of 2008, Congress appropriated $100 
million in disaster supplemental funding for EDA. In September 
of fiscal year 2009, provided another $400 million, a total of 
$500 million.
    Of the $100 million disaster funding provided in 2008, $22 
million is still unobligated or 22 percent and are only in the 
Denver and Chicago regions. What is the reason for the delay in 
obligating disaster funding in Denver and Chicago?
    Mr. Fernandez. I don't know if it is technically a reason 
for delay. I can tell you that doing disaster response work 
often is very complex. The communities are often devastated, 
the amount of initial work just in terms of first responder 
cleanups and relief.
    Mr. Mollohan. Are there projects in these regions which are 
appropriate for disaster funding?
    Mr. Fernandez. There certainly are.
    Mr. Mollohan. Still at this time?
    Mr. Fernandez. Yes. There are projects in the pipeline. I 
looked at this question ahead of time. In my conversations with 
our regional directors, in total out of both of those 
supplemental appropriations, essentially 90 percent, 96 percent 
of all those funds, are either approved, in final review, or in 
some stage where they are going to be moving forward.
    There is four percent left. And our commitment is to get 
those funds obligated by the end of the second quarter.
    Mr. Mollohan. Of the $400 million--I am sorry.
    Mr. Fernandez. We will meet that commitment.
    Mr. Mollohan. Of the $400 million provided in September of 
2008, 100--we were advised, $143 million or more than 35 
percent is still unobligated for projects in Atlanta, Denver, 
Chicago, and the Austin regions----
    Mr. Fernandez. Yes. And again----
    Mr. Mollohan [continuing]. And Texas regions.
    Mr. Fernandez. Yes. Again, I think we can brief you in more 
detail. But those are in the pipeline. The funding is in the 
pipeline.
    Mr. Mollohan. Okay. But----
    Mr. Fernandez. Let me give you an example if I could, Mr. 
Chairman. There is a huge project in Cedar Rapids that is 
probably a $35 million project. There are a lot of technical 
things they are working out at a local issue, at a local level 
to move that project forward.
    So it has been identified as a very valuable investment for 
the community as part of that rebuilding strategy. It is one 
that we certainly would be receptive to. But it is in those 
final kind of due diligence and review stage to move it forward 
to announcement.
    Mr. Mollohan. Okay. So you wouldn't even describe the fact 
that these funds have not been obligated as a delay?
    Mr. Fernandez. I wouldn't, because it would be one thing if 
I were telling you that we have got hundreds of millions of 
dollars that there is no pipeline for. That is not where we are 
at.
    Mr. Mollohan. Okay.
    Mr. Fernandez. We want to move as quickly as we can.
    Mr. Mollohan. So there are projects that in these regions--
    Mr. Fernandez. Yes, sir.
    Mr. Mollohan [continuing] That are appropriate for funding 
and are moving through the pipeline.
    Mr. Fernandez. Yes.
    Mr. Mollohan. Are there still appropriate applications for 
this funding? Would it be appropriate for an applicant to still 
file for this funding?
    Mr. Fernandez. Yes, because there is still the four percent 
that hasn't been really pushed into the larger pipeline.
    Mr. Mollohan. Okay.
    Mr. Fernandez. I would have to get back to you on 
specifically what that amount is though.
    [The information follows:]

                Disaster Funding Allocation Availability

    As of today, of the $500M total disaster supplemental, EDA has 
approved $271,629,200 with an additional $66,907,993 in final review in 
DC. That leaves $161,462,807 still being processed at some stage in the 
regional offices.

             AMERICAN RECOVERY AND REINVESTMENT ACT FUNDING

    Mr. Mollohan. Okay. You had some questions directed to you 
about the American Recovery and Reinvestment Act. And we 
mentioned in our statement that Congress appropriated $150 
million to EDA and directed EDA to give priority to areas of 
the Nation that had experienced sudden and severe economic 
dislocation and job loss due to corporate restructuring.
    I just would like to make the record as clear as possible 
on this. How much of the funding has been obligated to date?
    Mr. Fernandez. Hundred percent.
    Mr. Mollohan. What areas of the country have experienced 
sudden and severe economic dislocation and job loss due to 
corporate restructuring?
    Mr. Fernandez. It is hard to say which parts of the country 
have not been affected by restructuring and changes in the 
economy. It is a broad area.
    Mr. Mollohan. Can you give a----
    Mr. Fernandez. You know, my staff could give you an 
actual----

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    Mr. Mollohan. Okay.
    Mr. Fernandez  [continuing]. Breakdown of the counties.
    Mr. Mollohan. But why don't--why don't you give us a more 
detailed answer for the record. How did EDA determine the 
allocation per region? Would you prefer to do that for the 
record?
    Mr. Fernandez. We can give you the formula. What we used 
though was our--standard allocation formula that has been 
developed over the years between the staff and members, I 
believe of this Committee and others. And so we use 
essentially, that same formula.
    But one of the changes we made is rather than using a 24 
month period for calculating unemployment, it was reduced to 
three months to give more contemporary data of that sudden 
impact for which the Recovery Act was intended to address.
    [The information follows:]

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    Mr. Mollohan. I understand that there were 68 projects 
funded.
    Mr. Fernandez. Correct.
    Mr. Mollohan. That 64 were for construction coming out of 
public work investments, two were revolving loan fund 
recapitalizing or creation, and two were for technical 
assistance.
    Mr. Fernandez. Correct.
    Mr. Mollohan. And all the funding is out.
    Mr. Fernandez. Yes.
    Mr. Mollohan. Well let me congratulate you for getting that 
funding out. And it looks like they really went to bricks-and-
mortar projects, which----
    Mr. Fernandez. As you know, I mean there is a wealth of 
projects in the pipeline.
    Mr. Mollohan. I am sorry?
    Mr. Fernandez. There is a wealth of projects in the 
pipeline.

                     ECONOMIC DEVELOPMENT DISTRICTS

    Mr. Mollohan. Okay. In fiscal year 2009, Congress provided 
$4 million above the request for a planning program to 
increase--for the planning program to increase the amount 
provided to each economic development district and to reduce 
the backlog of designated but unfunded EDDs. This direction was 
continued in the fiscal year 2010 bill.
    Does the fiscal year 2011 request incorporate the increased 
levels for the EDDs?
    Mr. Fernandez. It does.
    Mr. Mollohan. How much does that provide to each EDD?
    Mr. Fernandez. Currently it is approximately $60,000 
annually.
    Mr. Mollohan. Do you know how many funded EDDs there were 
in fiscal year 2010?
    Mr. Fernandez. Three hundred eighty three.
    Mr. Mollohan. How many designated but unfunded EDDs are 
there?
    Mr. Fernandez. As far as I know zero.
    Mr. Mollohan. What is the process for designating an 
economic development district?
    Mr. Fernandez. The communities build an application based 
on the criteria in our statute. And they submit it to the 
regional offices. They look at an application, evaluate it, and 
then forward it on. Currently we have three pending 
applications.

                      TIMELINESS OF REVIEW PROCESS

    Mr. Mollohan. There are always concerns about the lengthy 
review of these grant applications. It really appears to be an 
issue affecting particular regions maybe rather than all of 
them.
    Are you aware that EDA applicants have concerns about the 
length of time for review of their applications--in their 
particular regions?
    Mr. Fernandez. Yes. I am aware. I come to this job with 
kind of a double-edged sword of having been on the other side 
of the table.
    I understand how effective EDA can be. I also have 
experience. I share some of the frustrations that our 
constituents face from time to time. And we have put together 
an internal interagency working group being led by our regional 
offices in partnership with DC to look at how we can refine our 
process to make it more accessible but also more efficient.
    Mr. Mollohan. Are there some regions that have a particular 
problem with the timeliness of review of grant applications? 
And I would ask you to identify them.
    Mr. Fernandez. In a more specific way than the perceptions 
of pace, I can't single out a particular region.
    Mr. Mollohan. Would you for the record provide the 
Committee with a review of the--a comparative review of the 
response times for review of grant applications region by 
region? So that we can identify regions that are taking longer 
and kind of do a bell curve.
    Mr. Fernandez. I can do that. And I would be happy to do 
that. But let me just, if I could though, maybe step back and 
talk about the process.
    [The information follows:]

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    Because, again, from my perspective I think there are areas 
of opportunities for improvement. When communities come to EDA 
or they meet with an EDR, one of our economic development 
representatives, and start talking about their needs and some 
of the kinds of projects that they think might be helpful for 
their community--well let me step back.
    There is even a beginning point. There are some communities 
that know exactly what they want today. They can fill out an 
application, hit the send button on grants.gov, and that is in 
the system.
    There are many other communities where an important role of 
what EDA does is to try and do the consultation at the front 
end and help move along an application. So it is really hard 
sometimes to get apples-to-apples comparison.
    Mr. Mollohan. Sure. And I understand that. I don't think 
too much can be drawn initially from such a depiction. On the 
other hand, it can identify areas where it may not have 
anything to do with the personnel or the leadership in the 
region. It may have something to do with the fact that we don't 
have a representative in a particular geographic area where we 
should have a representative in that geographical area helping 
people. So that may be the need, the requirement.
    There may be a lot of reasons for the disparity. But, you 
know, it would be interesting to look at that.
    Mr. Fernandez. It would be.
    Mr. Mollohan. Where, you know, government interfaces with 
constituents. We ought to look and see how the constituents are 
judging the performance. And if there are concerns expressed, 
then, you know, we need to address them, not in a judgmental 
way. But look at it----
    Mr. Fernandez. I absolutely agree.
    Mr. Mollohan [continuing]. From an administrative 
standpoint and see where we might. And actually that might 
bring for the Committee an understanding, but also a process 
that I am sure your folks have gone through, bringing a greater 
efficiency. We don't want to beef up an area with personnel 
where they already have the resources to do a really good job 
and other areas they may need additional resources to do a good 
job. And I think evening that out across the board would be 
very helpful.
    I know in West Virginia this consultive ability is very, 
very important. And maybe it is just because we have been used 
to having it for years and years. But it is something that 
people have missed for a number of years since the agency has 
been hobbled by a lack of personnel and expertise, both at the 
regional and at the national levels. So I think that is a good 
starting point to begin analyzing them.
    Mr. Fernandez. And if I can, Mr. Chairman, my focus on this 
is not totally unique or new to the agency. A few years ago 
based on a lot of input, the EDA did modify their process to 
streamline it. There used to be a pre-application then a formal 
application. They have condensed that to try and expedite the 
process. There has been a commitment in trying to improve 
processes that predate my position here.
    We are continuing to work on that. It is something we are 
very committed to doing in terms of making the system more 
effective.
    I think you have to get to the point where you can tell 
people yes or no. And you have to do that in a timely manner. 
In my old world I would do deals where I could get a yes or no 
in a relatively short amount of time.
    And the yes or no might be, okay, here is my commitment 
letter on financing. Of course there is going to be tons of due 
diligence, lots of other stuff that I am going to have to check 
the box on to actually close, right?
    But in the context of EDA, I don't understand why we can't 
have that kind of early process to review the merits of a 
proposal and get you an answer based on the competitive grants 
system. And then, of course, there will be some things we may 
have to do in terms of due diligence, things that are internal, 
and solely issues of the federal government process.
    But at least you will know on whether or not you can move 
forward with that project or not, at least with the EDA 
component.
    I think there is room for improvement. And I know that 
staff across the board does not want to be in a system that is 
perceived or in reality is, you know, too bureaucratic and 
slow.

                    NATIONAL INNOVATION MARKETPLACE

    Mr. Mollohan. Well we don't want to, you know, hang that 
label on you or any particular region. This is in the spirit of 
addressing it positively.
    Final inquiry, in our NIST hearing we discussed the 
National Innovation Marketplace. And I know you have discussed 
that in a number of different places.
    A new initiative in the MEP, the Manufacturing Extension 
Program out of NIST, we have learned that EDA has a role in 
this initiative. If you would discuss that role in terms of 
goals and vision and in the process, you know, we inquired 
about this at a previous hearing.
    And I think we need some elaboration on what is the 
National Innovation Marketplace. And in the process of telling 
us that, what is EDA's role in it?
    Mr. Fernandez. To be perfectly honest, that was news to us. 
The marketplace, as I understand it, is----
    Mr. Mollohan. You mean it was news to you that you were 
involved with it?
    Mr. Fernandez. Well I don't think----
    Mr. Mollohan. Or maybe we are misinformed.
    Mr. Fernandez. Well I am trying not to say that.
    Mr. Mollohan. No, no, no, please say it. We are misinformed 
all the time.
    Mr. Fernandez. I don't think that is the case. There are 
certainly opportunities----
    Mr. Mollohan. We don't have a corner on knowledge here. 
Believe me. And that is why you are here testifying.
    Mr. Fernandez. Now the marketplace concept is a virtual 
program that NIST has developed to match technology to business 
spinoffs, et cetera. We are not engaged in that.
    We are broadly engaged though in a discussion with NIST and 
a whole host of other Department of Commerce bureaus about 
partnering on commercialization ideas, how we can accelerate 
commercialization, and we certainly have a role in that in 
terms of some thought leadership as well as looking at----
    Mr. Mollohan. Commercialization of university research for 
example?
    Mr. Fernandez. Federal labs.
    Mr. Mollohan. You have a role in that. Elaborate on that 
for us.
    Mr. Fernandez. We can have a role. I mean, we find the 
university centers, some of which are specifically focused on 
commercialization, like the University of Kentucky. They are 
specifically focused on how they accelerate commercialization.
    We have accelerators that we invest in, incubators that are 
regional-serving that are located on campuses. So we do play a 
role in that commercialization and innovation economy.
    We believe there will be opportunities. And that is part of 
the Office of Innovation and Entrepreneurship's directive is to 
look at how we can broadly collaborate within DOC as well as 
other federal agencies.
    Mr. Mollohan. You know, I think----
    Mr. Fernandez. But the manufacturing--the program you are 
talking about, that is not something that we have been involved 
in.

                            Closing Remarks

    Mr. Mollohan. Okay. Well thank you for that clarification.
    We will have some questions for the record and other 
members may as well. We have asked you to submit for the record 
as we proceed in this hearing. And, you know, we would really 
like for you to actually respond to all those requests 
respectfully.
    Mr. Fernandez. We certainly will.
    Mr. Mollohan. I am sure you will. And thank you for the 
good job that you have already done and the attitude you are 
bringing to the Economic Development Administration.
    I know your attitude it is not only sympathetic to the core 
mission, but also brings a rigor to the efficiency of the 
agency and to the service that it provides to our communities. 
And also I think brings some imagination to the job, which we 
look forward to supporting through the funding process.
    Thank you for your testimony here today, Assistant 
Secretary Fernandez.
    Mr. Fernandez. Thank you.
    Mr. Mollohan. The hearing is adjourned.

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                                       Wednesday, February 3, 2010.

                  ECONOMIC DEVELOPMENT ADMINISTRATION

                               WITNESSES

MAYOR DAVID BRADFORD, MUSCLE SHOALS, ALABAMA
CHUCK WEMPLE, HOUSTON-GALVESTON AREA COUNCIL, TEXAS
JOHN BROWN, BROOKE-HANCOCK-JEFFERSON PLANNING
  COMMISSION
MICHAEL KING, NORTH COUNTRY COUNCIL
DR. LES WYATT, ARKANSAS STATE UNIVERSITY

                            Opening Remarks

    Mr. Mollohan. Welcome. The hearing will come to order. In 
fiscal year 2010 Congress provided $255 million for the 
Economic Development Administration's Economic Development 
Assistance Programs, but in fiscal year 2011 the budget 
proposes $246 million. Beyond the proposed $9 million reduction 
the budget also proposes to shift almost $90 million from 
Public Works grants to the Economic Adjustment Assistance 
grants.
    EDA provides critical funding for communities across the 
nation working with state and local governments, private 
industry, academia, and nonprofits, and leveraging investments 
to create and sustain jobs and improve local economies. Through 
the testimony of today's witnesses we will hear about the value 
of such appropriations to local communities as well as 
suggestions from grantees on how EDA can improve its processes 
and provide better services as it plays a critical role in our 
national economy.
    Today we will hear from grantees from various regions with 
a wide variety of EDA grant experiences. Each grantee will 
touch on his or her depth of EDA experience. Most, if not all, 
of our witnesses, have received Public Works grants, possibly 
the most important and clearly the most traditional of EDA's 
grant options. Today's witnesses will also talk about the 
importance of Planning grants, Economic Development Districts, 
disaster assistance, revolving loan funds, University centers, 
and technical assistance. Through their collective testimony 
the Subcommittee hopes to obtain an alternative view of EDA's 
programs and their effectiveness. A view from the ground, a 
view from implementors, a perspective we often do not get from 
the Beltway.
    In the first panel we will hear from John Brown, Executive 
Director of the Brooke and Hancock Regional Planning and 
Development Council in Weirton, West Virginia; and Michael 
King, Executive Director of the North Country Council in 
Bethlehem, New Hampshire and board member of the National 
Association of Development Organizations.
    In the second panel we will hear from Mayor David Bradford 
of the City of Muscle Shoals, Alabama, and the immediate past 
Chairman of the Northwest Alabama Council of Local Governments; 
Chuck Wemple, Economic Development Program Manager of the 
Houston-Galveston Area Council; and Dr. Les Wyatt, President of 
the Arkansas State University System.
    Well, thank you all for coming. Following the statement of 
the ranking member, Mr. Bonner, we will move to welcome your 
oral testimony and your written statements will be made a part 
of the record.
    Mr. Bonner. Mr. Chairman, distinguished panel, my name is 
Jo Bonner and I am pleased to sit here today on behalf of our 
Ranking Minority Member Frank Wolf of Virginia, who has another 
conflict but who hopes to be with us to join in welcoming you 
to the Committee. We certainly appreciate your coming today and 
we are interested in hearing from you about how you have 
utilized EDA grant funding.
    With unemployment nationally at 10 percent, and in parts of 
our country at much higher, I have a county in my district that 
is at 20 percent unemployment today, we all know, Democrats and 
Republicans, and certainly this Subcommittee under the 
leadership of our Chairman, that it is critically important for 
us to hear from the people outside of Washington, D.C. on how 
the federal government can do a better job than what we have 
done to create sustainable economic growth. We encourage each 
of you to be very candid in talking about the things that have 
worked, the good things that the government and EDA 
specifically are doing and are doing well, as well as to be 
constructively critical of those things that we are doing 
poorly.
    Thank you again for the opportunity to hear from you today, 
and we look forward to not only your testimony but also the 
answers to some of the questions we might have. Thank you, Mr. 
Chairman.
    Mr. Mollohan. Thank you, Mr. Bonner. Today, I would 
especially like to welcome to the hearing Dr. John Brown, who 
is the Executive Director of the Brooke-Hancock Regional 
Planning and Development Council. He is doing really 
outstanding work up in the northern part of our district, which 
has been particularly challenged. And we look forward to not 
only his testimony here today but continuing to work with him 
in the final organization in order to be successful, and get 
our economy in the northern part of the state turned around, 
which is challenging, as I am sure we are going to hear. And I 
also welcome Mr. King to the hearing and look forward to your 
testimony. I am going to start with Dr. Brown.

                  Opening Statement by Dr. John Brown

    Mr. Brown. Chairman Mollohan, Ranking Member Bonner, and 
members of the Subcommittee, thank you for the opportunity to 
testify on behalf of the Brooke-Hancock Regional Planning and 
Development Council. We are located on top of West Virginia, in 
the northern panhandle. Our region is a rust belt with a 
population of 50,000. Through the devastation of international 
steel competition since 1995 our two-county region has lost 
12,000 steel worker jobs. Our two domestic steel companies are 
now international conglomerates. In 1995, Weirton Steel, the 
regional lynchpin in our region, was the top private sector 
employer in West Virginia. Today West Virginia's top employer 
is Walmart. As recently as Thursday, that is last Thursday, 
January 28th, we lost another 180 steel related jobs.
    So from the perspective of the U.S. Economic Development 
Administration and its mission we are ground zero. For our 
region the need to have an active and engaged EDA could be no 
greater than today. Mr. Chairman, I would like to focus on 
three major issues related to EDA. First, as a region in 
transition we are literally reinventing our economy. While we 
understand our leadership role, we need partners to invest 
capital and to provide technical skills through the core EDA 
Public Works and the Economic Adjustment Assistance programs. 
In 2007 we received $891,000 for an EDA Public Works grant to 
construct related downtown infrastructure to a state office 
building. That was matched with $600,000 in local funds. The 
project was completed one and a half years later in '06 and 
resulted in over 300 new or saved jobs. Located in our key 
downtown, the project has sustained the integrity of our 
downtown and leveraged private sector downtown investment. I 
wish I had a picture. We were not allowed to put pictures in 
here, but if you could see our downtown, what we are about, I 
think that picture is worth a thousand words.
    In late '09 we received 215,000 economic dollars in an 
Economic Adjustment Assistance grant to create and carry out a 
detailed project, specific action strategy, for job growth and 
diversification. And that project will use market information 
to develop site investments while benchmark measurements will 
be defined. Our approach focused on advantageous employment 
clusters as a way to identify job training needs, launch 
programs to attract investments, retain and expand emerging 
industries, and increase employment opportunities for workers. 
Over a five-year period the project will result in the creation 
or retention of over 500 jobs in the region.
    My second point is we support and advocate stronger 
incentives to reward regional collaboration, partnerships, and 
initiatives, not only among the public and private sector but 
between EDA regional offices, and you all probably know there 
are six regional offices. Our region is one labor force, 
crossed by two states, and divided by the Ohio River. In the 
case of employment these barriers are literally transparent. 
EDA's Chicago region, which serves our West bank communities, 
and the Philadelphia Regional Office, which serves our East 
bank communities, has initiated the steps to recognize this one 
labor force issue that we have.
    So in 2009 through the encouragement of local development 
agencies, and we have two of them, and the regional Chamber of 
Commerce, our joint program we call the 3-2-1 Program was 
created. And the 3-2-1 should be no secret. It stands for three 
counties, two states, one goal. And this approach challenges 
the Chicago and Philadelphia regions to coordinate plans and 
provide, boundary flexibility. We have 50,000 on the West 
Virginia side, we have 70,000 on the Ohio side. And so in the 
Chicago office, they incorporated our three-county labor force 
in a recent targeted industry study. The strategy is to find a 
clear building block for a forthcoming U.S. EDA management 
project outside the Chicago EDA map boundary, but inside our 
labor force boundary.
    So the lesson here is boundary flexibility can and will 
define truer markets and assure wiser investments. And we do 
have this issue up and down the Ohio River, whether you are in 
Wheeling, Parkersburg, or Huntington. They are all, the labor 
forces go in two states.
    My third comment is that the Economic Development District 
Partnership Planning Program has been invaluable to us. Due to 
the downturn in the economy the demand for the Partnership 
Planning Program has increased significantly. In our region, 
Congressman Bonner, for example, our unemployment is running at 
12.5 percent in one county, it is 13.5 percent in the other. We 
have a lot of discouraged workers that have left the area, so I 
do not even know how to count those.
    Established in 2005, we are a relatively new EDD. And since 
that time, through the mandated Comprehensive Economic 
Development Strategy, that is called CEDS, we have prioritized 
future investments and set a path for the future. Through the 
Planning Program we created companion programs such as 
brownfield initiatives, because we have got a lot of 
brownfields. We have a lot of properties that need to be 
returned and act as job generating sources. And we have a small 
business start up program called Valley Ventures. And in the 
case of brownfields, we have initiated hazardous waste and 
petroleum site clean up to attract jobs. We have created a 
dialogue for a river barge to rail/truck and intermodal site. 
And we have communicated a very viable economic future for our 
region.
    In January '08 ArcelorMittal Weirton, which used to be 
called Weirton Steel, the key remaining steel company in the 
region, announced its intent to divest its nonessential 
properties. These nonessential properties, characterized as 
mothball commercial industrial properties, constitute, and this 
is the key, they really constitute 30 percent of the city's 
land area in Weirton. This divestment issue has created an 
unusual opportunity. Without EDA's planning partnership 
resources we could not complete the necessary due diligence to 
organize, prioritize, and redevelop these sites.
    In the case of Valley Ventures, we recognized small 
business is the key driver for new jobs. Over 70 percent of all 
new jobs are created through small businesses. And for the past 
twenty-plus years our community has held, and I have heard 
Congressman Mollohan say this, has held adamantly to the myth 
that the steel companies will reopen, and jobs will return. In 
recent years reality has set in and this myth has deteriorated. 
Valley Ventures is a private, nonprofit organization formed and 
managed by a board with business and professional men and 
women. This innovative organization assists entrepreneurs and 
small business owners. Valley Ventures provides businesses with 
hands on technical assistance, financial resources, business 
education, and important business networking. In '09 Valley 
Ventures is credited with starting ten new businesses.
    So in summary, EDA is the only federal program focused 
exclusively on private job creation. At ground zero it has been 
an invaluable and flexible resource. And given the ongoing 
challenges facing the communities in my region, and across the 
nation, the need for EDA has never been more pressing. With its 
forty-year track record of job creation and retention and 
ability to leverage private sector funds, we know EDA has the 
tools necessary to help communities. Now is the time to assure 
it has the resources to fully develop its potential. I thank 
the Committee for this opportunity to testify in front of you, 
and I welcome the chance for any questions.
    [The written statement of Dr. John Brown, Executive 
Director, Brooke-Hancock Regional Planning and Development 
Council, follows:]

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                 Opening Statement by Mr. Michael King

    Mr. Mollohan. Thank you, Dr. Brown. Mr. King.
    Mr. King. Good afternoon, Chairman Mollohan and members of 
the Committee. My name is Michael King and I am the Executive 
Director of North Country Council, which is the Regional 
Planning Commission and Economic Development District for the 
northern region of New Hampshire. I am also a board member of 
the National Association of Development Organizations. Thank 
you for affording me the opportunity to testify today. I have 
submitted my written statement for the record and would like to 
submit this oral testimony in regards to the Economic 
Development Administration.
    I would like to provide you some examples, and I have tried 
to meet your goal of looking at some of the things that EDA 
does well and looking at some of the things that maybe we can 
make some improvements in. So there are three examples that we 
have seen EDA invest in over the last several years in my 
region. EDA and the State of New Hampshire invested $3.9 
million in the Littleton Industrial Park, this was several 
years ago, which was a Public Works project driven by local 
leaders to attract and nurture new manufacturing and service 
businesses to the region at the time of an economic downturn. 
After two companies left the area taking with them 700 jobs, 
community leaders formed a local government corporation, and 
with the help of the Economic Development District, EDA, and 
the State, created the Littleton Industrial Park. Today the 
industrial park supports eleven companies with over 1,200 jobs 
and a combined payroll of $48 million.
    Another example, more recently, is the Sustainable Economic 
Initiative (SEI) Program. It is a perfect example of how 
economic development funds can be successfully used to promote 
regionalism and regional innovation. This four-state project 
brought over sixty community and state leaders together to 
build on a common economic demographic, environmental interest. 
You have got to understand the northern part of New Hampshire 
is a heavily forested area and a very rural area. We developed 
a strategy for the region in the sustainable forest industry, 
in telecommunications, and transportation networks, and for the 
development of renewable energy. These central themes, along 
with additional priorities outlined in the SEI action plan, aim 
to balance the unique environmental characteristics of the 
region with our core economic, cultural, and geographic assets.
    Another example is the Dartmouth Regional Technology 
Center, DRTC. This initiative is focused on nurturing the 
growth of our biomedical and engineering technology cluster. In 
partnership with Dartmouth College, and with funds from the 
State of New Hampshire and EDA, we have built a 32,000 square 
foot incubator and are in the process of adding on to it with a 
28,000 square foot addition. We are very proud of the 
accomplishments with this project. To date, eighteen companies 
have taken tenancy in the DRTC with eleven still located in the 
building. Over $60 million in venture capital investment has 
been made by DRTC's tenants in the last three years. In 
addition, the most recent graduate, Mascoma Corporation, 
consolidated its Boston and Lebanon operations building a 
32,000 square foot facility of their own two miles from our 
incubator. That is a big success for us.
    Mr. Chairman, one of the common threads of all three of 
these success stories is the involvement of our Economic 
Development District, the EDD. My EDD uses EDA's matching funds 
from the Planning program to bring public and private sector 
investments and public and private sector leaders together on a 
regional basis to identify, prioritize, and pursue common 
economic development opportunities and strategies. This 
leverages the assets of our region to create and retain high 
quality jobs. And the aim of our region is to try to create the 
jobs where we can. This results in projects such as the 
Littleton Industrial Park, the Dartmouth Regional Technology 
Center, and the Sustainable Economic Initiative, which happened 
over quite a span of years. We have been an Economic 
Development District since 1975 and those are three examples 
over those years that I brought to you.
    Mr. Chairman, I would also like to offer a couple of 
observations and recommendations for making further 
improvements to the programs and operations of EDA from a local 
practitioner's perspective. First, we have seen a major 
decrease in the number of EDA's professional program staff 
positions both in headquarters and in the regional field 
offices. These EDA staff reductions have caused delays in 
project approvals and funding which can be fatal to closing and 
implementing economic development projects. Especially in a 
region such as mine in the northern part of New Hampshire, 
where our construction season might be very short, it is 
important that we get things through EDA as quick as possible.
    Second, we remain steadfast in our support for maintaining 
the agency's core Public Works program, which provides vital 
matching funds for distressed communities like mine to address 
the necessary building blocks for economic development.
    Third, we urge the Committee to provide new and additional 
resources for the administration's proposed regional innovation 
initiative. It is essential that our nation's distressed 
regions pursue more in-depth and sophisticated economic 
competitive strategies that leverage local assets and foster 
the development of emerging clusters.
    Most importantly, we encourage the agency to tap into the 
existing regional planning process, spearheaded by EDDs, as the 
primary building blocks for regional innovation strategies.
    In closing, Mr. Chairman, I would like to thank the 
Committee for your recent efforts. Increasing the minimum 
funding levels for EDA planning grants, these modest yet 
invaluable matching funds are used by organizations such as 
North Country Council to provide much needed professional 
economic development planning and project implementation 
assistance to our local governments and communities, especially 
in the distressed small rural areas like mine. Thank you again 
for allowing me to testify today, and I welcome any questions.
    [The written statement of Mr. Michael King, Executive 
Director of the North Country Council and Board Member of the 
National Association of Development Organizations, follows:]

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                       LENGTH OF REVIEW CONCERNS

    Mr. Mollohan. Thank you. Thank you, gentlemen, both. Dr. 
Brown, I know that you have recently been going through a 
pretty intensive assessment of the condition that we are facing 
up in the northern part of the State. And you have been 
interfacing with EDA in that process. Just describe to what 
extent you think the EDA involvement has been helpful, and 
areas where perhaps it could be more helpful? And what do you 
think the outcome might be?
    Mr. Brown. Well, we have been an Economic Development 
District for four years. I have been at the regional council 
for twelve. I want to tell you, first of all, that it is 
apparent to me that there has been more hiring in our 
Philadelphia regional office, so we have gotten a little more 
assistance. That is good. In terms of doing applications for 
EDA, it is, as it should be, a long, extensive process of 
review. We made an application in February, heard in----
    Mr. Mollohan. February of 2009?
    Mr. Brown. Yeah. At least, we heard in July. The program 
has been up and running, and at last getting a consultant, we 
are in that process right now. So we are sitting here, what, 
six or seven months after that point in time. We have a nine or 
ten month window to complete the program. So we will be rolling 
very fast. And probably, if I could, later on tell you how it 
is going because I am sure you are very curious about it, too. 
We have ten months to get it done. I do know, if you come into 
any region like I am in, and I know, we all had lunch, and I 
was interested about how this all works. It is the fact that 
clearly in our region people are tired of getting plans and 
putting it on the shelf. They want to see action. If you have a 
high unemployment rate of 12.5 or 13.5 percent, councils, 
commissions are very cautious of where you are going and how 
you are doing it. In our time with EDA, timewise, we clearly 
told them that. We have beefed up staff a little bit.
    Mr. Mollohan. I hear you saying that actually they beefed 
up staff a little bit, and that is your way of saying they 
needed to beef it up a long time ago----
    Mr. Brown. Absolutely.
    Mr. Mollohan [continuing]. And this process needed to be 
expedited----
    Mr. Brown. Absolutely.
    Mr. Mollohan [continuing]. Considerably. Yeah, I mean, if 
you are going to give help with regard to economic development, 
I mean, it has got to, the approvals have got to come much more 
quickly and the aid has got to come much more quickly----
    Mr. Brown. Yes.
    Mr. Mollohan [continuing]. Than a year, which is what I am 
hearing you say.
    Mr. Brown. Absolutely.
    Mr. Mollohan. Have you broached this subject with them? And 
if so, what do they say?
    Mr. Brown. I have not personally broached the issue with 
them. Clearly, we have told them we need it in a certain time, 
but I never said there is an issue here and we need you to move 
forward with that. I do not, I guess Michael, I defer to you.
    Mr. Mollohan. You are talking about some of the process 
issues. And Mr. King, will you speak to that?
    Mr. King. Yeah, I have broached with the regional director 
some of those concerns in getting projects through. And I think 
the answer that I got, received, was that indeed the agency was 
hurt in reductions, but has since recovered from that. But the 
problem that we are having now is the staff is somewhat 
inexperienced. And there is a learning curve that regional 
staff and even, if you look in the Philadelphia region all of 
the EDRs, with the exception of one, are fairly new to the 
region. So there is that learning curve. There is that, you 
know, administratively it is a federal bureaucracy, and we have 
to go through those federal bureaucracies. So there is 
something to be said for that. Getting things through the 
agency is critical. We are building this new addition to the 
incubator, and we are right on the timeline to be able to meet 
construction in time right now. And you know, in the Northeast, 
our construction season, as I said, is shorter. So you just 
have to, you have to be able to move those along quickly.

                                PLANNING

    Mr. Mollohan. Where do you find the Economic Development 
Administration most helpful? In the planning process? In funds 
for infrastructure?
    Mr. King. I will defer a little bit. I think they are 
pretty helpful in most of the areas. I think the planning 
process is very good. You know, planning sometimes gets a bad 
name. And I want to be careful to say what EDA does in their 
planning process is, it is an implementation process and not 
just a planning process. And at least in my region, that is 
what we use it for. We are not sitting there developing plans. 
We are meeting, our planning process is to meet with 
practitioners and decide which projects are the best projects 
and can get the most bang for the buck in our region. And that 
is our planning process, so we can follow right into 
implementation when we are doing that. And EDA is very 
supportive of that. And their particular planning process is 
very supportive of us doing that.
    Mr. Mollohan. What do they bring to the table in that 
process?
    Mr. King. Well----
    Mr. Mollohan. Besides money?
    Mr. King. They bring money, which is important. I think----
    Mr. Mollohan. How about advice?
    Mr. King. I do not think we get a lot of advice from the 
agency itself.
    Mr. Mollohan. Should you?
    Mr. King. And I do not think we ask for a lot of advice, to 
tell you the truth.
    Mr. Mollohan. So you are not really interested in their 
actually coming forward with lessons learned in other areas, 
or----
    Mr. King. Well, I guess I have not thought too much about 
that, Mr. Chairman.
    Mr. Mollohan. I mean, you may have those resources at your 
disposal. How about you, Dr. Brown?
    Mr. Brown. I think that is a good point. And I am thinking 
why I did not ask our EDR, who is both in West Virginia and 
Maryland spread so thin, but that is a very good question, 
about how we could better use that. I would say, I hate to say 
we are working and we know better, but quite honestly when we 
get our CEDs we have got $550 million of projects that are 
being prioritized. And one of the great advantages, I know Mike 
and I have talked about this, the fact is if this is the one 
time I can get the nine incorporated areas, two counties, in 
one room and talk about, ``Folks, these are what the available 
dollars are.'' Even if it is not EDA or ARD, we are talking 
about energy efficient programs. If we did not have planning 
partnership forums, that would not be happening.
    Mr. Mollohan. And that came from?
    Mr. Brown. Those comments of priorities and where we were 
going to go came from the locals, council people, commission 
people, private sector, all sitting in a room.
    Mr. Mollohan. Mm-hmm.
    Mr. Brown. And we have about fifty-five people on our 
regional council.
    Mr. Mollohan. But the dollars came from?
    Mr. Brown. From EDA.
    Mr. Mollohan. Yeah.
    Mr. Brown. Which is, we get $62,000 a year for a planning 
grant, which must be matched on a 50-50 basis through our 
regional council.
    Mr. Mollohan. Yeah. Okay. Mr. Bonner.

                    COORDINATION OF FEDERAL AGENCIES

    Mr. Bonner. Mr. Chairman, as I was listening to the 
witnesses give their testimony, and answered some of your 
questions, I was reflecting on a conversation that I had with a 
small businessman in my district, a gentleman by the name of 
Albert Winfield, on Monday of this week. Mr. Winfield is like a 
lot of other small businessmen in America, not just in Alabama. 
He has been very successful after some time developing a 
barbecue restaurant that has become one of the most popular 
barbecue restaurants in my district. So popular, in fact, that 
he wanted to expand and sell franchises. So he went to the 
Small Business Administration to get their help. They agreed he 
had good barbecue but they said that he needed to go to the 
banks. So he goes to the banks. And they said, ``Well, you have 
really good barbecue but you need to go to the Small Business 
Administration.'' And at the end of the day he is like so many 
other small businesses throughout the country, just chasing 
himself in a spiral, trying to grow, trying to add new jobs. 
Trying to help sell his franchise to other places around our 
region, certainly around our State. And he seems to keep 
running into one roadblock after another. So listening to you, 
Dr. Brown, say, I believe this was your quote, that EDA is the 
only federal program that you know of that really focuses on 
job creation, something to that effect.
    Washington has so many alphabet agencies that are acronyms, 
and yet to small towns and to planning commissions and others 
that really are your lifeline to the federal government. And I 
guess my question to you would be, not only within the 
Department of Commerce, International Trade Administration, EDA 
of course, Minority Business Development Administration, but 
outside SBA, the rural development programs, Department of 
Agriculture, HUD grants, and other things, how well do you 
think the federal agencies coordinate their activities and 
their support with each other in an effort to help Mr. Winfield 
and other small businessmen and women around the country know 
that there is some real help out there? If that makes sense?
    Mr. King. In my opinion, not well, Congressman. I think one 
of the values of EDA are the districts, like mine, who get 
practitioners together, and like Dr. Brown's. That is more 
coordination than you will get from the federal government. We 
access not only EDA in my organization. We access Rural 
Development. We have people sitting on there that have CDFI 
corporations, or are getting federal funds for that, SBA, and 
those kinds of funds. And really the task that we have is to 
try to bring those agencies together. Because going directly to 
your question, if we did not I do not think the federal 
government is going to do it very well at all. I just, they are 
not set up to do that, to bring small, and particularly the 
smaller type businesses. I think they probably do a better job 
in larger developments, but not to the small businessman. It 
just does not work.
    Mr. Bonner. Dr. Brown.
    Mr. Brown. We have small business development centers in 
our area, SBA run programs. Much like many federal programs 
that are avenues of assistance, they are clearly understaffed 
and are not there everyday. If you were to come ten years ago 
into the area, the SBA office would have been open everyday. 
They are not. They are there two days a week now, leaving a 
void. And you would think maybe community colleges will pick up 
some of that. Well, community colleges do a little bit of small 
business things. They do training more than anything else.
    The group I mentioned, Valley Ventures, probably is our 
biggest advantage, and that was created through our regional 
council, through planning partnership funds. It now has a 
private foundation providing some support for that. One staff 
member, a secretary, but run by businesswomen; people who have 
a barbecue place and are able to, if they know Valley Ventures 
is out there, can get assistance for that. But it is local, it 
depends on originality, locally what emphasis is on it, and 
what kind of funds you can get for it. But I recognize the 
conflict and the discussion, the dialogue sometimes does not 
quite work. And I understand the frustration. I have people 
walk in my office asking about small business assistance. I am 
not a small business person. We will try to point them in the 
right direction.

                           APPROVAL TIMELINE

    Mr. Bonner. Mr. King, you indicated that because of the 
decreases in the EDA staff, that that extends the time, the 
process, to get the EDA support approved. What on average is 
the timeline in terms of going after EDA funding and finding 
out whether or not you have gotten it?
    Mr. King. I think it varies quite a bit, and it varies 
quite a bit depending on what is coming down through EDA and 
what their priorities are, and what funding buckets they need 
to get out quickly, and what funding buckets they do not need 
to get out as quickly. And so I know that is not a great answer 
but it does vary widely. If we push hard on it, and 
particularly, and get projects to be a priority, they can do it 
very quickly. And if we are not pushing as hard it takes a long 
time. For instance I can give you an example. There was a 
particular public works project, bank erosion along a 
particular industrial park that was going to wash away a 
building. And that problem is still there. But we have lost 
this season to be able to do it because they could not get the 
money out quick enough. And, you know, you have to get this 
when the water is low, and so forth and so on. So this will not 
be done until next fall when we can do it. Now, the money is 
out, the grant is approved, and we are going to go ahead with 
it. But that was put back in, sometime back in April, that 
funding. And we just lost the season.
    Mr. Bonner. April of last year?
    Mr. King. April of last year. And, you know, on the other 
hand, for the Dartmouth Regional Technical Center they did a 
very good job. We were able to get that funding through. That 
is ARRA money, so it was a little bit, it had a little bit more 
behind it to say, you know, this is the kind of thing where the 
nation wants to create jobs so let us get that money out. And I 
think in some cases it is, you know, the priorities are set by 
you yourself that tell you how fast, you know, you want funds, 
how the bucket of funds go out. And we just have got to be a 
little careful of that in my opinion. We want them to move 
ahead.
    Mr. Bonner. Well, my last question, I know there are other 
members, other colleagues that would like to have a chance to 
ask some questions of you, is this Committee has been very 
active. I have only been on it for a year, but I thought 
Chairman Serrano worked me hard when I was on his subcommittee, 
and he did. But Chairman Mollohan, last year, my first year on 
the Committee, really brought a lot of people in to give us 
some good feedback about what programs worked, what programs 
did not work, and what we could do to make better use of the 
limited resources that were available.
    I read in the paper yesterday, in the Washington Post, I 
believe I am right, that thirty-three cents of every dollar 
that we will spend this year is borrowed money. So that makes 
your testimony on behalf of a program, either things that work 
well or things that need to work better, especially in light of 
the pressure that the administration is under and that we are 
under, all the more valuable. Of what we can do to make 
programs like EDA stretch those dollars even further. And 
certainly it seems to me that one constructive comment that you 
have just offered is it is just unacceptable that it takes so 
long to get approval. Think of what could have been done if 
that could have, that timeframe could have been met last year? 
So I would just encourage not only you, and the next panel that 
will come after you, to think and to continue this dialogue as 
we go forward. Things that we could do a better job at our, in 
our role in government of trying to make the process work a 
little bit better. Thank you, Mr. Chairman.
    Mr. Mollohan. Thank you, Mr. Bonner. Mr. Serrano.

                             GREEN PROJECTS

    Mr. Serrano. Thank you, Mr. Chairman. Gentlemen, thank you 
for being here. And as you know, there is an emphasis greater 
than ever on green industries, green businesses, and just 
hopefully the greening of America, as we would like to call it. 
Do you sense from EDA's actions a desire to promote green 
projects? To invite people to submit green project requests? Do 
you see anything that indicates that that could be happening? 
Either one of you, or both?
    Mr. King. I do not necessarily see a sense of that coming 
directly from EDA. I think, however, the agency itself is very 
supportive of those projects that will come forward, in my 
opinion. And I think, in my particular region, again, you did 
not, you were not here for my oral testimony, but it is a very 
forested land, and very concerned with creating green energy 
projects. We are very concerned with our forests, and 
maintaining sustainable forestry, and so forth. So it is very 
receptive, they are very receptive to those kinds of projects. 
Though I do not feel that they are promoting that, per se, if 
you will.
    Mr. Serrano. And I am not sure, Mr. Chairman, if that is 
correct on my part, to assume that EDA would promote any kind 
of business. But rather, I am not sure I know what their role 
should be other than to accept good projects and then promote 
them. But there seems to be a national desire on all sides to 
get more of this going. So I was just wondering----
    Mr. King. If I can just make one, you know, my personal 
feeling is I see EDA's role is, and I think, is to create jobs. 
And jobs are extremely important, be it a green job or a non-
green job. I mean, it just, we need to be out there creating 
jobs and EDA is helpful doing that. I guess that is how else to 
say it.
    Mr. Brown. I would certainly say, if it is not EDA, I hear 
from other agencies, whether it is Appalachia Regional 
Commission, or a lot of different agencies, clearly energy 
means jobs. We are doing a strategic cluster now, trying to 
look at our employment sources, and it is tough to figure out 
how energy mixes into all of that. But the economy is changing, 
there is no doubt about it. And we have seen energy, at least 
in the northern panhandle, the environmental aspect may be 
second to the aspect that it means jobs. And there is the 
maximizing dollars, and where the opportunity is, appears to be 
in the energy field.
    Mr. Serrano. Right.
    Mr. Brown. And whether it is EDA, or ARC, or some other 
agency, and we hear a lot about different agencies, we are 
looking at it. People that would not have looked at it five 
years ago or sort of deflecting on the energy issue, or clean, 
are much more accepting of that.

                 PARTNERSHIPS WITH HIGHER INSTITUTIONS

    Mr. Serrano. And I think that that is the key. You have hit 
on the most important part of this whole argument, that the 
same folks who years ago found themselves as enemies, the 
environmental movement and the business community, now realize 
that it is not only sound for the environment but it is good 
business practices. And it does create jobs. And so I think we 
have now gotten to a point totally different from where, when I 
started out in public service, where these folks were at each 
other's throats all the time.
    With that in mind, higher education, also institutions of 
higher education always play major roles in our communities. 
And they serve as a place for training of people, and promoting 
business practices, and other issues. Do you know of any 
partnerships with higher institutions in different regions that 
we could be discussing?
    Mr. King. Well, I am right in the middle of a partnership 
with Dartmouth College. And we built a 32,000 square foot 
incubator at Dartmouth College. We are adding on a 28,000 
square foot addition, 28,000 square feet. And we are doing that 
because that 32,000 square feet was fully subscribed. Not only 
Dartmouth College but the State of New Hampshire, 
commercialization of the knowledge coming out of that college 
is a very big priority for the region within the State. So, 
yeah, we have got super priorities with them. It is a major 
project in our region.
    Mr. Serrano. It is an incubator you said?
    Mr. King. It is a technology incubator. In the Dartmouth 
area, for Dartmouth College, they have the Thayer School of 
Engineering, and the Dartmouth Medical School, and a major, 
major hospital, the Tuck School of Business. But when they did 
all the biomedical engineering some of the businesses coming 
out of that, there simply was no lab space for businesses, for 
people who wanted to come out of the school doing research at 
the hospital and had ideas to commercialize things, there was 
no lab space. And that is what our incubator did. And we 
started to have 50-50 lab space. When we finished the building 
it was about 75-25. So it just fit a need to really help with 
getting businesses in it. And we have been very, very 
successful with that.
    Mr. Serrano. All right, good. Any thoughts on that?
    Mr. Brown. Well, our area is a little different. We have 
only one four-year college. And really where the technical 
skills and training occur in our region are through the two-
year community colleges. And that may be due to the fact that 
we have three major steel mills, and most people up till about 
fifteen years ago were promised a job in the mill. And they saw 
community college as a potential training, or revisiting but 
with that with workforce investment, councils in the community 
colleges, it is moving along.
    I would say to give you an example, we are, through Ohio 
University, which is by the way located 180 miles from us, one 
of their schools, is doing a targeted industry study. And we 
will have people from our training group in the community 
colleges, workforce investment. We are going to really try to 
establish where our employment advantages are in the future. 
And I have certainly thought about the energy field, I am going 
to tell you, and it certainly it is coming up as one of those 
areas. I am not sure how viable it is, we will know in a couple 
of more months where that is, but our point is in the 
industrial heartland of Weirton. And Brooke and Hancock are the 
community colleges that are sort of taking that on. That is a 
good bang for the buck, too, for the population.
    Mr. Serrano. Thank you. Thank you, Mr. Chairman.
    Mr. Mollohan. Thank you, Mr. Serrano. Mr. Aderholt?
    Mr. Aderholt. I do not have any, thank you.
    Mr. Mollohan. Mr. Culberson.

                 EFFECTIVENESS OF EDA AS A LOAN PROGRAM

    Mr. Culberson. Thank you, Mr. Chairman. I want to ask you 
each if I could, and Mr. King in particular, you have got, each 
of you have got a lot of success stories to talk about locally 
that you have been able to use the money from, the grant money 
from the EDA. And Mr. Bonner's questions, in order to sort of 
follow up on his point, we are entering a whole different era 
in the United States of really unprecedented levels of debt and 
deficit. And the good work that EDA has done, could you both 
speak to, certainly because these programs you are talking 
about have been successful, what if Congress were to 
restructure this as a loan program? And to expand, for example, 
the responsibility of the SBA? Could a lot of these grants not 
be repaid to the taxpayers to the job creation, success you 
have had with these incubators, the local tax I am sure 
incentives that the State of New Hampshire and Littleton, New 
Hampshire, I suspect, probably granted some property tax 
exemption, or some tax break of some kind? Could you not put 
together packages, rather than grants, recognizing the scale of 
the debt and the deficit that we could structure this program 
as a loan program, and still be as successful and repay our 
kids?
    Mr. King. I suppose we could. I do not know if it would be 
as successful. You know, you get involved with the Dartmouth 
Incubator, for instance, we pay full taxes, property taxes on 
it. And we try to do the best we can in that. We think what you 
are doing is you are generating, there is a number of small 
businesses going into that incubator, and some of them are 
going to be successful and some of them are not. And they do 
not in particular own the property. The property is owned by 
nonprofits that are trying to help these companies. I think one 
of the biggest problems we have with midrange companies is that 
the lack of funding, as Mr. Bonner stated, you know, there is 
this guy, he just cannot get any money to keep his business 
going. And I think we are faced with the same problem in some 
of the companies we bring into the incubator.
    You know, on the other side of the tax benefit, they are 
creating jobs. And those jobs create tax dollars. For instance 
the tax dollars, just going back to the Littleton Industrial 
Park, I forget what the number was.
    Mr. Culberson. Oh sure, no question it is worthwhile. But--
--
    Mr. King. It is millions of dollars worth of tax dollars 
being generated from making that investment. And I----
    Mr. Culberson. But based on your experience, and what you 
have seen, this program could be restructure as a loan program, 
and the money could be paid back?
    Mr. King. I do not think it would be as effective. Just 
personal opinion, I just do not think it could be. I think you 
would have trouble making it as effective, for instance, we 
could not pay the money back from the Dartmouth Incubator. That 
would not be something that we could do. We just, it would, the 
program would not go forward. The building would not have been 
built.
    Mr. Culberson. Mr. Brown, what about in your experience? 
Recognizing the level of debt and deficit, we are really about 
to hit a brick wall as a nation, turning this into a loan 
program?
    Mr. Brown. I would say Governor Joe Manchin of West 
Virginia probably understands the debt issue like most 
governors do. And if you ever walk into the Governor's office, 
he visits with you, he always wants to know what you have in 
the game. You are not going to get a grant. Things have 
changed. You have to have significant investment in the 
project, whether it is a loan, or whatever, a bond. You are 
going to have to, you cannot walk away from this.
    Mr. Culberson. And that is always a good thing.
    Mr. Brown. Yeah. And the word is out. No one is showing up 
at the Governor's Office saying you want a grant. That is not, 
that is not happening. In terms of loans, it all depends how it 
is configured. I just do not know how, I do not know if I have 
a real good feel for that in terms of how it is configured, 
what is being loaned, what is being granted, what the max is, 
what jobs it brings, could bring. I mean, if it is a wise 
investment, and----
    Mr. Culberson. What would you recommend? Just, I throw that 
out as food for thought, because we are entering a whole new 
era, unlike anything the country has ever faced before.
    Mr. Brown. You are going to have to give me some time to 
think about that one.
    Mr. Culberson. Okay. Thank you very much.
    Mr. Brown. I am sorry.
    Mr. Culberson. Thank you. Thank you, Mr. Chairman.
    Mr. Mollohan. Thank you, Mr. Culberson. Mr. Fattah.
    Mr. Fattah. Thank you, Mr. Chairman. I think the first 
place we should start in these loan agreements is the $20 
billion we spent in Iraq on reconstruction. Now, if we want to 
get a loan, maybe they should pay us back. But when we tried to 
structure that in the Appropriations Committee I know that 
there was not a lot of enthusiasm. In fact, we have wasted over 
$1 trillion of our money in this ill-conceived war in Iraq.

                            PLANNING NETWORK

    But I am very happy that you are testifying here today, and 
that you are trying to put Americans back to work, and that you 
are doing it. I saw the President was in your home state, Mr. 
King, yesterday, in New Hampshire, and talking about the 
recovery. And the shift in, you know, last January we lost 
780,000 jobs in this country. This week's job's report will 
probably show us dead even, not gaining jobs, not losing jobs, 
but definitely putting a break on this hemorrhage of jobs in 
our economy. And we saw the gross domestic product go from 
negative 6 percent to a positive 5.7 percent a year later, both 
in purchasing orders, and a whole range of other economic 
indicators. We seem to be moving in the right direction.
    Now, I know that people in New Hampshire pay federal taxes. 
And I assume they have every right to expect to be, when they 
have a worthy project, like the incubator. Now this first grant 
was 3.9 and it was overbooked, almost, and you had to move 
forward again. And I am glad EDA is giving you another grant. 
These are the kinds of efforts we should be involved in as a 
government because it is critically important that if we are 
actually concerned about the debt and the deficit that we put 
Americans to work, and that we create the economy that will 
carry our nation forward. And this partnership you have with 
Dartmouth is an excellent example of how higher education, and 
the private sector, now I understand in this network you have 
dozens and dozens of players, private sector, nonprofits, for 
profits. And if you could talk about that level of cooperation 
and collaboration it might inform us. Because one of the things 
that I think EDA may want to do is to use as a model this kind 
of effort of Americans working together. Everyone understanding 
how important it is that we develop economic basis on a 
regional level.
    So I want to welcome you to the Committee. I thank the 
Chairman for having you, and I would like you to expand on the 
work of this network.
    Mr. King. Well, thank you. I have somewhat of a bone to 
pick with the President because I happened to be----
    Mr. Fattah. You got caught in a traffic jam?
    Mr. King. No I happened to be flying out exactly at the 
same time he was flying in, so they shut down the airport and I 
was stuck on a plane waiting for him to come out. But that was 
okay. It was not a long period of time. But when you are the 
President you get to do those kinds of things, I guess.
    I think, as I said earlier, one of the things that we do 
have is the CEDS document and the CEDS process. It is not so 
much a document as much as it is a process, allows us to bring 
these practitioners together. And though Chairman Mollohan 
asked about what advice EDA gives. You know, I think one of the 
best things they do is they have this planning process. And as 
I stated earlier, I really do not think it is a planning 
process but it is an implementation process because it brings 
different kinds of economic development together. You know, 
local development corporations, directors from regional 
development corporations, private businesses, people like SBA 
people, and people who can provide short term financing to 
companies together. And we meet once a month, and we spend our 
time looking at the various projects that are in the region, 
looking where they are in their cycle of development. And it 
really is a marvelous tool. And I hope it is used the way we 
use it throughout the country. I do not know if I am answering 
your question or not, but that is the kind of thing we are 
doing.
    Mr. Fattah. No, I think that is very helpful. I want to 
know, and also Mr. Brown in West Virginia, since the President 
has laid out a goal of doubling our export over the next five 
years, in the work that you are doing do you see, I know in the 
Philadelphia region, I am from Philadelphia, and we are very 
parochial. I looked at these stats the other day. We are behind 
the eight ball in terms of our export, you know, versus other 
economic regions in the country. There is obviously a great 
deal of growth. I have got the peanut chew factory in my 
district. I love peanut chews. They have been around for 125 
years. We got them connected up with the export/import bank and 
now they are, they are selling peanut chews in forty-five other 
countries. Now, these are still the same candy bars that I have 
been eating since I was a kid. But they have got the language 
of the nation of origin on the cover, and other than that they 
are produced right there in my district. People are working.
    I have got another company that is making, they have no 
domestic competitor at all, and they make saltwater fishing 
reels, the very best in the world. They sell for almost $1,000 
a reel. They are employing people, and they are selling this 
product all over the world. But there are plenty of these 
opportunities for us to take American products and to make sure 
that doors are opened. And I just wonder in your instance 
whether you think that the goal, I know all of the economists 
who have commented say that the President's goal is absolutely 
achievable, I think is the words that were used by one of the 
most noted ones. So the question is, you know, to get all of 
our business, and small and medium-sized businesses really 
focused on these markets overseas.
    Mr. Brown. Well, that is a very good message. I am not sure 
if, at least in our region, it has reached ground zero, or the 
local level. It is getting there. I think if you ask that 
question two or three years from now, it would be well 
enhanced. I am saying this. We are on the Ohio River. And we 
seen the Ohio River as a major freight mover from the Gulf up 
through the Mississippi, all the way up through the Ohio. And 
it is going to expand our opportunities. As you probably all 
know, even what is going on on the interstates now, traffic is, 
freight traffic is going to double here in the next twenty 
years, or three times that, in the next twenty years. And we do 
not have the infrastructure to handle that. We feel that we 
have an infrastructure advantage in where we are located, and 
particularly for exporting through the Gulf. That message is 
coming a little louder, I think, for us. I think in terms of 
looking at export opportunities, clearly we know it is, 
although the steel market is down, and if there is a new steel 
market it will be less labor intensive and it will be a 
different type of specialty steel.
    So I think, at least at our local level, it is probably 
evolving in terms of our interpretation of what you are saying. 
But ask in two or three years. It is much like the energy 
argument. I think we will be much more knowledgeable about 
that.
    Mr. King. We have industries, you know, in my testimony 
with the Littleton Industrial Park, there is a number of 
companies that are selling internationally right now. You 
yourself, if you go hiking in the woods, might use DEET, is one 
product that is made in this little town of Littleton, New 
Hampshire. And one of the companies is a foreign company that 
makes large connectors for electrical connectors. So yeah, I 
think from a product standpoint, we surely are promoting those 
kind of companies if they want. And we are, interesting enough 
we are right on the Canadian border. And we have some French 
speaking companies that come into the region, and they are 
building there. And just on the other side of that coin, in the 
service industries in, and technology, there are companies 
developing, I am not the scientist enough to be able to know 
what I am talking about here, but developing the different 
kinds of immunologies for cancer and infectious diseases. And 
if those kind of start up kind of companies, if they really hit 
it, that is better for all of us.
    Mr. Fattah. Absolutely. Well, thank you for your testimony, 
and we need to look forward to continuing the progress that you 
are making. And I know that the Chairman is committed to making 
sure that as we consider the appropriations request of the 
administration that we look at the work of EDA and some of the 
other organizations and agencies in the Commerce Department to 
make sure that we are doing what we need to do to promote job 
growth in this country. Thank you.
    Mr. Mollohan. Thank you, Mr. Fattah. Certainly, Mr. 
Serrano.
    Mr. Serrano. Mr. Chairman, just a reminder that it is okay 
under the House rules to bring products from your State to 
share with the other members.
    Mr. Mollohan. Member to member?
    Mr. Serrano. Peanut chew?
    Mr. Mollohan. Yeah, I do not think the Committee has 
received any peanut chews.
    Mr. Fattah. I am going to make sure that the Chairman has 
the first opportunity to experience this product.

               ECONOMIC DEVELOPMENT DISTRICT DESIGNATION

    Mr. Mollohan. This is the serious business of legislating. 
Both of you are EDA designated economic development districts. 
Mr. King, you have been one for some time. Dr. Brown, you have 
been one for less time. If each in turn would describe the 
value of the EDD designation for your organization. Maybe you 
have had one longer, Mr. King, you could talk first? What is 
the benefit of that?
    Mr. King. Well first of all, being recognized by EDA, the 
obvious one is you are eligible for funding. And that is, you 
know, a huge benefit. And I think in the wisdom of when the law 
was written, making, developing economic development districts 
and developing a planning and implementation process that they 
did was the reason that you become eligible, because some of 
the things that I talked of with Mr. Fattah. It is just, I 
think that is a huge benefit. I think some of the things that I 
was disappointed in in the last go round was that they took 
away some of our ability to create more of, which made the 
communities provide more of a match. I hope that the Committee 
will consider restoring what it used to be. And, you know, it 
used to be easier for communities and the local project 
developers to be able to, for EDA to contribute more to the 
project, and the local people commit less.
    Mr. Mollohan. How did, just tell us how that changed, and 
how that----
    Mr. King. Well I think, you know, for instance in my 
district, and I am not sure what happened, we were a 60 percent 
funded and a 40 percent match. That went down to 50-50. And, 
you know, that does not seem like a lot, but it is a lot to a 
project and a project developer, in some cases. And there was 
always the ability before from the Assistant Secretary to be 
able to get more than the 60 percent, and maybe up to 75 
percent. That went away, and we were not able to do that. And 
that hurt some projects. You know, some projects were not able 
to go forward because of that. And you know, just to say it 
again, you know some of the things that we do as a district, 
and when we are doing the project development, we have got to 
get the project funded. And, you know, EDA is only one piece. 
And so we are out looking for the rest of the funding. We are 
looking for private investment. We are looking for state to put 
some skin into the game. I hope I am answering your question 
there.
    Mr. Mollohan. No, you certainly are. Are you opposed to the 
match in and of itself, or just opposed to the percentage of 
the match?
    Mr. King. I think it is critical that we have a match.
    Mr. Mollohan. And what do you think would be a better 
ratio?
    Mr. King. Well, at least we would like to go back to where 
it was in prior years.
    Mr. Mollohan. What do you think would be the optimum match?
    Mr. King. I do not know if I know. I think the 60-40 was 
good at the time we were doing it. I would like to at least see 
it restored to that.
    Mr. Mollohan. It was workable?
    Mr. King. And have the ability that depending on the 
project to allow the regional directors and the Assistant 
Secretary to look at it and see if----
    Mr. Mollohan. Have some sort of waiver authority?
    Mr. King. Some kind of waiver authority, yes.
    Mr. Mollohan. Dr. Brown.
    Mr. Brown. Well----
    Mr. Mollohan. Describe the value of the EDD designation to 
you.
    Mr. Brown. Right. It allows locals to be focused, 
committed, and prioritized. And without that to go to 
congressional representatives, state representatives, 
otherwise, if we did not have that we would not be looking at 
priorities. You would be looking at a variety of people that 
you may have seen sometime come into your office on an hourly 
basis, and they are all talking about something different, and 
you did not realize was a problem in your district.
    Mr. Mollohan. So it is important to you as establishing a 
real process and funding that process?
    Mr. Brown. Absolutely. And then we are in tune with the 
other federal partners, or state partners, how that all works. 
Clearly, the more committed we are locally the much easier job 
we can do for our other partners. The other thing is EDDs, and 
the funding for the economic development districts, is 
increasingly more important. Let me give you an example. The 
City of Weirton had to cut its budget 20 percent last year. 
That is our major business center, major city in our area. What 
is important about that, what they cut out was their economic 
development person. Now they are depending on us to be their 
economic development people. We do mapping, technical 
assistance, but otherwise if we weren't there, an economic 
development district and the planning district funding, there 
would not be, I do not know, I am sure it would be filled some 
way. But I am not sure it would be adequately filled to give 
those priorities and commitments for you.
    And in terms of the match, we are all different. There are 
a lot of original EDDs in the area. I would like to have your 
money, match money. Because I have 50 percent match, and have 
had 50 percent, and it has always been that. I would say that 
if they looked in the last five years at the eligibility 
criteria we have probably changed. So I would ask that maybe 
the eligibility criteria should be updated on an annual basis.
    Mr. King. Yeah, that is a good point.
    Mr. Mollohan. And the eligibility criteria be a sliding 
scale based on some needs based formula?
    Mr. Brown. Right, whether it is unemployment rate, per 
capita income, measures, other measures of distress would be 
very helpful. And if that were updated on an annual basis it 
would be very helpful.
    Mr. Mollohan. Yeah, too high a match obviously biases less 
economically distressed areas against more economically 
distressed areas, if you follow that. I think I said it the way 
I meant it. That the less economically distressed areas would 
be more likely to get the assistance than the more economically 
distressed areas, because you would be out of the game because 
you could not make the match.
    Mr. King. That is right.
    Mr. Mollohan. Yeah, we have seen that in some other 
programs, too.
    The funding associated with the designation, Mr. Brown, 
would you speak to its importance? It may be some specific 
examples, or you already have a little bit, but just for the 
record?
    Mr. Brown. The funding?
    Mr. Mollohan. The funding associated with the EDD 
designation? And you have already said it does matter.
    Mr. Brown. Right. The----
    Mr. Mollohan. I mean, that is just crucially, let me just 
answer this, is that crucially important to the whole 
designation?
    Mr. Brown. It is very crucial to our region because we 
would not--
    Mr. Mollohan. As you testified.
    Mr. Brown. I mean we have these projects, a lot of our 
water and sewer projects are essentially the planning, the 
application, the monitoring, the close out of projects is done 
through that type of program. If we did not have those funds, 
just the moving of technically the project forward and closing 
it out would be, we would not be staffed to do that. And I 
would say, where we are the locals do not have, when we are 
talking communities of a relatively small size that just do not 
have the ability to carry staff to make that happen.

                       PUBLIC WORKS FUNDING LEVEL

    Mr. Mollohan. Okay. Shifting gears here, the administration 
has proposed to shift significant funding away from the public 
works account into the economic adjustment assistance program 
based on the rationale that EAA is a more flexible program. 
From your perspective, is this shift desirable, appropriate? 
Why and why not?
    Mr. King. Well my opinion is, you know, where they are 
shifting it to be more flexible, and to provide more innovative 
types of projects, I mean, we need some more innovative types 
of projects. I do not think necessarily the way to do that is 
to take money out of public works and shift it into economic 
adjustment. I think, you know, you want to do that, give more 
money to economic adjustment. Public works in a rural area is 
critical. We still need the basic building blocks to be able to 
do economic development. You know, most of my communities are 
under 5,000 people, and many of them are under 1,000 people. 
And that infrastructure, you know, there has to be some kind of 
continued infrastructure. And I am not saying we need to 
continue to build industrial parks. But there are serious 
places where infrastructure needs to be continually built. And 
do not take too much away, you know, public works was the core 
of EDA. And it, has not changed that much that we should take 
all the money out of public works and start shifting it to 
these innovative planning things. We need more, we need bricks 
and mortar, and we need to have people doing that.
    Mr. Brown. Yeah, I agree, bricks and mortar are key. But 
economic adjustment does create the creativity and ideas to get 
the bricks and mortar. So it is sort of a catch-22 type of 
approach. But I, once again, it is just bricks and mortar which 
are fundamental projects. And you are looking back ten years 
from now, that is what you are looking at. The infrastructure 
that is there.
    Mr. Mollohan. Mr. Bonner.
    Mr. Bonner. I have no further questions, Mr. Chairman.
    Mr. Mollohan. Mr. Serrano. Mr. Aderholt. Mr. Culberson. Mr. 
Fattah.
    Mr. Fattah. No further questions, Mr. Chairman.
    Mr. Mollohan. Gentlemen, we want to thank you very much for 
your appearance here today. We understand that you had to 
travel a long distance, prepare. You have been very helpful to 
the Committee. There may be some questions submitted which if 
you would be kind enough to take some extra time to answer it 
would be really helpful to the Committee. I know I do have some 
follow up questions, actually, which I may be in touch with 
both of your individually about. But thank you for your 
appearance here today, and your good testimony.
    Mr. King. Well, thank you for affording us the opportunity 
to come down and talk to you.
    Mr. Brown. Thank you.
    Mr. Mollohan. You are welcome, and for your good work back 
in your regions.
    Mr. King. Thank you.

                          Second Panel Remarks

    Mr. Mollohan. If the next panel would take come forward? 
Okay. We welcome our second panel. Mayor David Bradford, the 
City of Muscle Shoals, Alabama, was the immediate past Chairman 
of the Northwest Alabama Council of Local Governments; Chuck 
Wemple, Economic Development Program Manager of the Houston-
Galveston Area Council; and Dr. Les Wyatt, President of the 
Arkansas State University System. Gentlemen, we welcome you all 
to the hearing today. Your written statements will be made a 
part of the record, and after Mr. Bonner makes any comments he 
might want to make, or if Mr. Aderholt would like to make a 
comment before the witnesses proceed please, Mr. Bonner?
    Mr. Bonner. I would be happy to yield to Congressman 
Aderholt.
    Mr. Aderholt. Well I just want to say thank you. It is good 
to see Mayor Bradford here. Thank you for your testimony today. 
And thank you for your work, you and other regional leaders in 
Northwest Alabama, and the direction you have taken Northwest 
Alabama. And so we thank you for your testimony here today, 
look forward to hearing it, as well as your colleagues here 
today to testify before the Committee. So thank you.
    Mr. Mollohan. Okay. Thank you, gentlemen. Why do we not 
just lead off with Mayor Bradford?

                  Opening Statement by Mayor Bradford

    Mr. Bradford. Thank you, Mr. Chairman. Good afternoon, my 
name is David Bradford. I am the current Mayor of the City of 
Muscle Shoals, Alabama, and the immediate past Chairman of the 
Board of Northwest Alabama Local Governments, an EDA designated 
economic development district. We thank you for the opportunity 
to be here today and speak on the role of the Economic 
Development Administration. And we have submitted a lengthy 
statement for the record so I will limit my remarks to a few 
key points.
    First, I would like to stress the importance of EDA to 
local economic development efforts. EDA provides support for 
strategic planning, ongoing collaboration, and project 
implementation. And each type of support is tremendously 
important to successful strategies to create jobs. Through its 
strategic planning investments EDA lays the groundwork for 
successful strategies to prepare and promote communities. With 
its planning partnerships, EDA gives regional organizations, 
such as the Northwest Alabama Council of Local Governments, and 
other economic development districts, the capacity and the 
support to maintain planning, project development, technical 
assistance, and grant resource opportunities. And finally, EDA 
supports job creation efforts by investing in infrastructure, 
revolving loan funds, business incubators, and other economic 
development projects. With these investments EDA has helped to 
create or retain over 4 million jobs and over $130 billion in 
private investment.
    In our region alone EDA's support was important to the 
location decisions of two international companies that have had 
great positive effects on our local economy. Without EDA 
assistance, SCA Tissue of Sweden in 2003, and North American 
Lighting Koito of Japan in 2007, would have been more 
difficult, if not impossible to recruit. For both of these 
companies EDA's strategic planning and infrastructure 
investments proved to be critical. These investments were 
coordinated through the economic development district which 
proved to be a vital partner along with local governments and 
the Shoals Economic Development Authority. In both cases modest 
investments and strategic plans laid the groundwork for success 
by pointing out opportunities and focusing on regional efforts 
in collaboration with governments. In each case EDA made 
investments in infrastructure to prepare sites for industries. 
Combined, EDA's $2.83 million for water production storage at 
two locations in Colbert County helped create over 600 new jobs 
and leverage over $300 million in private investment. These new 
industries located in our region in 2003 and 2007 and 
immediately helped to improve unemployment rates and incomes in 
an area that has long suffered from economic troubles. These 
industries continue to be strong employers despite these 
economic times that we are in.
    EDA's investments in our region are coordinated by the 
Northwest Alabama Council of Local Governments, which was 
recognized by the EDA as an economic development district in 
2001. EDA's support allows the council to provide vital 
resources to regional collaboration through a five-county 
region in Northwest Alabama. And EDA's planning partnership 
investment is used to provide ongoing planning and project 
development, technical assistance, and grant resources to area 
governments and partners throughout a five-county region.
    Despite working with EDA through the years there are 
probably two areas that EDA activities could be strengthened. 
First, EDA sometimes takes too long to review the application 
and these delays can sometimes strain relationships with 
industries and other local partners. And second, EDA is charged 
with creating higher skill, higher wage jobs, and oftentimes, 
for more rural areas, the quality of job opportunities is 
relative to the existing conditions. Certain industries in our 
region, such as tourism, may not have nationally competitive 
wages but are strong local industries, and they are part of a 
regional strategic context. Improving EDA's ability to speed up 
the application process and understand the context of its 
investments will make EDA an even stronger partner.
    Finally, I would like to point out the EDA's significance 
going forward. We are currently in the middle of one of the 
deepest economic crises in memory. But for over two decades our 
region steadily improved its lagging economic performance. And 
we had double digit unemployment because of the loss of 
manufacturing, and textile jobs in the late nineties, or mid-
nineties. And through much of 2005, 2006, and 2007 our region 
had unemployment rates as low as 3.5 to 4 percent. For a region 
with historically bad performance compared to much of the 
nation, this was an amazing task to accomplish. It was done as 
a result of strategic planning and investment in economic 
development, with help from EDA.
    Today, however, in each of the five counties our EDD 
serves, unemployment rates have more than doubled in just over 
the past two years, in some cases 12 percent, as much as 17 
percent. Rates are as high as they have been in decades. 
Because of our positive experiences with EDA we think that the 
administration can be a model for economic recovery. EDA's 
investments and strategic plans create a solid base of support 
for working toward regional solutions. Its support for regional 
councils and economic development districts enhances local 
capacity to pursue development in a way that no other agency 
can replace.
    EDA's commitment of investing in a variety of solutions has 
tremendous value. We need solutions to be regionally developed 
and supported so they can take a variety of forms, and EDA has 
a commitment to regions for strategic planning, ongoing 
collaborative action, and a variety of implementation 
opportunities. In addition, EDA has a proven track record for 
promoting economic development success and taken together these 
qualities make the EDA a vital partner for the nation's 
economic recovery.
    And I thank you again, Mr. Chairman, and members of the 
Subcommittee for this opportunity to be here today. And I 
welcome any questions.
    [The written statement of Mayor David Bradford, of the City 
of Muscle Shoals, Alabama, follows:]

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    Mr. Mollohan. Thank you, Mayor Bradford. Mr. Wemple.

                    Opening Statement by Mr. Wemple

    Mr. Wemple. Good afternoon. Thank you, Mr. Chairman, 
Subcommittee members. Thank you for allowing me to testify 
before you today. My name is Chuck Wemple. I am the Economic 
Development Program Manager for the Houston-Galveston Area 
Council. We are a thirteen-county region, including the 
nation's fourth largest city. So we have about 5.75 million 
people in the region. We also have some very small, very rural, 
sparsely populated counties as well. So it is kind of a 
challenge for us sometimes to line up those different needs.
    I want to get across three key points today with regards to 
our involvement with EDA. The first being that EDA's response 
to our region following Hurricane Ike was exceptional, and 
continues to play a key role in our region's recovery from that 
natural disaster. Secondly, I want to talk about the 
effectiveness of the district funding and why we think that is 
a solid, good investment of federal funding. And then third I 
want to talk about the importance of not reducing the types of 
funding that are currently available to our local governments, 
and also offer up some areas for possible improvement as well.
    For those of you who may not be familiar, Hurricane Ike hit 
our region in September of 2008. And we took a direct hit from 
Hurricane Ike. The storm came out over Galveston Island, 
bringing with it 100-mile per hour winds, extensive rain and 
flooding, and a twenty foot tall storm surge which laid waste 
to many of our coastal communities. We had widespread 
devastation. We had neighborhoods turned into debris fields. We 
have 200,000 homes either damaged or totally destroyed in our 
region. Thousands of households displaced, thousands of workers 
displaced, and thousands of businesses impacted either 
physically or at least through extensive long term power 
interruptions.
    EDA quickly responded to our region following the disaster. 
While many of our communities were digging out from under 
debris and trying to get their communities back to a 
functioning form of government, the local office came down and 
met with us, and through our development district we identified 
twenty-eight projects worth nearly half a billion dollars that 
could be implemented with EDA disaster recovery funds. We 
narrowed that list down, and ended up funding, through the EDA 
office, nine projects totaling about $42 million. And these 
projects were prioritized based upon the ability to get them 
implemented quickly, and the relief that they would bring to 
our communities.
    There are a wide variety of projects. All of them are 
infrastructure based projects. One of our small coastal cities 
is looking to restore their waterfront area, running sewer and 
water lines and elevating a roadway. The Port of Galveston on 
Galveston Island is improving bulkheads and expanding their lay 
down areas. And some of our rural counties are running 
utilities along their interstate frontage roads with the 
attempt to move more of their economic development a little 
further inland so they will be more resilient if and when the 
next storm hits.
    One of the most exciting projects that we have through the 
EDA supplemental funds after Hurricane Ike is our revolving 
loan fund that was granted to our economic development 
district, which I manage. It is a $10 million revolving loan 
fund. The first cycle of funds, that first $10 million, is 
going to focus exclusively on businesses that were impacted by 
Hurricane Ike. We have that program launched. We are currently 
reviewing about eighteen applications totaling about $2.5 
million. And we expect that that first cycle of funding will 
create about 500 jobs for our region. It is a large variety of 
businesses that we are looking at, restaurants, auto repair 
shops, and medical facilities.
    All of these projects are going to bring hope to our 
devastated communities. It may not sound like much to some 
folks, but if you are a rural coastal community and you hear 
that Pat's Tire is coming back in business, and if you got a 
flat you can call Pat again, that is their slogan, people start 
to shine a little more. And it kind of helps with that recovery 
effort. A lot of the businesses that were hit by Hurricane Ike 
were doing well before the storm. But once they were hit by the 
disaster, and right on the heels of the Hurricane Ike disaster 
we had a lot of economic downturn issues nationwide. All of a 
sudden those folks do not have access to traditional forms of 
credit. So it becomes very imperative that a revolving loan 
fund like this be developed and put into play.
    I want to emphasize a couple of things about the RLF. It is 
not designed to compete with private banks. If anything we want 
to complement what private banks can offer to our applicants. 
Much like the SBA program, if there is a loan that the bank may 
not do because they may not be comfortable with the type of 
business, or the condition of that business after Ike, we are 
able to come in and provide a loan for part of that funding and 
the bank can move forward. Or in some cases, traditional 
funding is not available at all and we are able to come in and 
help those businesses get back on their feet and recover.
    I want to talk a moment about district funding. Personally, 
I think it is a great investment. Relatively modest amounts, we 
get about $50,000 a year to run our economic development 
district. It provides us to do the regional planning that the 
previous folks testified about. We develop our comprehensive 
economic development strategy, able to get those rural folks 
from the sparsely populated counties, and our urban developers 
together, and talk about priorities and linkages across the 
region. It also allows our local governments to go after the 
EDA grants. And it also allows us to respond to major events, 
like Hurricane Ike. If our EDD would not have been in place it 
would have been much more difficult for EDA to move quickly, 
identify those projects, and get those funds allocated, and 
help our communities. We view it as an extension of the EDA 
staff for the region as well.
    We are encouraged to see an increase in the level of 
funding for the districts. It has also allowed us to get people 
in the room and start to explore new opportunities for our 
region, so some of our communities can transform or diversify 
their economies. We have folks that are now looking at 
renewable energy manufacturing component facilities. We are 
looking at embracing and capitalizing on the local food 
movement, raising more food locally and finding ways to get 
some of those products to market. So we are very, very excited 
about that and think those are a good investment that return a 
lot of dividends.
    I want to talk real briefly about the importance of the 
diversity and flexibility in EDA funding. In my opinion, the 
current mix works very well. When you have a suite of products 
that communities can draw from, whether it is public works, or 
adjustment, or the other products that are offered by EDA, 
honestly I think that reducing the diversity of their funding 
portfolio, of moving a lot of money out of public works, is a 
step in the wrong direction, just to be very frank. So I want 
to really emphasize the importance of diversity and 
flexibility. If anything, you might want to consider expanding 
some of the projects that might be eligible. We heard about 
tourism a while ago. Infrastructure for ecotourism could be 
considered. Not every community has a smokestack. Sometimes 
that is your best bet, to protect your natural resources and 
have a good quality of life for your citizens and good jobs.
    A few recommendations. One thing that I think is important, 
and it kind of ties into the flexibility I just mentioned, is 
the final disposition of revolving loan funds. For those of you 
that may not be familiar with the EDA revolving loan fund, that 
money stays federal forever as long as you are able to keep 
revolving those funds, and letting those monies out. And I 
think there are going to be times, even with our Ike Recovery 
Fund, when those funds may not be as easy to move as they are 
going to be after a natural disaster, and when the credit 
market is tightened. And I think that when you get to a point 
where maybe you cannot be moving those funds, it would be nice 
if those funds could be turned into another EDA eligible 
project. Perhaps the RLF money could then go towards a public 
works grant, or a planning grant, or some other project. I 
think that that would probably be a good investment of those 
funds in the long term rather than having a revolving loan fund 
that might carry on for many years without being very 
productive.
    I also want to talk about something that was mentioned 
earlier. Folks talked about hiring in the regional offices. I 
think it's very important that EDA look at strategic hiring. I 
think that as with many corporations and HTs that are out 
there, there's a degrading of the workforce, and I think that 
it's important that hiring be done to start to fill those slots 
that are going to be retired and vacated, and I think moving 
forward with that is a very important thing. Our regional 
office has actually done that recently and we applaud those 
efforts.
    In closing, I just thank you for your efforts to maintain 
and hopefully increase funding for EDA, and Mr. Chairman, that 
completes my testimony, and I would welcome any questions.
    [The written statement of Mr. Chuck Wemple, the Economic 
Development Program Manager for the Houston-Galveston Area 
Council, follows:]

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    Mr. Mollohan. Thank you, Mr. Wemple. Dr. Wyatt.

                     Opening Statement by Dr. Wyatt

    Mr. Wyatt. Mr. Chairman, and Committee Members, I'm Les 
Wyatt. I'm President of the Arkansas State University System, 
in Jonesboro, Arkansas. I wanted to tell you how EDA grants to 
University Centers have help build capacity at our university--
--
    Mr. Mollohan. Dr. Wyatt? I apologize for interrupting you. 
I just want to note that we have been joined by your 
distinguished Member of Congress from Arkansas, Marion Berry. 
Marion, welcome to the hearing. We appreciate your coming by 
today. If you want to take a seat at the table, you're welcome 
to do that. Maybe you can see better.
    Mr. Berry. Thank you.
    Mr. Mollohan. Yes, sir. You're welcome.
    Mr. Berry. I'm hear to show my support for Arkansas State 
University and Dr. Wyatt, and the EDA which has been a great 
agency for our part of the world.
    Mr. Mollohan. Well, great. Thank you for coming by. We 
appreciate your attendance here today.
    Mr. Wyatt. That is essentially my speech.
    Mr. Mollohan. Well, that's why we value him so much up here 
is because when he says something, it's short, sweet, but has a 
lot of meaning associated with it. Dr. Wyatt, please continue. 
I apologize for interrupting you.
    Dr. Wyatt. That's all right. I want to tell you how our 
capacity has been increased with these grants; what has been an 
outgrowth of economic development in our region; and finally I 
want to describe a tangible outcome of that activity that will 
affect you and your children.
    I live in the 1st Congressional District which is 
represented by Congressman Marion Berry. He wrote to all of us 
in our District. This District is the Mississippi river delta 
of Arkansas, and has some of the richest land and the poorest 
people in America. Our regional economies have traditionally 
been based upon agriculture and manufacturing, two sectors that 
have declined in profitability. Over the last century many jobs 
have been lost in these areas. Our region's products have had 
value added and profits taken outside our region, and most 
recently by offshore interest. As a result, our communities are 
dwindling. Our schools are inadequate, and our economic future 
is challenging.
    Our university was created 100 years ago to serve the 
students of this region. We do so with a wide variety of 
academic programs which have produced over 60,000 alumni. A 
large majority of these graduates live in the 1st District 
where they form the basis of hope for economic growth and 
sustainability for our future. We're at the eastern edge of an 
EDA region overseen by Mr. Pedro Garza and his staff in Austin, 
Texas. Mr. Garza has long been concerned for the economic 
conditions of eastern Arkansas, and he's provided support and 
expertise, assistance and encouragement to many agencies in our 
state, including our university. Mr. Garza and his staff are 
problem solvers, and they are entrepreneurial, in terms of 
their outlook for our future. They've been patrons when we've 
badly needed patronage, and their investments are paying off, 
and in a moment I will describe a perfect example of that 
return on investment.
    EDA has provided support for economic development centers 
which are located on several university campuses in our state, 
and throughout our EDA region. The Delta Center for Economic 
Development on our campus provides assistance and information 
to small and large businesses, government agencies, communities 
and individuals. The Delta Center has also received support 
from EDA to construct a facility where assistance is given, 
where data can be generated and kept, and where staff is based 
for outreach across our region. There is no comparable economic 
engine in our region, and the Delta Center would not exist if 
it were not for EDA support. We and thousands of citizens in 
east Arkansas are grateful for the EDA financial support for 
the Delta Center for Economic Development at Arkansas State 
University.
    The Delta Center also works closely with the state's 
economic development agency, local Chambers of Commerce, and 
city officials across the region to recruit new businesses and 
industries to our area. This process is frequently supported by 
a productive relationship between Mr. Berry, Mr. Garza, and our 
state's governor, Mike Beebe, and a host of other 
collaborators. Our campus resource, the Delta Center for 
Economic Development, has been a player in most of these 
projects across the region, thanks to EDA support for staff, 
programs, and facilities on our campus. This campus-based 
university economic development center is a model you can be 
proud of.
    On a parallel track, our campus also receives support from 
the state to create a research initiative called the Arkansas 
Biosciences Institute. The purpose of this initiative is to 
study plant materials which may be produced or modified to 
improve the lives of Arkansans, often at the intersection of 
medicine and agriculture. We're particularly interested in 
health benefits from plants which may be consumed by domestic 
livestock or by humans, for both chronic and acute diseases. 
The Biosciences Institute is five years old. It has a staff of 
research scientists from around the world, and it has 
successful competitive grant awards from a number of federal, 
health related agencies.
    The Biosciences Institute has also received significant 
support from EDA to create an incubator facility to move 
research from benches in the laboratory toward 
commercialization of products and processes. Several small 
companies have been created, based on patents received through 
these research and development activities, thanks again to EDA.
    So I've described support from EDA which sustains the Delta 
Center for Economic Development, which is a business 
organization, and EDA support which created an incubator, a 
research organization. The two came together in an important 
economic development project which will affect you and your 
constituents and your families.
    Our state recruited a New York company, called Nice-Pak. 
Nice-Pak has produced billions of these little packets. They're 
disposable wipe products and they're used for sanitary, 
cosmetic, medical, and hygienic applications. You've used these 
products. Every citizen has used these products at restaurants, 
medical facilities, beauty shops, retail stores, daycare 
centers, and nurseries, all across the country. Nice-Pak is an 
organization that was recruited through EDA support and 
sponsorship. We worked with their company officials to relocate 
their operation and manufacturing activity to our city. Using 
the facility and staff supported by Mr. Garza's grants, the 
project in Jonesboro is up and running. The CPA of Nice-Pak, 
Mr. Robert Julius, was rightly concerned about the 
environmental affect of these products, because a billion of 
these little foil packets, and the wipes that are inside these 
things, will go into our landfills.
    Mr. Julius and one of their customers in Arkansas, the 
Walmart Corporation, decided to seek more environmentally-
friendly packaging and application materials. So they turned to 
our campus for assistance, and the value of EDA support became 
very quickly evident. The researchers in our Biosciences 
Institute got together with the production staff of the company 
that makes these little things and they're putting together a 
concept to use cellulose-based materials for the wrapper, and 
to integrate plant materials into the wipes themselves. These 
products, when introduced back into the landfill, will be 
biodegradable, and will leave this planet better for our 
children because of that activity. The wipes themselves will be 
based on plant materials which are found in abundance all 
around us, and this will add an additional layer to our 
economic capability.
    The outcome of this effort, which integrates a number of 
EDA-sponsored projects will touch the lives of millions of 
users around the country and across the world, one wipe a time, 
billions of times. So this has become a win-win, win-win-win 
outcome. The prime sponsor of all of this activity has been the 
EDA office, Mr. Garza, and his staff, and because of your 
appropriations. We want to thank you for directing the people's 
money for this important activity, for making our university 
center possible, and for the great success that you've 
engendered. Thank you, Mr. Chairman.
    [The written statement of Dr. Les Wyatt, President of the 
Arkansas State University System, Jonesboro, Arkansas, 
follows:]

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                    ECONOMIC RECOVERY IN NW ALABAMA

    Mr. Mollohan. Thank you for your testimony, Mr. Wyatt. Mr. 
Bradford, in your oral presentation, you referenced a model for 
economic recovery.
    Mr. Bradford. Yes, sir.
    Mr. Mollohan. Would you elaborate on that a bit, please?
    Mr. Bradford. I came into office in 2000. We had double 
digit unemployment at that time. We'd been suffering a great 
deal of unemployment since the mid-1990s, and local leaders and 
I, by local leaders I mean mayors, county commission, chairmen, 
chamber of commerce counsel, open government such as EDAs, 
focused on job creation economic development through 
infrastructure improvements, and we knew we had to diversify as 
far as our workforce, our labor workforce, and actually go 
after jobs and so that's what we started working on. We had 
jobs, economic development infrastructure, education, and 
transportation issues, and that's primarily what we've been 
working on to date. But in 2005, 2006, and 2007, we turned that 
double digit unemployment around into 3.5 to 4 percent, and we 
were looking for, we were able to pick and choose some of the 
companies.
    Mr. Mollohan. I see. That effort turns out to be a model 
effort for economic recovery.
    Mr. Bradford. Well, as far as planning, in 2001 we went to 
EDA and looked for an economic development model, and for 
planning on infrastructure, and what type of jobs that we could 
go after, what type of jobs our area would support our 
workforce development and so forth, and with that plan in place 
in 2003, we got our first company, which was a Swedish company, 
SCA Tissue, and they now employ over 480 people.
    Mr. Mollohan. Did you receive from EDA only money and then 
you went out and hired a consultant to develop your plan, or 
did EDA themselves participate in fashioning the plan?
    Mr. Bradford. They didn't participate in fashioning the 
plan. I think they gave direction as to accountability and how 
we would be able to go out and actually take bids from 
consultants and chose the consultant that was the best fit for 
our area, but they did not participate other than the 
accountability aspect.
    Mr. Mollohan. In your testimony you emphasize the 
importance of EDA's strategic planning investments through its 
comprehensive economic development strategy process and 
planning grants. Is that the process that you just described 
right there?
    Mr. Bradford. Yes, sir. It was known as the Wilson Dam 
Corridor Comprehensive Plan, and actually, in northwest 
Alabama, we actually lay on the Tennessee River, Wilson Dam is 
part of the TVA reservoir, and it's one of the largest lift 
lock dams in the world, but we also have ready access available 
to rail, in one of computerized railcar assemblies. These 
companies actually lay in between those areas and also a 
regional airport, so we were able to coordinate our resources 
and from there go forward.

                       DISASTER RECOVERY IN TEXAS

    Mr. Mollohan. Mr. Wemple, your testimony discusses how 
quickly your District was able to provide EDA with suggested 
projects following the devastation of Ike. What was the dollar 
value of that assistance? The total dollar value of that 
assistance?
    Mr. Wemple. Dollar value as in number of projects, or how 
much it cost us to do the work?
    Mr. Mollohan. How much money you got from EDA in their 
assistance in your recovery from Hurricane Ike?
    Mr. Wemple. We conducted the analysis by leveraging our 
planning dollars that we get from our District with other 
projects that we have within our economic development program, 
and then the amount of funding that actually came to the region 
from the grants was right about $42 million dollars.
    Mr. Mollohan. And does that count the $10 million from 
the----
    Mr. Wemple. That includes the $10 million revolving loan 
fund, yes.

                          REVOLVING LOAN FUND

    Mr. Mollohan. And who administers the revolving loan fund?
    Mr. Wemple. My program administers that at our economic 
development district.
    Mr. Mollohan. And do you have assistance from a banking 
institution?
    Mr. Wemple. Actually one reason why we were able to work 
with EDA and get the revolving loan fund is my department also 
administers a very robust small business administration 504 
loan program which we've had in existence for a number of 
years. We are one of the top producers in the state of Texas, 
and definitely in the Houston region. About a 300 loan 
portfolio totaling over $220 million dollars.
    Mr. Mollohan. And that revolving loan program is part of 
EDA's regular authorization? Or was it a special authorization 
under that emergency funding?
    Mr. Wemple. It was special under the supplemental emergency 
funding.
    Mr. Mollohan. So it, not only the money but also the 
authorization, would not have been available except for the 
emergency authorization?
    Mr. Wemple. Yes, and we would not have pursued it without 
the emergency money, the main need.
    Mr. Mollohan. In other words, another organization could 
not go after a revolving loan fund because it was only 
authorized in that emergency funding bill?
    Mr. Wemple. We were identified as the only entity within 
our region that could successfully administer it and come up to 
speed quickly.

                 DELTA CENTER FOR ECONOMIC DEVELOPMENT

    Mr. Mollohan. Okay I'll follow up on that. Mr. Wyatt, your 
EDA University Center, that is exciting, there's no question 
about it, and I guess it's an example of how powerful an 
association with an academic institution can be. Just explain 
to us what role that plays in the community and how it 
facilitates economic diversification, I expect, in most 
instances.
    Mr. Wyatt. The fact that it's based on a university campus 
is misleading. It's really an organization for the community. 
It covers a large geographic territory and in fact, the entire 
1st District. People go out from that base of operations on our 
campus to other locations and so its real value is perceived by 
the communities around us in the business and the industries 
there. But its placement on the university campus is very 
important because we have assembled a large group of experts in 
many areas that constitutes the university faculty, and the 
Delta Center for Economic Development can tap those resources 
as needed to provide assistance in the communities where they 
do their work.
    Mr. Mollohan. Mr. Bonner.

                                EXPORTS

    Mr. Bonner. Jobs, jobs, jobs. That was the message the 
President delivered last week in his State of the Union 
address. It's certainly the message that all of us have been 
saying for some time now because the economy has suffered so 
much loss of jobs, and in your testimonies today each of you 
have given testimonials about the importance of EDA. One 
question that I'd like you to address is the President also 
talked about the need to pass some trade agreements that 
whether it's Columbia, or Panama, or wherever, help export 
American products and create jobs here in this country. Any of 
you all have an example of how EDA specifically has helped your 
community or businesses in your communities take advantage of 
that opportunity to export American products to other countries 
overseas?
    Mr. Wyatt. This is an example of many of the activities 
where our University Center has been productive. In our area 
where agriculture product is so prominent, our University 
Center has given counsel to a number of our agricultural 
producers to move their products around the world, and in fact, 
products from Arkansas serve world markets. We could ship a 
boatload of rice, down that river to any place in the world, 
and we're doing it, and we're giving assistance through the 
University Center to the people who would provide for shipping, 
harvesting, processing, finishing and producing those products. 
It's happening every day.
    Mr. Wemple. Our region, given that we have major ports 
within our region, and also an intra-coastal canal, we have a 
lot of import and export activity within our region. There's a 
good likelihood that businesses that will be helped through the 
revolving loan fund, particularly on Galveston Island, will be 
eventually looking at exports. You know we do have success 
stories from our Small Business Administration program and 
others where that happens, so I can't point to a specific 
example. But these EDA funds definitely help by diversifying 
our economies, allowing folks to take advantage of that 
opportunity.
    Mr. Wyatt. SCA Tissue, which is a global company, actually 
the SCA plant located in the Schoals area, serves the entire 
north American continent, and is a non-pulp paper product 
company, so you don't get some of the environmental concerns. 
In fact, we use recycled paper, cardboard, and other products. 
They make tissue paper, they make restaurant supply type of 
paper products as well as hygiene materials and cardboard 
shipping containers. So that's going all over north America. 
The North American Lighting, which makes taillight assemblies 
for Toyota, Nissan, GM, and Ford primarily stay here in the 
United States.

                             CREDIT ACCESS

    Mr. Bonner. And Mr. Wemple, you had mentioned specifically 
about some of the problems that businesses, especially small 
businesses, were having with regard to credit. I asked the 
previous panel a question using an example, I think you all 
might have been in the room, of a local businessman's story 
that he had shared with me. Specifically do you think EDA is 
positioned to help programs like yours filter out, since there 
is so much concern about credit today being available, whether 
it's through commercial lending or through SBA or other federal 
agencies, is EDA doing as much as they could do to help fill 
the gap?
    Mr. Wemple. Well, I think maybe I have two different parts 
of an answer for you. I think that our revolving loan fund in 
particular is going to fill a very severe need in our region 
and so in that regard they are definitely stepping up to help 
fill that void. One of the best things I think EDA has really 
done for us is through the funding of our economic development 
district, and through the development of our comprehensive 
economic development strategy, we actually get people together, 
people come to us to ask what types of grants they might be 
able to get, what type of loans they might be able to get, 
whether it's a local government or sometimes a business 
venture, and then because of the ability of our district to 
exist through EDA, we're able to link them up. Maybe they have 
a better opportunity going through the USDA Business and 
Enterprise Fund as opposed to EDA, or maybe SBA is a better 
option. So it allows us to operate as a bit of a clearinghouse 
in that regard, so I think that's probably one of the most 
critical things that they allow us to do.
    Mr. Bonner. Mayor, Congressman Aderholt had another meeting 
for which he had to be excused, and asked that you would 
forgive him for leaving early.
    Mr. Mollohan. Thank you, Mr. Bonner. Mr. Fattah.

                          REVOLVING LOAN FUND

    Mr. Fattah. Thank you, Mr. Chairman. I realize we have a 
vote coming, so just some quick questions. Do you charge 
interest on this revolving loan fund for businesses?
    Mr. Wemple. Yes. We're required to charge a minimum of four 
percent.
    Mr. Fattah. Do you charge the minimum, or do you charge 
above the minimum?
    Mr. Wemple. Right now, our program is charging four percent 
as our interest rate.

                       LENGTH OF REVIEW CONCERNS

    Mr. Fattah. We've got to go vote. Mr. Mayor? I'll try to 
get my geography right. You've got a golf course there? Shaw 
Creek?
    Mr. Wemple. Actually, we do. It's Robert Trent Jones Golf 
Course.
    Mr. Fattah. Condoleezza Rice just joined, right?
    Mr. Wemple. Yes, sir.
    Mr. Fattah. I try to keep track of your local economic 
activity, at least in relation to golf. My colleague from 
Alabama was telling me about the golf trail. I hope to visit. 
Mr. Chairman, let me get to the point. In your comments 
submitted to the Committee, you said one of your concerns, 
among all of the glory that was bestowed by your comments on 
EDA, was their decisions are slow. And that sometimes dealing 
with private enterprise, they're looking for a quicker paced 
decision package, and so I was trying to see how we might 
reconcile that with our responsibilities. You know, the 
government only works at one speed, which is slow. But it's for 
a reason, that is to say, you have to be caretakers of the 
public's treasury. So I was just interested if you could share 
with the Chairman any real life anecdotal story about the 
slowness of the process.
    Mr. Bradford. Well, I believe that in both of these 
projects it was prior to this group or EDA being able to hire 
additional personnel, and that was the biggest thing. It would 
take six to nine months to get some of these projects approved, 
and you're on a time line to get infrastructure to them when 
they're investing, you know, $40, $50 million, sometimes $100 
million on their projects on their site, and they're wanting 
their infrastructure there and of course you're going through 
the bid process, design engineering, and so forth, and we 
understand that there has to be accountability and so forth and 
making sure that you know where this money is going.
    Mr. Mollohan. It sounds like that timeliness is a problem 
all over the country. We want to get Mr. Schiff and I'm sorry 
we didn't see him right then, and he hasn't had the chance. Mr. 
Schiff, welcome to the hearing.

                             CREDIT ACCESS

    Mr. Schiff. Thank you. I just wanted to ask and I don't 
know how much a part of this is in your bailiwick, what efforts 
EDA has undertaken to help small businesses access credit, 
because that's the number one complaint that I hear among my 
constituents, that banks they have longstanding relationships 
with where they just can't get credit. A lot of the job 
retention issues in my district are a little different than 
some of my colleagues. It's more about trying to retain motion 
picture production and not have that run away to Canada and 
other countries. But, I'd love to hear your thoughts about 
EDA's work on access to credit.
    Mr. Wemple. Again, through our revolving loan fund that we 
have, that's going to be a major access for our businesses to 
credit they can't get otherwise. Also we work closely with the 
small business development centers at our colleges and 
universities to make sure that the businesses get in good shape 
where they can maybe have a better chance of having that credit 
at the bank. If you don't have a business plan or projections 
and various things in place, it's difficult to get a bank to 
seriously consider you. So we make that requirement through our 
EDD revolving loan fund, and then again the district funding is 
critical to my group to allow us to have the capacity to be 
able to steer businesses to other non-EDA programs, as well.
    Mr. Mollohan. Well, thank you, gentlemen, very much for 
your testimony. We are looking at five votes which will take us 
40 minutes or so. We're not going to make you stay here during 
that period. Your testimony has been excellent. I think 
everyone has had two rounds. There may be a question or two 
submitted for the record. You're not an agency, you're not 
required to respond to that, but it would be nice if you did 
because you're really helping the Committee with your 
expertise. I have one question. Mr. Wemple, you indicated that 
EDA funding, you're looking for diversity and flexibility, so 
to broaden the opportunities for funding by expanding the 
current funding portfolio to include special projects and 
unique economic settings. If that resonates with you, I'd like 
a comment on your ability to be flexible with EDA programs. 
It's a changing environment. We're going from traditional 
economies to the future, and diversification is very important 
and just for that reason alone this flexibility is important 
and I'd like to hear you all comment on that. Only for the 
record, and I'm sorry to do that because right now I've got 
zero minutes to go, zero seconds to go vote. But thank you so 
much, all of you, for testifying, both panels for being here 
today to testify. It's excellent testimony and will certainly 
help us to establish a support base for EDA as we move forward, 
certainly on the Subcommittee and beyond. So thank you for your 
testimony here today. This hearing is adjourned.
                                          Thursday, March 25, 2010.

   USPTO (UNITED STATES PATENT AND TRADEMARK OFFICE) FY 2011 BUDGET 
                                OVERVIEW

                                WITNESS

DAVID KAPPOS, UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND 
    DIRECTOR OF USPTO

                            Opening Remarks

    Mr. Mollohan. The hearing will come to order.
    Good afternoon, welcome. Today we have with us the Director 
of the United States Patent and Trademark Office, Mr. David 
Kappos, Kappos.
    Mr. Kappos. Kappos.
    Mr. Mollohan. Kappos? Thank you.
    To examine the fiscal year 2011 budget request and 
operations of the USPTO.
    Director Kappos, you well know that the USPTO plays an 
important role in fostering innovation which in turn drives job 
creation, economic recovery, and prosperity.
    You also know well that the USPTO found itself in fiscal 
year 2009 in a precarious fiscal position. Fiscal years 2010 
and 2011 will likely present new and equally daunting financial 
challenges for the Agency and key performance measures like 
patent pendency and backlogs will likely continue to decline if 
left unaddressed.
    USPTO's fiscal posture of last year highlighted major 
unacceptable deficiencies in its budget formulation and 
execution processes and underscored the need for a sustainable 
funding model that would allow your Agency to weather periods 
of economic downturn and reductions in fee collections without 
disruption to patent and trademark operations.
    You are aware of these deficiencies and that your budget 
includes several proposals to address them which we will 
explore this afternoon.
    Your fiscal year 2011 budget request for USPTO is $2.3 
billion, an increase of $435 million over the fiscal year 2010 
enacted level. Of this total USPTO projects fee collections 
under the current fee structure of nearly $2.1 billion. The 
difference, some $224 million, would be generated under the 
request by a temporary 15 percent surcharge on patent fees 
which the Agency would require new statutory authority to 
impose.
    In addition, the budget request proposes new fee setting 
authority that would permit the Agency to work with its 
external partners to align fees in future years with the actual 
cost of Agency services.
    These two legislative proposals seek to establish a more 
sustainable funding model for the USPTO, but are authorizing in 
nature and outside the jurisdiction of this Committee. For this 
reason it is imperative for the Committee to understand the 
impact of your Agency operations if such new fees are not 
established for fiscal year 2011.
    Lastly, it is important to note that the budget request 
proposes to establish an operating reserve to ensure the 
availability of adequate funding to address multi-year budget 
plans and unexpected fluctuation in revenues, but again the 
creation of such a reserve is predicated on the collection of 
new fees.
    I would like to thank you for your cooperation and close 
working with the Committee staff, it is certainly appreciated 
and your efforts to develop a requirements-based budget, which 
I think will go a long way in the long term to solving your 
problem.
    We have some structural issues that hopefully your 
authorizing effort will address or that maybe we can address 
otherwise.
    I am going to invite you to summarize your written 
statement which is made part of the report, but first I am 
going to call upon our Ranking Member, Mr. Wolf.
    Mr. Wolf.
    Mr. Wolf. Thank you, Mr. Chairman.
    Mr. Secretary, welcome. You're leading the Patent Trademark 
Office in a very troubling and difficult and challenging time. 
Your revenues are down, your patent backlog is over 700,000, 
unemployment reaching ten percent in the country, inventors now 
waiting three years, so we are anxious to hear how you plan on 
dealing with that.
    I also know that, I think, through the effort of this 
Committee over the years on the telework, that you are probably 
one of the leaders in telework.
    How many are teleworking at your----
    Mr. Kappos. Well on the trademark side of our Agency nearly 
every trademark examiner can telework. On the patent side, 
large numbers in the thousands of examiners.
    Mr. Wolf. Well we have been told that you want to expand 
it, so we will be anxious to hear how you want to expand it.
    And again, we look forward to hearing your testimony.
    Mr. Mollohan. Mr. Kappos.

                    Opening Statement By Mr. Kappos

    Mr. Kappos. Okay, well thank you, Chairman Mollohan and 
Ranking Member Wolf, members of the Subcommittee.
    I am really pleased to be able to join you here this 
afternoon and have an opportunity to discuss the USPTO's 
operations and our programs and initiatives, and the 
President's 2011 budget request in order to fund our efforts at 
the Agency.
    Mr. Chairman, we all recognize that innovation is a 
principal driver of our economy, perhaps the principal driver 
of this century. Stimulating economic growth, promoting 
innovation, and creating high paying jobs are key priorities of 
course for the Administration.
    The President's 2011 budget clearly recognizes and supports 
the role that the USPTO plays in enabling U.S. innovators to 
flourish and to bring new products and services into the 
marketplace. Yet the Office currently faces significant 
challenges, as has been pointed out already, a backlog 
approaching 750,000 patent applications, unacceptably long 
patent pendency rates by any measure, 35 months and counting to 
final action, and outdated information technology 
infrastructure.
    Our 2011 budget request provides the USPTO with the 
resources and the flexibility that we need to start addressing 
these problems.
    The President's budget, as you noted, requests $2.322 
billion for the USPTO based on projected fee collections of 
about $2.098 billion under the current fee schedule, and an 
estimated additional $224 million that would be brought in by 
an interim fee increase.
    Just like the business community, if we collect less fees 
than expected, we have to manage the Agency based on the 
revenues that we receive. And to safeguard against economic 
downturns, the budget request emphasizes business tools such as 
creating a reserve so that we can insure that we can execute 
multi-year plans and serve the public without disruption even 
in cases where patent filings dropped as they did in 2009.
    However, to help the USPTO and put us on a solid path 
toward a more sustainable funding model, the budget further 
proposes fee setting authority to permit the USPTO to work with 
its stakeholders and better align our fees with the actual cost 
of our services.
    So specifically, the President's request was formulated as 
a requirements-based budget at the request of the Subcommittee 
and supports a five-year plan that would reduce the time to 
first office action in patent applications to 10 months, reduce 
total average pendency to 20 months, and invest in a 21st 
Century IT architecture infrastructure and tools that are badly 
needed at the Agency.
    For those applicants in fast moving industries who need 
even shorter patent pendency, we are also formulating options 
to provide 12-month pendency from filing until grant or final 
action.
    To achieve these performance commitments we will initiate 
targeted hiring to recruit and hire 1,000 patent examiners for 
a net increase of 400 to 500 after retirements and other 
attritions annually during fiscal year 2011 and fiscal year 
2012.
    We are refocusing our hiring strategy to attract 
experienced IP professionals who will require far less training 
and will be able to quickly begin working on reducing the 
patent backlog.
    In fiscal year 2011 we will continue to promote a 
nationwide workforce, as has already been mentioned, and to 
invest in our telework programs which have been a model for 
other federal agencies.
    We are also studying ways to strengthen our organizational 
structure to support our extra strategic initiatives, and we 
look forward to working with the Committee as those efforts 
progress.
    So while fiscal year 2011 looks promising, our current 
financial situation is less than optimal.
    Our revenues from user fee collections declined 
substantially during fiscal year 2009, and the Office was 
forced to cut spending sharply in many important operational 
areas, cuts that cannot be sustained in the long term.
    Some of these financial constraints carried over into 
fiscal year 2010 even as we started to improve the efficiency 
and production of the Agency while operating on a bare bones 
budget.
    Thus far in fiscal year 2010 we have lost 115 patent 
examiners through the end of March, and have replaced only six 
so far. In total for fiscal year 2010, we project nearly 300 
patent examiners will leave the USPTO and we will be able to 
hire about 250.
    So our Agency will deteriorate slightly in size even while 
the backlog grows at current course and speed.
    Mr. Chairman, I would be remiss if I didn't provide an 
update on our current fee income projections.
    Based on the first five months of fiscal year 2010, we are 
seeing a very substantial rebound in user fee collections.
    Our current projection is that the USPTO will collect 
between $146 million and $232 million more than its 
appropriated spending limit for fiscal year 2010.
    So our new leadership team has undertaken a broad array of 
efficiency initiatives to provide the speed and quality of 
patent processing that our country needs. These initiatives are 
described in more detail in my written statement.
    Progress toward our strategic goals, however, is dependent 
on a number of important elements. These include establishment 
of a sustainable funding model, authority to set appropriate 
fees, an interim fee adjustment on patent fees, and an 
operating reserve to insure adequate reserves to address multi-
year budget plans.
    Our fiscal year 2011 budget provides a framework for 
continuing the work we have already started to make critical 
changes that support innovation, enable investment, and 
contribute to the U.S. economic recovery.
    Mr. Chairman, the challenges we face at the USPTO are 
significant, but we can address them with improved management, 
working closely with our external partners to identify the best 
solutions for improving the Agency, and with adequate 
resources.
    We appreciate your continued support of the USPTO and we 
look forward to working closely with you and with your staff on 
our fiscal year 2011 request in the weeks and months ahead.
    Of course I am happy to answer questions.
    [The written statement of USPTO Director David Kappos, 
Under Secretary of Commerce for Intellectual Property, 
follows:]

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                          BUDGET REQUIREMENTS

    Mr. Mollohan. Thank you, Mr. Kappos.
    You are asking for quite an increase here, and your request 
is not keyed to your fee collection estimates are they, as they 
have been in the past?
    Mr. Kappos. Correct, our request is greater than our fee 
collection estimates.
    Mr. Mollohan. Yeah. And why is that?
    Mr. Kappos. Well we started this year for the first time 
with a true requirements-based budget. So we started by asking 
within our business units what do you need to do in order to 
make substantial progress against the huge backlog that we have 
got? How many people do you need? What resources do you need? 
We simply added all of that up and it came out to more than our 
estimated fee collections.
    Mr. Mollohan. So the budget you are requesting here today 
is based on what you need to achieve some goals, not based upon 
what your estimate of the fees that you might collect during a 
fiscal year that you are projecting.
    Mr. Kappos. Correct.
    Mr. Mollohan. All right. I think that is a whole lot 
better, and again, in opening remarks I complimented you for 
that and I want to compliment you again for doing that. I think 
that is the start of getting some rationality in this whole 
fashion of fiscal policy for the USPTO and getting away from a 
lot of misunderstandings, which maybe we just leave behind us 
as we march forward, unless there is any interest in churning 
all those issues. Because the issues are structural and not 
necessarily anybody's fault, it is just people working within a 
system that I consider to be dysfunctional, which is my term.
    So you have requested this pretty large increase, and what 
are your goals with regard to it?
    Mr. Kappos. What we plan to do with that money is first in 
my mind and foremost, is to implement some really significant 
efficiency improvements.
    My belief is that you don't hire a lot of people under 
broken systems, you have got to fix the systems. I wish we had 
forever to fix the systems first, but we don't, so we are going 
to have to fix the systems, which we are already working on, 
and hire a substantial number of people, as I mentioned. 1,000 
people in fiscal year 2011 and 2012 while we are fixing the 
systems.
    We have got to turn on overtime 100 percent, which is an 
extraordinarily efficient way for us to get work done.
    We have got to get the information technology working and 
start making some investments in our information technology.
    We have got to fully fund our Patent Cooperation Treaty, 
which is an international treaty. We have got to fund the 
contracts so we can keep that work with our contractors so we 
can use our internal resources to work on U.S. patent 
applications.

                   PENDENCY GOALS VS. PENDENCY STATUS

    Mr. Mollohan. Let us go to your goals with regard to your 
pendency and your first response times. What are they right 
now?
    Mr. Kappos. So right now----
    Mr. Mollohan. Average pendency.
    Mr. Kappos. Average total pendency--I am doing this from 
memory--is about 35 plus months.
    Mr. Mollohan. And so that is 35 months starting when?
    Mr. Kappos. Starting from when the patent application is 
filed to when we give a final decision on issuance or 
rejection.
    Mr. Mollohan. Okay. So just so emphasize it, from the time 
a patent application is filed to the average time it is 
disposed of one way or another is 35 months?
    Mr. Kappos. Correct. Actually a little more than 35 months.
    Mr. Mollohan. Okay. And since that is average there are 
some shorter and there are some probably much longer.
    Mr. Kappos. Sure.
    Mr. Mollohan. What is the first response time frame that 
you are working at? What do you call that?
    Mr. Kappos. First action pendency.
    Mr. Mollohan. First action.
    Mr. Kappos. Right. So the pendency until the first time we 
give a substantive answer to the applicant is somewhere around 
27 months or so.
    Mr. Mollohan. So on an average a person filing an 
application would just say well a couple years from now I will 
hear from them for the first time.
    Mr. Kappos. Correct, and that is not good at all.
    Mr. Mollohan. Well we agree with you.
    So what are your goals now with this new budget? To what 
extent and how in terms of objective criteria, these numbers--
--
    Mr. Kappos. Right.
    Mr. Mollohan [continuing]. What do you hope to achieve in 
terms of reducing those pendency periods?
    Mr. Kappos. We are going to do three things. And of course 
it will take multiple years. With a backlog as big as we have 
we can't get it all done in one year. But we are going to do 
three things.
    Mr. Mollohan. Well we will talk about that in a second, but 
go ahead.
    Mr. Kappos. Right, okay.
    So we are going to take average total pendency down from 
the 35 plus to 20 months.
    Mr. Mollohan. So your ultimate goal a couple years out is 
to get to 20 months final disposition.
    Mr. Kappos. Correct.
    Mr. Mollohan. Okay.
    Mr. Kappos. We are going to take average first office 
action pendency down to ten months. So 27 or so down to 10, a 
very substantial decrease.
    Mr. Mollohan. Okay. So we file it, we expect to hear from 
you in 10 months instead of 27 months.
    Mr. Kappos. Yes.

                          PENDENCIES, OPTIMAL

    Mr. Mollohan. That is improvement.
    Mr. Kappos. Those are the optimal pendencies.
    Mr. Mollohan. Well that is my next question.
    What is the right time, I mean the optimal time to use your 
word, that a applicant should expect to hear back from you with 
first response and then final disposition?
    Mr. Kappos. The answer is it depends on the applicant in 
the situation. Some applicants want to hear back immediately. 
There is no such thing as too soon for them. We will talk about 
them in a minute.
    But on average, applicants actually want to have some time 
before they hear from us so that some prior art can get out 
there, so that they can do market research on their product, 
for a number of reasons. And it turns out that 10 months is 
optimal because it is as long as we can wait, but it is less 
than 12 months. Twelve months is when applicants have to make 
foreign filing decisions.
    So optimally they want to have all of the information they 
can have from us shortly before they are required to make their 
foreign filing decisions, which is why you want to push close 
to 12, and 10 is about the closest you can get and give them 
time to respond.
    Mr. Mollohan. So these times, these target turn around 
periods are optimal turn around periods. I mean that is what 
your community, your customers so to speak, that is what they 
would like to--that is the goal they would like to see 
achieved.
    Mr. Kappos. Right.
    Mr. Mollohan. They wouldn't like to see you turn these 
applications around any more quickly.
    Mr. Kappos. Not in general. There are some who will, we can 
talk about those.
    Mr. Mollohan. Okay.
    Mr. Kappos. So to talk about the ones who want a very quick 
response. So frequently----
    Mr. Mollohan. But let me just be clear on this and then 
please on that.
    Twenty months for a final disposition and ten months for a 
first response. Those are the goals the communities advocate 
for.
    Mr. Kappos. Right.
    Mr. Mollohan. And this budget that you are projecting here 
achieves those time frames in what time period?
    Mr. Kappos. Well we will achieve the time frames, and if I 
am recalling right now, 2014 for the--I might have to refer to 
my notes here--but 2014 I believe for the 20-month total 
pendency and 2015 for the 10-month first action pendency. But 
it is 2014, 2015.

            FEE SETTING AUTHORITY AND RESERVE FUND REQUESTED

    Mr. Mollohan. Okay. Let us quickly, and I am going to come 
back to the FTE numbers here later, but let me just finish up 
my line here by asking you about the funding scheme that you 
are proposing.
    Elaborate on that beyond your introductory remarks, if you 
will.
    Mr. Kappos. Okay. So let me make sure I have the question 
right. Our funding----
    Mr. Mollohan. Your proposal for funding and for your new 
fee proposal----
    Mr. Kappos. Okay.
    Mr. Mollohan [continuing]. And your reserve fund that you 
want to create, and talk to us about this proposal and how this 
works for you.
    Mr. Kappos. Okay.
    So it starts with getting the bridge funding provided by 
the 15 percent surcharge next year.
    Mr. Mollohan. Right, because you want to build up the 
surplus and the reserve fund.
    Mr. Kappos. Correct. And that helps us to build up starting 
with a $50 million reserve fund so that we don't get ourselves 
in financial trouble in the future.
    Mr. Mollohan. Okay.
    Mr. Kappos. It also enables us to start on the path toward 
recovery, hiring the 1,000 examiners, turning over time all the 
way on.
    Mr. Mollohan. Well the reserve fund doesn't do that. Your 
increased fees do that I think don't they?
    Mr. Kappos. Correct.
    Mr. Mollohan. They support your base budget, the reserve 
fund is sort of your float, if you will.
    Mr. Kappos. Right.
    Mr. Mollohan. It is the ``go to'' you are proposing in case 
you don't meet your budget request----
    Mr. Kappos. Right.
    Mr. Mollohan [continuing]. With your fee collections.
    Mr. Kappos. Correct.
    Mr. Mollohan. Okay.
    Mr. Kappos. Right. So the next major piece to the financial 
product is having the ability for the Agency to set its own 
fees with significant oversight and user community input so 
that we insure that we are staying very balanced and 
reasonable, but that will provide us with the ability to get 
fees much more aligned with the cost of actually delivering 
services, which I believe will help significantly to prevent 
another major shortfall in the future.
    Mr. Mollohan. And a significant difference here in your 
proposal as compared to what the situation you face now is your 
fees are set. You can't adjust your fee rates, correct?
    Mr. Kappos. Correct.
    Mr. Mollohan. You can't adjust your fees.
    Mr. Kappos. Right.
    Mr. Mollohan. What you are seeking is authorizing 
legislation at the best where you would be able to adjust fees 
through some process that you didn't have to come back to the 
legislature and ask for that, either through a rule making--is 
it through a rule making you are proposing that?
    Mr. Kappos. Yes.
    Mr. Mollohan. Well that is not very efficient either. I 
mean if you actually have to go through a rule making before 
you change every fee you are talking about a year or two year 
process.
    Mr. Kappos. Indeed it is a significant process, and so we 
wouldn't be changing our fees on any very short-term basis, we 
would be going through getting significant user input----
    Mr. Mollohan. And you are comfortable with having to do 
that?
    Mr. Kappos. Yes, I am.
    Mr. Mollohan. I guess you are, because somebody told you 
you had to go that way or because it is okay with you?
    Mr. Kappos. No, because I think it is actually critically 
important that we have input from the patent user community.
    Mr. Mollohan. I see.
    Mr. Kappos. And that we keep our fees reasonably balanced.
    Mr. Mollohan. So you have an interactive process with your 
customers, if you will.
    Mr. Kappos. Correct.
    Mr. Mollohan. Okay. Are you requesting an authorization for 
this?
    Mr. Kappos. Yes, it is in the President's 2011 budget, 
director fee-setting authority.
    Mr. Mollohan. But my question is a little different than 
that. That is a request to the appropriators. My question is 
are you seeking an authorization, going to the authorizing 
committee and asking for this fee structure change and the 
reserve fund approval?
    Mr. Kappos. Well yes, we are. The director's fee-setting 
authority is a provision that is included in the Senate 515 
patent reform legislation.
    Mr. Mollohan. Which you are working with the authorizers on 
both sides of the Capitol, the Senate and the House?
    Mr. Kappos. Correct. Right. We are trying to support the 
House right now----
    Mr. Mollohan. Do you have an opinion from them as whether 
you are going to get an authorization in time to give us 
direction with regard to this fee proposal?
    Mr. Kappos. No, I don't.
    Mr. Mollohan. You don't have an estimate?
    Mr. Kappos. No.
    Mr. Mollohan. Well you might ask them. We will as well, but 
you might tell them how important it is. Okay. Well that is 
good.
    Mr. Wolf.

                   EXPORT CONTROL AND SECRECY ORDERS

    Mr. Wolf. I thank the Chairman.
    I have a couple questions here in a different area. A few 
months ago I had a visitor to my office who raised a concern 
that the PTO put its complete patent application for software 
on the Internet. He was prohibited from exporting his product 
because of its potential military intelligence capabilities. He 
would never want to export it and I would be opposed strongly 
if he ever tried.
    But our system of export control is meaningless if the 
plans for developing technologies are posted by the U.S. 
government on the Internet. We all know that our country's 
adversaries, China and others, our rivals are aggressively 
working to steal as much of our intellectual property as 
possible.
    Two questions. Are you concerned that patent information on 
dueling technologies is on the Internet, and have you 
participated in any NSC led multi-agency to reform our Nation's 
export control laws?
    Mr. Kappos. Okay, thank you for those questions, Ranking 
Member Wolf.
    I am going to have to offer to get back to you on the 
second question, because I am not sure about that.
    As to the first question, I certainly would be concerned 
about the export of U.S. controlled technologies.
    The role that we play in the USPTO as the patent 
applications involves in our Agency a very course filter and 
then relying on other agencies, I believe DoD and DoE, to 
filter the vast majority of our patent applications and put 
those that involve controlled technology under secrecy orders. 
And so, to my knowledge, that process works pretty effectively.
    I would be concerned though, if something slipped through, 
and I certainly would like to investigate that.
    Mr. Wolf. Well if you would just give me a call and come 
back and take kind of a different approach on these secrecy 
orders.
    In fiscal year 2008 there were imposed 69 secrecy orders 
and in fiscal year 2009, 103, more than 78 percent of these 
were DoD and NASA initiators, the remainder being foreign 
initiators.
    But did the Patent Trademark Office impose any secrecy 
orders for reasons of economic security in either fiscal year 
2008 or 2009?
    Mr. Kappos. Not that I know of.
    Mr. Wolf. That is important, because we are losing jobs.
    What authority, if any, does the PTO have to impose secrecy 
orders for reasons of economic security?
    Mr. Kappos. I actually don't believe we have that 
authority.
    Mr. Wolf. But China is stealing us blind. And Mr. Chairman, 
I think when I hear of this program created in China, maybe we 
could carry language here, we are giving them that authority. 
Because while it is great the secrecy orders which would be a 
national security, but on economic security whereby the stories 
that I have heard is that China just kind of codes these 
things, it kind of comes through.
    Let me take the third question. Should the technologies 
restricted for export by the Department of Defense, Commence, 
Homeland Security, State, NASA, Justice, and Energy 
automatically be subject to a PTO secrecy order?
    Mr. Kappos. So if I understand in the case where there is a 
dual use technology, right, that is covered----
    Mr. Wolf. Put Defense, Commerce, Homeland Security, State, 
NASA, Justice, and Energy.
    Mr. Kappos. Yeah, I would think that those issues should be 
getting caught by those other agencies that do the reviews for 
us.
    Mr. Wolf. Well apparently they all haven't, and it troubles 
me too that you can't really be economic. Can you see the 
importance of the economic security?
    Mr. Kappos. Sure.
    Mr. Wolf. Almost ten percent unemployment in the country. 
The Chinese can come in and access patents and move that. You 
believe that the Chinese are looking at the patents that come 
on?
    Mr. Kappos. I believe that China and lots of other 
countries are looking at them.
    Mr. Wolf. And so does it make sense for you that you would 
have that ability because of economic security as well as 
national security?
    Mr. Kappos. Difficult question to answer.
    Mr. Wolf. Because if we get to 11 percent unemployment and 
12 percent unemployment all you have to do is get on a train to 
Washington and take it to New York and look at the factories 
that are empty or closed.
    Probably China is where it is now with the space program 
because of the stealing of technology. The cyber attacks 
against our government, DoD, Homeland Security and into 
companies.
    So it is economic security. A great nation needs a strong 
economic base to support its national security.
    You are shaking your head, you agree with me. So how do we 
deal with this?
    I can see I caught you a little bit by surprise, but this 
is not a trick question.
    Maybe we ought to get together and I can bring some people 
to see how we deal with this issue. Would you not agree that 
this is important with regard to the industrial base of the 
Nation so that we don't have this technology and information 
taken away?
    Mr. Kappos. Right. I certainly agree with that.
    If I could make a suggestion, perhaps this is an idea that 
we can put together some kind of a study to take a look at what 
level of potential expansion of secrecy orders makes sense.
    Mr. Wolf. Maybe a 30-day study. I don't want a year study 
or two years. You will be practicing law downtown and move it 
onto somebody else. So if we can do a quick 30-day that would 
be fine.
    Last question on this area. What arrangements does the PTO 
office have with the patent offices of Europe, Asia, and other 
agencies cooperating in non-publication from national or 
economic security when innovations are involved?
    Mr. Kappos. I don't believe we have any arrangements. We 
handle non-publication on a unilateral basis. So for the USPTO, 
if we get a secrecy order, we put the entire case under lock, 
if you will, and don't publish anything. We don't tell overseas 
offices anything about those cases.
    Mr. Wolf. So let me ask a last question. What does China do 
and what does England do?
    Mr. Kappos. In fact I believe in both of those countries, 
and some other countries, they have the same requirement as we 
do for local applicants to get export clearance for their 
patent applications. So you have to actually go into their 
patent offices, just like you have to come into the USPTO, and 
give the office an opportunity to evaluate the subject matter 
for secrecy purposes.
    The UK does that. I am quite confident China does and some 
other countries do so.
    And so I expect they have programs similar to ours where 
they are pushing those applications through their security 
apparatus and asking the same questions that DoE and DoD do for 
us, and pulling some of those with secrecy orders.
    Mr. Wolf. I hope you don't have any collaborative 
agreements with China, do you?
    Mr. Kappos. Collaborative agreements?
    Mr. Wolf. You are not bringing China over and sitting down 
with them and talking to them.
    Mr. Kappos. Our major collaborative agreement, which we 
don't have with China, is called the Patent Prosecution 
Highway, we have that with some other countries like the UK, 
but not with China.
    Mr. Wolf. And so you are not doing this with China. What do 
you do with China?
    Mr. Kappos. Well we are both members for instance of the 
Patent Cooperation Treaty, but there are many countries I 
believe, somewhere around 160 countries, or some huge number.
    Mr. Wolf. What is your special relationship with China?
    Mr. Kappos. I am trying to be helpful. Special 
relationship?
    Mr. Wolf. Well rather than taking up the Committee's time 
with that why don't you think about these and then maybe 
arrange for a time to come on by.
    Mr. Kappos. Sure, sure. Okay, thank you.
    Mr. Mollohan. Thank you, Mr. Wolf.
    We have two minutes, 50 seconds to go vote, 339 members 
have not voted, just to let the Committee know, we have a 15 
minute--finishing a 15-minute vote and two 5-minute votes.
    Mr. Fattah.

                 PATENT REQUESTS: FOREIGN VS. DOMESTIC

    Mr. Fattah. Thank you, Mr. Chairman.
    Along the lines of what the Chairman was talking about 
earlier, you know, I am very interested in how we can help you 
work through this backlog and how to get the decision packages 
done more quickly.
    So your optimum is 20 months, and along this continuum of 
budget request you think you can achieve that by when?
    Mr. Kappos. Again, I am doing this from memory, but I 
believe we can get to 20 months total pendency by 2014 and 10 
months first action pendency by 2015.
    Mr. Fattah. Okay. And I am very sympathetic to the request 
in terms of the reserve fund and the 15 percent.
    I have another question. Who is requesting patents? Who are 
the, you know, compared to domestic versus foreign requests 
what is the balancing of that these days?
    Mr. Kappos. Okay. Well, I am fond of saying that it seems 
like everybody is requesting patents these days.
    Mr. Fattah. I understand that. My point is have we arrived 
at a rubicon where we now have more foreign companies 
requesting patents than domestic?
    Mr. Kappos. Yeah, it is about 50/50. It depends on how you 
count, but the best way to count you come out about 50/50.
    Mr. Fattah. And is there any fee differential?
    Mr. Kappos. No, there is no fee differential between 
foreign and domestic.
    Mr. Fattah. And what about your counterparts in the UK and 
other places, is there a fee differential?
    Mr. Kappos. No. There are treaty requirements that cause 
all countries' patent offices to charge local applicants the 
same as overseas applicants.

                       PENDENCY BACKLOG REDUCTION

    Mr. Fattah. Okay. And the budget request for the additional 
15 percent, this floating reserve fund, right, would generate 
about $50 million?
    Mr. Kappos. Yeah, the reserve fund would start at $50 
million, right. In my view it should become significantly more 
than that over time.
    Mr. Fattah. And if we wanted to front load the reduction 
and the delay can you quantify for the Committee how much more 
it would take to get this backlog to the optimum quicker?
    Mr. Kappos. More quickly? Well so this is a very difficult 
point. I totally agree and I would love to get there quicker, 
but the problem I am going to have--my major tool would be to 
hire more people, but the problem I am going to have if I hire 
more people in 2011, 2012 is that it will cause the backlog to 
go down so fast that I will wind up having potentially some art 
units in the office literally run out of work, and I won't be 
able to get people out of the office fast enough by normal 
attrition.
    So I am very concerned about over hiring in early years, 
which would cause an overshoot.
    Mr. Fattah. I can understand the desire for perfection 
here, but if you follow the Chairman's thought, and it is in 
your testimony, that there is a direct link between you doing 
your work and other Americans being about to go to work, and 
new inventions come on the market and so on, we might be 
willing to live with some unevenness.
    And plus in your design you are going out and you are 
hiring former examiners in part, right?
    Mr. Kappos. Uh-huh, correct.
    Mr. Fattah. In order to expedite this process, which I 
think is a great way to proceed.
    So if the production of the patent decision expedites the 
development of new products in a way that puts lots of 
Americans back to work, it may be worth us trying to expedite 
your work, right? Versus worrying about how neatly the hiring 
and tradeoffs are in the packages of your personnel.
    Mr. Kappos. Okay, correct. So we would be happy to go back 
and----
    Mr. Fattah. If you could provide that to the Chairman that 
would be helpful.
    Mr. Kappos. Yes, absolutely.
    [The information follows:]

       Cost of Speeding Up Hiring of Patent Examiners Immediately

    If the USPTO were to speed up the hiring process by hiring 350 more 
patent examiners during FY 2010, it would cost approximately $12 
million this fiscal year. There would not be any additional cost in the 
out-years due to already being included in the base funding in our FY 
2011 budget request.
    The below chart illustrates the impact of immediate hiring on 
patent pendency and backlog:

            PATENT EXAMINER HIRES--ACCELERATE 350 IN FY 2010
------------------------------------------------------------------------
            Pendency reduction                    Backlog reduction
------------------------------------------------------------------------
--2011  0.8 mos...........................  --2011  24,300 applications.
--2012  1.5 mos...........................  --2012  24,500 applications.
--2013  2.1 mos...........................  --2013  24,200 applications.
--2014  2.7 mos...........................  --2014  23,700 applications.
--2015  3.3 mos...........................  --2015  22,800 applications.
------------------------------------------------------------------------

    Mr. Fattah. All right, thank you.
    Mr. Mollohan. We are going to recess and we will be back 
after two additional five minute votes. It shouldn't be too 
long. Ten, 15 minutes.
    Mr. Kappos. Thank you.
    Mr. Mollohan. Thank you, Director.
    The hearing will resume.
    Mr. Schiff.

                          PATENT SYSTEM REFORM

    Mr. Schiff. Thank you, Mr. Chairman. Director, good to have 
you with us.
    Congress has been examining proposals as you know and we 
have discussed reforming the patent system for several years, 
and I believe the key to addressing the concerns with the 
current patent system is to work to increase efficiency at the 
PTO and improve the quality of patents as well as get rid of 
the backlog. In order to achieve those goals we need to insure 
we are providing the Office with adequate resources and staff.
    What I wanted to ask you about was if you look at the 
fiscal year 2011 performance chart, you have provided estimates 
on fee collections for fiscal year 2015. The chart indicates 
that if funded accordingly, average total pendency will come 
down to 19.9 months.
    Do those fee collection estimates contemplate the 15 
percent surcharge or are you building that into your 
expectation? Can you tell us a little bit about how you arrived 
at 15 percent? And do the estimates also contemplate other fee 
increases?
    In other words if you are building at 15 percent and you 
are asking for fee setting authority, are you contemplating 
other fee increases? If so, what kind of fee structure are you 
contemplating?
    Would it be advisable, for example, to have a scaled fee 
structure where organizations that have multiple, multiple 
patent applications pay more because they are utilizing the 
resources and have the capacity to pay more?
    The other question I wanted to ask you is sort of about the 
long term and about the historic record of the Patent Office.
    I asked my staff to look at the Office's projections five 
years ago as a way of evaluating sort of the projections five 
years forward, and I know it won't surprise you to learn that 
the Patent Office, when they estimated this is what we will 
need to get rid of the backlog, were very close in getting what 
they said they needed. I mean they were a little bit off, but 
not off by that much. But when you look at what the result was, 
the result moved in the other direction.
    In fiscal year 2006 the Office projected that the average 
first action patent pendency in fiscal year 2010 would be down 
to 18 months, but just a year later in fiscal year 2007 the 
projection was up to 23 months, and two years later it is up to 
26.5 months.
    So the resources have come in not all that differently than 
anticipated, but the pendency times, et cetera, have actually 
moved in the wrong direction.
    So the increase in the times cannot be fully explained by a 
lack of resources, and this is coming from someone who is a 
strong advocate of more resources.
    So I guess, you know, one question, and you know, I think 
we all have is, we want you to have the resources, but how much 
confidence should we have that if you are given the resources 
you say you need that the numbers will actually change in the 
right direction? So if you could address that.
    And you know, the final comment I would make on the fee 
issue is, as important or as valuable as it may be for the 
Office to set fees, unless you have the advantage of using the 
fees, I don't want a situation where you are raising fees, not 
getting use of the revenues, and the Patent Office is being 
used to subsidize other government activities.
    So if you could comment on those three areas.
    Mr. Kappos. Okay. Well thank you, Congressman Schiff, those 
are great questions. I will see how many I can remember and you 
can perhaps guide me back to the other ones.
    So relative to fee setting, which I think was one of the 
first issues.

                       FEE INCREASES CONTEMPLATED

    Mr. Schiff. You know, let me summarize and make it easy for 
you.
    The three categories I am interested in are do your 
estimates contemplate fee increases? Well, do they take into 
consideration 15 percent? Do you contemplate additional fee 
increases? And what do you think about scaling up those fees 
for sort of multiple, multiple users? Then how do you in 
evaluating the performance record of PTO for the last five 
years, what will you be doing differently to avoid the trap of 
getting the resources, but not getting the productivity? And 
then finally the retention of the increased fees.
    Mr. Kappos. Okay. So the estimates contemplate both the 15 
percent surcharge and separate fee increases, but not that they 
would be operating together at the same time.
    So what I mean by that, as Chairman Mollohan pointed out 
before, is that fee-setting authority under notice and comment 
rule-making takes at least a year, and my understanding is 
between a year and 18 months in order to actualize.
    If we are going to get started at improving the Agency 
immediately, we need to have access to additional funding 
before we would be able to get through any permanent reset of 
fees.
    And so the 15 percent surcharge is designed as a bridge, it 
is sort of step one. It is something we can put in place 
immediately while we are working on resetting the fee structure 
in a more permanent way.
    The 15 percent surcharge was calculated, as I mentioned 
before, literally on a requirements-basis. So we started by 
adding up what we needed to get done, figuring out how much 
that would cost, then subtracting from it the funds we expected 
to collect, and that left us with some $232 million, or around 
that level, that weren't going to be funded.
    And so if you then do the math as we did, to ask how much 
if you were going to do a simple across the board surcharge, 
how much would you need to do, accounting for some amount of 
leeway or applicants changing behavior, and it just literally 
mathematically comes out to 15 percent, so that is how we got 
the number.
    Mr. Schiff. And I guess this gets to the Chairman's point, 
which is a good one. That you know, in the ideal situation you 
would develop a five-year plan for reducing the backlog, swift 
processing of patent applications, tell us what you need to 
establish that and we would appropriate the money. If it is 
more than the fees, then we would appropriate more than the 
fees, if it is less than the fees, you know, theoretically we 
could appropriate less than the fees.
    It sounds like in the beginning it would be more than fees 
because it will take you time to change the fees, but is it 
your goal with the 15 percent and whatever additional increment 
to set the fees at a level that presumes that that will be the 
budget sufficient for the Agency to eliminate the backlog, et 
cetera?
    In other words is what you will be aiming for with a 15 
percent increase and whatever fee increases and however they 
are scaled on top of that to arrive at a fee level that would 
make the Agency self-sustaining in this downward backlog 
reduction trajectory without having the necessity of the 
appropriation of any funds on top of fees, but at the same time 
using all the fees that are collected?
    Mr. Kappos. Yes, that is correct.

                     FEE SCALING FOR MULTIPLE USERS

    Mr. Schiff. Okay. And what do you think about scaling the 
fees for the numbers of applications?
    Mr. Kappos. Right. So for multiple users, we are actually 
working on something that is similar to that, and I want to use 
an approach when we get to fee setting, if we get Agency fee 
setting authority, that would be very, very similar, which is 
to charge differentially, based on the number of pages that are 
submitted in the application based on the number of claims that 
are submitted more so than we do now.
    We currently have some level of additional charge for 
additional claims, but it needs to be substantially higher for 
additional claims.
    So you get very close to the same place by charging based 
on the amount of work that we have to do in order to handle the 
application, which is a function of the number of claims and 
the number of pages of specification.
    Mr. Schiff. How will you handle a situation where we have 
organizations that acquire patents from others where you would 
need to pierce the veil to see who the patent owners are to 
know how many applications they are making and how do you deal 
with that situation?
    Mr. Kappos. Well that is a significant problem, and that is 
one of the reasons that I think the way to get at the issue 
that we are talking about here, which is to differentially 
charge those who are requiring more of the offices resources, 
the way to do it is on a per page and per claim basis, because 
then you don't have to ask the real party in interest or 
piercing the veil kind of question, you cut through that, just 
look at the individual application and say how much resource 
are we going to have to put into this as a function of the 
number of claims and the number of pages of specification and 
charge on that basis?
    Mr. Schiff. Are there other policy reasons though why you 
might want to know what the patent owners are in terms of the 
utilization, the system, the transparency of the system?
    Mr. Kappos. Well there certainly are in my view some good 
reasons.
    We currently get information on, of course, the inventors, 
and the true and correct inventors have to be disclosed, right? 
And then we get information on whoever the patent application 
is assigned to, if the assignee wants to have all the legal 
rights that you get from being transparently listed as an 
assignee.
    But to your point, applicants are able right now to form 
any kind of company they want, including shell companies, and 
list those as the assignees on applications. And in my view 
that indeed does create some transparency challenges. Because 
then, once a patent issues, and even when the application 
publishes, a member of the public can't tell who is truly the 
owner of the patent or patent application by looking at the 
assignment records.

                                OUTCOMES

    Mr. Schiff. And can you comment briefly, because I am 
probably running out of time, what should give us more 
confidence that with the resources that you are contemplating 
we will see a different track record than your predecessors?
    Mr. Kappos. Right. So look, we are doing everything 
differently, okay?
    There were many problems that have come up in the past 
starting with skating to where the puck is rather than where 
the puck is going, and we are trying to skate to where the puck 
is going rather than where the puck is.
    Putting it more specifically, there were terrifically high 
attrition rate of examiners who had been hired within the last 
two to four years. Those are the examiners that we have 
invested a tremendous amount of money into training and they 
were the people who we had gotten the least pay back from, if 
you will, in terms of production and work.
    By changing our hiring demographic, just one example, to 
trying to hire experienced IP professionals, former examiners, 
and people who at least have some life experience with the IP 
system, we hope to get a much more mature workforce demographic 
that will require a less training aggregate and will have lower 
short range attrition. So that is just one example that can 
have a tremendous impact on the Agency.
    Mr. Schiff. Does the top end of the pay scale pose a real 
limit on the quality of the applicants you can hire and your 
ability to retain them? Is that something that needs to be 
looked at as well?
    Mr. Kappos. I believe that our pay structure is okay. It is 
not as much as people make in the private sector, and we do 
lose employees to the private sector, but I have plenty of 
examiners who are telling me we feel like the pay isn't the 
issue at the Agency. They are issues like the work mix, like 
the management, and the structure of the management, and the 
incentives that we have been giving to management, the IT tools 
which are terrible, I commented on those before. Those are the 
issues that our examiners rightly complain about.
    I truly believe that while our pay is not what the private 
sector is, that is not the issue that is holding us back.
    Mr. Schiff. Thank you, Mr. Chairman.
    Mr. Mollohan. Mr. Ruppersberger.

                             CYBER SECURITY

    Mr. Ruppersberger. I know Mr. Wolf raised the issue about 
the cyber security issue, and because your mission is fostering 
innovation through technology and capital investment and 
whatever, do you have a security team that is working with 
Homeland Security or whatever?
    Because we know China, Russia, other--we are getting a lot 
of cyber attacks. Are you working--because the information that 
you have and gets in the hands, and we know it has, especially 
to China, millions of dollars worth of intellectual property is 
gone.
    Where are you as it relates to your security? Are you just 
starting, have you identified anything, where are you there?
    Mr. Kappos. Okay. So thank you for that question.
    We do have a security team at the USPTO. We also are 
working with our colleagues at the Department of Commerce which 
has a significant focus on cyber security related issues, and 
working to ensure that the USPTO is not vulnerable to those 
kinds of attacks.
    Mr. Ruppersberger. All right. Well, I think hopefully you 
will be very aggressive in that regard, because we are just--
Homeland Security is taking a little while to step up, but I 
think your area should be made a priority, and if you have any 
issues there if you could contact me in my office we would like 
to deal with you on that.
    And I will take this to another level. On the attaches 
embassies throughout the world that are there to help us to 
work with us to make sure we are protecting our American 
business and as far as their trade secrets or whatever, just 
discuss that program a little bit, and how are we also 
protecting them from the cyber attacks or any other 
intelligence gathering countries or people that are trying to 
get in fact.
    Mr. Kappos. Okay. So yeah, our attache program is 
relatively new still, I believe we started it in 2006. We have 
USPTO employees in several important countries, including China 
and Brazil and several other places, southeast Asia, India.
    When they go overseas they are typically housed in the U.S. 
government embassy and are put on information technology 
systems that are the same ones that foreign commercial service 
employees are put on.
    And so our view is that they have good security by virtue 
of being on the same secure systems that the foreign commercial 
service folks are on.
    Mr. Ruppersberger. Okay, good. Thank you.
    Mr. Kappos. Okay, thank you.
    Mr. Mollohan. Mr. Wolf. I anticipate this being a last 
round.

                               EXAMINERS

    Mr. Wolf. Thank you, Mr. Chairman.
    Given the PTO's backlog of patent applications, how many 
additional examiners and how much more of an operative budget 
and how long will the PTO need to meet the one year processing 
goal? So really how many more examiners? You said 1,000, but 
you said some are retiring. So how many more, how many more 
operating budget to become any chance of the one-year 
processing?
    Mr. Kappos. Okay. So as to examiners, our plan would be to 
hire 1,000 in fiscal year 2011 and then 1,000 again in fiscal 
year 2012. But of course there is attrition, so if you factor 
in retirements and other attrition you would be netting 
somewhere over 500 examiners each year. So we would have a net 
increase of workforce of somewhere over 1,000 examiners after 
the end of the second year.
    Mr. Wolf. So each year they are retiring you would have 
retirees, so that counts. And then the following year retiring 
and the following year? I mean as you get--each year more 
people are going to retire from there, so that is counting--
that would get you up on a permanent basis to the level.
    Mr. Kappos. Correct, right.

                 INCREASE IN FEES AND INDUSTRY SUPPORT

    Mr. Wolf. And how high would you need to raise fees in 
order to fund the one-year processing, and how would that be 
reacted to by the industry?
    Mr. Kappos. So in terms of the increase on fees, we are 
working on formulating those numbers and haven't gotten them 
completed yet. We will be getting a lot of input from the IP 
community to insure that the IP community is together with us 
in whatever we propose.
    Mr. Wolf. Do you have any rough idea?
    Mr. Kappos. It actually depends on the fee. There will be 
some fees frankly where we might either reduce them or don't 
change them at all. There will be other fees that will go up 
very substantially, and there will be other fees that we'll 
raise incrementally.
    Mr. Wolf. Okay. So you're feeling that the industry would 
still support that?
    Mr. Kappos. Yes, I actually believe that. Because they will 
be getting something for their money, which is reduced 
pendency, very substantially.

                  INTELLECTUAL PROPERTY THEFT ESTIMATE

    Mr. Wolf. Do you have an estimate of the level of revenue 
lost by U.S. businesses from intellectual property theft each 
year?
    Mr. Kappos. I don't know. I certainly don't have an 
estimate of that.
    Mr. Wolf. Is there any way that you could look at that?
    Mr. Kappos. We certainly can take a look. It may be a hard 
thing to estimate, but be happy to try. We have a new chief 
economist and that would be a good project for him to look at.
    Mr. Wolf. And if you would also estimate who is responsible 
for it, what countries would that be that may be responsible 
for that loss.
    Mr. Kappos. We would be happy to take a look at that.

                      INTELLECTUAL PROPERTY RIGHTS

    Mr. Wolf. Does the Patent Office work on promoting 
intellectual property rights internationally?
    Mr. Kappos. Yes, we do. And we have a number of programs 
that are very centrally directed to international IP rights, 
including the IP attache program that we were talking about 
before, and very significantly including our external affairs 
mission just focused on U.S. global leadership of intellectual 
property rights.
    Mr. Wolf. How closely do you work with the FBI and Homeland 
Security to prevent and investigate intellectual property 
rights crimes?
    Mr. Kappos. Well of course we support the FBI and Homeland 
Security and other enforcement agencies, and we work closely 
with the IP enforcement coordinator at the White House in order 
to support them.
    Mr. Wolf. Who is the IP coordinator at the White House?
    Mr. Kappos. That is Victoria Espinel.
    Mr. Wolf. And who is she under? Is she on the National 
Security Council or who is she under?
    Mr. Kappos. I believe she is in the office of the Vice 
President in OMB.
    Mr. Wolf. Oh, it is OMB. Is that a new position?
    Mr. Kappos. Yes, it is.
    Mr. Wolf. As of when? Is she a Czar or is it a different 
area? No, I meant that, that was a serious question. Was this 
by authorization a statute or was it----
    Mr. Kappos. By statute.
    Mr. Wolf. She was authorized by statute. And she is the 
first one?
    Mr. Kappos. Correct.
    Mr. Wolf. Could you ask her, we would like to have the 
opportunity to just talk to her some time, maybe she could--I 
don't always get my calls returned from the White House, so if 
you could maybe----
    Mr. Kappos. I would be happy to speak with Victoria.

                    JOB CREATION AND PATENT PENDENCY

    Mr. Wolf. I appreciate that. I think that is pretty much 
it.
    Just one additional question. What is the relationship 
between patent pendency and job creation? Have you ever looked 
at that? Is there a connectively to it? I mean there is, but I 
mean have you ever looked at how it is----
    Mr. Kappos. Yes, I believe there is a relationship, and I 
believe it is a directly correlated relationship. Meaning that 
the longer patent pendency is, the worse we are doing at job 
creation, and I believe there is actually a strong relationship 
between getting patents out of the USPTO and creating jobs for 
Americans.
    Mr. Wolf. Well that was a next question. How harmful is it 
to the U.S. economy that it takes a patent application almost 
three years? Has anyone ever done a study with regard to the 
length and the economy?
    Like one of the questions when you were testifying earlier 
I wrote when, when was the best year ever?
    Mr. Kappos. For patent pendency?
    Mr. Wolf. For patent pendency.
    Mr. Kappos. Well without looking back to the time of our 
founding fathers, recently I believe----
    Mr. Wolf. In modern times.
    Mr. Kappos. In modern times I believe there was a time in 
the 1980's when pendency was very favorable.
    Mr. Wolf. What were the conditions then insofar as the 
numbers, insofar as the spending? Why was it favorable then and 
not now?
    I am sure there is no--I mean there must be some connection 
as to was it----
    Mr. Kappos. Well there were a lot fewer patent 
applications.
    Mr. Wolf. Well then that is not a good reason. I mean when 
was the best year that you were doing very well? Not you, but 
the Patent and Trademark Office, when the number was still 
relatively high?
    Mr. Kappos. I don't believe in really recent history. In 
the last ten years the backlog has just gone monotonically up.
    Mr. Wolf. If you were to reduce that the way you want to do 
you think--is there any study showing what impact that would 
actually have on the economy?
    Mr. Kappos. Well, we do have some information, in fact a 
new study that we are just in the process of completing and 
anxiously want to share with the Subcommittee, does not go, 
Ranking Member Wolf, all the way to showing a direct 
correlation between patent output and jobs, but that is one of 
the projects that our new chief economist is focusing on, 
because we are very concerned about exactly the point you are 
raising, and we want to know exactly what the relationship is 
between patent output and job creation. We are in the process 
of studying that now.
    Mr. Wolf. So now basically you understand and believe that, 
but you don't have any proof, but what you are working on is a 
study?
    Mr. Kappos. Correct.
    Mr. Wolf. Okay. Well thank you very much. If we can chat 
with you some time with regards to the economic security issue, 
I guess you would have to determine what the standard was with 
regard to economic security. But when I see the loss of jobs 
and America has taken a leadership in so many areas and knowing 
how people are cherry picking and taken away I think it is 
something hopefully we can work out an argument to give you 
that opportunity to look at economic security as well as 
national security.
    Thank you for your testimony.
    Mr. Kappos. Okay, thank you.

                      PENDENCY REDUCTION TIMELINE

    Mr. Mollohan. Okay, thank you.
    Mr. Kappos, we talked about reducing pendency in terms of 
time and we are at 35 months and optimum is 20 months for final 
determination, which is your testimony. And under this budget 
request for fiscal year 2011, if everything worked well, if you 
got all your fee and surcharge approvals wherever you got them, 
you would reach the 20-month period in what time frame?
    Mr. Kappos. Okay, this is where I need to actually correct 
what I mentioned before, because I was reversing the dates.
    We would reach the 20-month period in 2015, and the 10-
month first action period in 2014. So I apologize for reversing 
those dates.
    Mr. Mollohan. Well that makes sense actually, which is a 
good thing. Okay.
    So this is really a multi-year effort to get to that, and 
that speaks to the question that Mr. Fattah was getting to. How 
do you modulate the employment or potential employment bubble? 
And I guess it is by not doing it three years earlier.
    Mr. Kappos. Right. Exactly right.
    Theoretically we could hire 1,500 or 2,000 people next 
year, but it would then cause us in somewhere around 2014 to go 
down a cliff in pendency and overshoot the ideal pendency 
level, which by the way is about 320,000 applications in the 
Office at any one time.
    The reason I say that is because we are operating a large 
work flow engine like a production environment similar to a 
factory in many ways, and you need to have inventory at all 
stages of the production system.
    Three hundred and twenty thousand applications ensure that 
at any one time there are about 70 dockets on the workload of 
each examiner, which ensures that each examiner has cases at 
all stages. Brand new cases, cases in the amendment process, 
older cases. They all move on their own time cycles, but it 
enables each examiner to have a very steady workflow.
    If you take the docket load down much below 70 you 
literally can risk examiners running out of work, and I don't 
want that to happen.
    Mr. Mollohan. Well, I want to talk about strategies of 
achieving what Mr. Fattah was speaking to in avoiding that 
bubble that we were just eluding to.
    But first I would like to get some absolute numbers with 
regard to your backlog. Right now what is your backlog?
    Mr. Kappos. About 750,000 unexamined applications. And if 
you include the number that some are in examination the total 
number is about 1.2 million. So that means 750,000 that we 
haven't even picked up to look at yet, and an additional 
450,000 or so that we are currently looking at, but we haven't 
made a final decision.

              BACKLOG REDUCTION WITH AND WITHOUT SURCHARGE

    Mr. Mollohan. Well let me ask you this. How do you define 
backlog?
    Mr. Kappos. The backlog is the total number of pending, 
meaning filed, but unexamined applications.
    Mr. Mollohan. Unexamined meaning not even looked at 
initially.
    Mr. Kappos. Correct.
    Mr. Mollohan. So backlog is unexamined. Then what do you 
call those that are in the examination process but are 
processing through over that two-year period?
    Mr. Kappos. We refer to those as in process applications.
    Mr. Mollohan. Okay. So right now today you have 750,000 
backlog.
    Mr. Kappos. Correct.
    Mr. Mollohan. You have not looked at 750,000 applications?
    Mr. Kappos. Correct.
    Mr. Mollohan. And in process you have how many?
    Mr. Kappos. In process, again doing this out of memory.
    Mr. Mollohan. And that doesn't count the 750-. I am looking 
for the number that you have first looked at and are now being 
processed.
    Mr. Kappos. Correct. Somewhere around 450,000. That is why 
you get to--1.2 million as the total number of cases that are 
in the Office that haven't had a patent granted or denied yet.
    Mr. Mollohan. Okay. You are effecting efficiencies and 
trying to do things right now within your fiscal year 2010 
budget to achieve some reduction in the backlog.
    So first, at the end of this fiscal year by October 1st of 
2010 do you have a projection for a reduction hopefully in your 
backlog, and what would that be?
    Mr. Kappos. I am going to have to refer to my notes on 
that. I do have some information. Current course and speed, at 
the end of this year, because we are not hiring enough people 
to counter for attrition----
    Mr. Mollohan. Because your 2010 budget won't allow you to 
do that.
    Mr. Kappos. Correct.
    Mr. Mollohan. Okay.
    Mr. Kappos. So this is showing slightly different numbers, 
but it is showing that the end of year--I will give you the 
number here, but I would like to actually confirm this if it is 
okay. It is showing an end of year backlog at the end of 2010 
of 692,350 applications.
    Mr. Mollohan. And 350 applications, what does that mean? In 
process?
    Mr. Kappos. No, backlog. Unexamined. So 692,350.
    Mr. Mollohan. Okay.
    Just taking the backlog numbers, at the end if you were to 
get everything you are asking for in your budget request for 
2011 to what number I am assuming you would reduce the backlog?
    Mr. Kappos. Right. We would be taking it down to a little 
over 668,000 in 2011.
    Mr. Mollohan. At the end of 2011 you would go from 92 to 
68? I tell you what, instead of doing it this way submit this 
for the record.
    Mr. Kappos. Sure.
    [The information follows:]

               Backlog Numbers With or Without Surcharge

    See below chart detailing projected backlog numbers under the two 
requested scenarios for Fiscal Year 2009-Fiscal Year 2015. Note that 
the backlog numbers below are consistent with the President's FY2011 
budget and were premised on hiring 600 new examiners. Given USPTO that 
these hires were not made, the estimates for at least FY2011 and 2012 
may at the end of these years be slightly higher.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   2009         2010         2011         2012         2013         2014         2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
2011 President's Budget:
    Average First Action Pendency............................         25.8         25.4         25.8         19.1         10.7         10.9         10.8
    Backlog..................................................      718,835      705,010      614,392      496,334      378,799      343,029      335,538
No Surcharge/Fee Setting Authority:
    Average First Action Pendency............................         25.8         25.8         26.0         26.6         28.0         30.1         33.0
    Backlog..................................................      718,835      719,077      724,908      750,038      803,559      888,034    1,003,369
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Mr. Mollohan. And what I would be interested in saying is 
this is what I would like to get at. Given your budget request 
what would you get to and in each of the next let us say four 
years?
    Mr. Kappos. Okay, sure.

                            BACKLOG, OPTIMUM

    Mr. Mollohan. And we got to the pendency that you wanted, 
optimum pendency. What is your, if this is the right way to ask 
it, optimum backlog level at any one time?
    Mr. Kappos. About 325,000 total applications.
    Mr. Mollohan. Why wouldn't zero be your backlog goal or 
your optimum backlog goal?
    Mr. Kappos. If you had zero, that would mean you would be 
picking up applications to examine them immediately when they 
arrived at the Agency.
    Mr. Mollohan. Yes.
    Mr. Kappos. Right. Which would mean you wouldn't have 
access to the prior art, because there is lots of prior art 
that takes months to get access to, which would not enable us 
to----
    Mr. Mollohan. No, because that assumes--getting access to 
prior art assumes you have touched the paper and it is no 
longer backlog, right, it is in process?
    Mr. Kappos. No, the prior art are all those documents out 
there that constitute work that was done before that can affect 
the patentability of the invention, and much of it isn't 
available to us when the application is filed.
    Mr. Mollohan. Okay, well would you just submit an 
assessment--a discussion of this for the record, please?
    Mr. Kappos. Sure.
    [The information follows:]

        Factors Considered in Formulating Optimal Backlog Level

  [note: also addressed in uspto's submitted qfr's (see mollohan, q6)]
    Given USPTO's current workload and budget, the agency currently 
expects that with its FY2011 request, it can to reduce average pendency 
for first action on patent applications to 10 months by FY2014 and 
reduce average total pendency time to 20 months by FY2015. USPTO is 
targeting a patent inventory backlog level of 10 months (approximately 
379,000 applications). Factors that were considered in formulating 
USPTO's aggressive pendency reduction goals included an analysis of 
international filings, patent term adjustment considerations, 
publication of patent applications, patent application docket 
management and international best practices--all of which were 
considered with the overall objective of providing optimal service for 
our innovators. The resources provided by the FY2011 Budget are crucial 
to achieving these goals.

           REDUCTIONS NECESSARY WITHOUT AUTHORIZED SURCHARGE

    Mr. Mollohan. With regard to the surcharge. We have already 
talked a little bit about your authorization. We would prefer 
that you have an authorization, that you go to the Senate and 
the House and get authorization. You said you are talking to 
the Senate and the House and that that is being considered.
    If you don't get an authorization for your budget request 
you are going to request this Committee to actually include 
this; is that correct?
    Mr. Kappos. Yes, correct.
    Mr. Mollohan. In the budget. What if you weren't approved? 
What expenditures would you expect to curtail to insure that 
your operations would not exceed the revenue collected from the 
current fee structure?
    Mr. Kappos. Well, we would have to limit our hiring of 
course. We would be hiring about to the attrition level.
    We would be not able to undertake our IT improvements which 
are critical to improving the Agency.
    We would be at a lower level of overtime than optimal and a 
lower level than we are at this year. And as I mentioned, 
overtime is the most efficient way for us to run the Agency. In 
fact, it produces more income than it costs in terms of 
training the examiners.
    And we wouldn't be able to fund the PCT treaty work that 
keeps overseas work off of the plates of our examiners.
    Mr. Mollohan. So you spent a lot of time developing this 
and you have thought through the fee structure you want, and if 
you don't get it nothing gets better over there, and if they 
are approved through the authorization process or through the 
appropriation process you really have a way forward here to 
achieve the long-standing goals of getting these pendency 
periods and number of applications that are involved to an 
expectable business accommodating level.
    Mr. Kappos. I think we really do, yes.
    Mr. Mollohan. Well, I had no more questions.
    Mr. Wolf. Mr. Chairman, if I could just----
    Mr. Mollohan. Sure.

                        TELEWORK--LONG DISTANCE

    Mr. Wolf. Okay. The staff had met with your people and 
years ago we authorized the telework program that you are 
using. We were told that you are interested in creating a long 
distance telework program which would increase the recruitment.
    Can you explain how the program would work and are you 
seeking legislative language in this report or this bill to 
give that you ability on a pilot, or do you have ability to 
have a pilot or do you need some language that gives you the 
ability to have a pilot?
    Mr. Kappos. Well, thank you for those questions.
    We are working, in fact, earnestly on putting together what 
I call a nationwide workforce program which will enable the 
USPTO to set up satellite offices in cities and states very 
distant from Washington, D.C.
    The plan that we are working on will use existing 
facilities, including already available government facilities, 
so very well-controlled real estate costs. It will include 
hiring obviously employees from the local workforce with 
preference to people who have deep experience in the IP system, 
again, so that we don't have to invest tremendous amounts of 
money. It will take advantage of good cost of living areas of 
the country in order to bring these people in. And it will have 
to manage within our IT infrastructure capabilities.
    Right now we have the ability to bring on, I believe it is 
something like 350 more remote workers onto our current IT 
infrastructures, so we have got all of that in the plan.
    Mr. Wolf. And have you shared that language with your 
authorizers?
    Mr. Kappos. So there is language that is pending that will 
enable us to effect that plan most efficiently in a couple of 
bills, including Senate 515.
    There is another bill that is pending, and I forget the 
number of it right now, but another bill that also has 
nationwide workforce or distant teleworker language in it which 
would get us the authorization that we need.
    Mr. Wolf. Now there was a question. Do you expect there to 
be a bill this year? Do you expect to have a bill this year and 
authorizing this year?
    Mr. Kappos. Well that is a difficult question.
    Mr. Wolf. Was there any sense that there is? Or I wondered 
if there isn't then maybe you should share with the Chairman 
language that would enable you to move ahead certainly on a 
pilot. Because if you don't get one this year then you are into 
the following year, and pretty soon you just push this thing 
farther and farther behind.
    And I am looking at the numbers here, I mean, you have one 
of the better percent of eligible positions at the PTO that are 
teleworking; 81.85 percent of the eligible patent positions 
that are teleworking 82.52. That is pretty impressive. And I 
think you have demonstrated that is a less expensive way, 
office space and every other way.
    But if you don't think you are going to get it maybe you 
can share it with the Chairman and it would give you the 
ability to move ahead on that. Obviously check in with the 
authorizers first.
    Mr. Kappos. Well thank you, we will certainly do that.
    [The information follows:]

    Proposed Telework Legislation That Would Support USPTO's Program

[note: uspto also responded to a question on telework in its submitted 
               qfrs (see response to rep. wolf, q1 & q2)]
    As requested, the following bills addressing telework have been 
provided to the committee:
          --H.R. 1722 (as reported out of Committee 5/4/2010)
          --S. 707 (as passed by the Senate on 5/24/2010)
          --S. 515, Section 13 (as reported out of Committee 4/9/2009)

    Mr. Wolf. Tell me how bad things would be, because it was 
actually my idea, so I want to hear, tell how bad things would 
be seriously if you could not have telework at PTO.
    Mr. Kappos. We would have much higher attrition, we would 
have gotten nothing done during the recent snowstorms where we 
operated the Agency at nearly full capacity despite the fact 
that nobody could come into work for four days.
    I believe it would multiply our pendency problems and 
exacerbate all of the other issues we have had at the Agency, 
because telework is such a huge employee benefit.
    Mr. Wolf. Yeah, I mean there is nothing, Mr. Chairman, to 
locking yourself into a metal box and driving from beautiful 
West Virginia driving downtown when you could just stay in West 
Virginia, and I think it has been one of the most successful. 
We have had great resistance, the agencies that now use it love 
it. So hopefully if they don't get the authorization we would 
give them the ability so they can move ahead. Thank you.
    Thank you, Mr. Chairman.
    Mr. Kappos. Right. We will make sure the to send the 
language to the Chairman.

                            Closing Remarks

    Mr. Mollohan. That is also probably one of the strategies 
to use to avoid this bubble--to avoid a hiring bubble as you 
get experienced people on telework.
    Thank you, Director Kappos for your testimony here today 
and for your good work with the Agency. We look forward to 
working with you and being as responsive as possible to your 
requests.
    Mr. Kappos. Okay, thank you very much.
    Mr. Mollohan. Thank you.

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                           W I T N E S S E S

                              ----------                              
                                                                   Page
Bradford, Mayor David............................................   393
Brown, John......................................................   393
Fernandez, John..................................................   313
Gallagher, Dr. Patrick...........................................   233
Kappos, David....................................................   461
King, Michael....................................................   393
Locke, Hon. Gary.................................................     1
Lubchenco, Dr. Jane..............................................   123
Wemple, Chuck....................................................   393
Wyatt, Dr. Les...................................................   393


                               I N D E X

                              ----------                              --
--------

                            Bureau Reference

Bureau and Topic
                                                                   Page
Census  2010 Decennial........................................... 13-15
Census  2010 Decennial Participation............................. 24-25
Census  2020 Census..............................................   116
NIST  9/11 and Building Design Failure..........................265-266
NIST  9/11 and NIST's Role in Rebuilding........................266-267
NIST  9/11 Recommendations and Implementation in New York........   267
NIST  9/11 Report Updates.......................................264-265
DOC  Access to Credit............................................ 19-21
EDA  Access to Credit............................................   390
USPTO  Accuracy of Fee Collection Estimates and ``Swing'' 
  Language......................................................511-513
USPTO  Accuracy of Fee Collections..............................509-511
DOC  Administration's View on Spectrum...........................96-105
NIST  American Recovery and Reinvestment Act...........267-268, 248-250
EDA  American Recovery and Reinvestment Act And Jobs.......347, 353-358
EDA  Application Flexibility....................................366-367
DOC  Appropriations, Authorizations, Obligations and FTE......... 81-94
EDA  Approval Timeline..........................................416-417
NOAA  Aquaculture...............................................223-224
NIST  ARRA--Construction Funding................................290-294
NIST  ARRA--Science and Technical Research Funding..............285-290
EDA  ARRA Funds.................................................378-381
EDA  Award Funding Formula......................................343-344
USPTO  Backlog Reduction With and Without Surcharge.............493-495
USPTO  Backlog, Optimum..........................................   495
EDA  Best Practices for Commuting in Need.......................346-347
NTIA  Broadband Technology Opportunities Program (BTOP).......... 74-81
NOAA  Budget for Restoring Climate Sensors......................211-212
USPTO  Budget Requirements.......................................   476
NOAA  Catch Shares.........................................169-179, 200
NTIA  Cellular Detection and Jamming Technologies................ 18-19
Census  Census Scams............................................. 62-63
ITA  China......................................................120-121
ITA  China's Currency Manipulation............................... 23-24
NOAA  Climate Service...........................................143-144
NOAA  Climate Service and Business Information..................204-205
NOAA  Closing Remarks............................................   161
USPTO  Closing Remarks...........................................   498
NIST  Command Centers in Buildings...............................   267
DOC  Commerce Reports Not Timely.................................    36
NIST  Competitive Construction Grant Program....................269-272
NOAA  Constellation Observing System For Meteorology, Ionosphere 
  and Climate...................................................160-161
NIST  Construction of Research Facilities.......................297-300
EDA  Coordination of Federal Agencies...........................415-416
EDA  Coordination With Other Agencies............................   343
EDA  Coordination With Other Federal Agencies...................385-387
EDA  Credit Access.........................................458, 459-460
BIS  Crime Control Technologies.................................. 17-18
NIST  Cyber Attacks Against NIST................................281-282
NIST  Cyber Security............................................254-255
USPTO  Cyber Security............................................   489
NIST  Cyber Security and Interagency Efforts....................279-280
NIST  Cyber Security and NIST's Role in Private Sector..........262-263
NIST  Cyber Security and Other Agencies.........................263-264
NIST  Cyber Security Increase..............................261-262, 280
NIST  Cyber Security Initiative.................................309-311
NIST  Cyber Security of U.S. Systems Overseas...................280-281
Census Decennial Census.........................................115-116
EDA  Deficit Spending...........................................332-333
EDA  Delta Center for Economic Development......................456-457
USPTO  Departmental Oversight.................................... 46-47
EDA  Disaster Assistance........................................391-392
EDA  Disaster Funding..................................352-353, 381-384
EDA  Disaster Recovery in Texas.................................455-456
NOAA  DOD Appropriations for NPOESS.............................157-158
NOAA  Discovery Mission.........................................214-218
EDA  Economic Development District Designation..................424-426
EDA  Economic Development Districts..............................   358
EDA  Economic Development Representatives.......................324-325
EDA  Economic Recovery in NW Alabama.............................   455
EDA  EDA Reorganization--Office of Innovation and 
  Entrepreneurship..............................................367-369
NOAA  Education Program.........................................145-148
EDA  Effectiveness of EDA as a Loan Program.....................420-421
DOC  Emergency Steel Loan Program................................ 27-28
EDA  Energy Efficient Building System Regional Innovation Cluster 
  Initiative (E-RIC)............................................369-370
EDA  Energy Regional Innovation Clusters........................351-352
USPTO  Examiners.................................................   490
USPTO  Export Control and Secrecy Orders........................480-483
BIS  Export Control Program...................................... 16-17
EDA  Exports....................................................457-458
USPTO  Fee Increases Contemplated...............................486-487
USPTO  Fee Scaling for Multiple Users...........................487-488
USPTO  Fee Setting Authority....................................505-506
USPTO  Fee Setting Authority and Reserve Fund Requested.........478-480
USPTO  Fiscal Year 2011 Budget Request..........................499-501
NOAA  Fisheries Stock Assessments...............................148-152
ITA  Fraud and False Statements--During Investigations and 
  Administrative Review.......................................... 67-68
EDA  Gambling..............................................345-346, 347
NOAA  Geostationary Operational Environment Satellite Program....   166
NOAA  Geostationary Operational Environment Satellite-R Series 
  Space and Ground Awards.......................................162-164
EDA  Global Climate Change Mitigation Incentive Fund...337-342, 374-375
NOAA  Goes-R Instrument Updates.................................164-165
NOAA  Goes-R Satellite Program..................................212-214
EDA  Green Projects..............................................   418
NIST  Homeland Security and NSA..................................   264
EDA  Human Capital Development...................................   332
DOC  Human Rights and Economic Trade With China.................. 29-31
USPTO  Increases in Fees and Industry Support....................   490
NIST  Industrial Technology Services--Tip.......................294-295
USPTO  Intellectual Property Rights....................21, 491, 522-523
USPTO  Intellectual Property Theft Estimate......................   490
DOC  International Traffic in Arms Regulations (ITAR) and Export 
  Control Systems................................................ 31-32
USPTO  IT Modernization.........................................516-517
EDA  Job Creation...............................................333-335
USPTO  Job Creation and Patent Pendency.........................491-492
NIST  Job Expansion in China Instead of U.S.....................252-253
DOC  Job Protection, Commerce's Role............................. 25-26
DOC  Job Repatriation............................................26, 28
EDA  Job Repatriation...........................................325-330
NIST  Job Repatriation Program..................................253-254
NIST  Jobs at NIST..............................................255-256
NOAA  Joint Polar Satellite System..............................152-154
NOAA  Joint Polar Satellite System...............................   155
NOAA  JPSS Budget Impacts.......................................158-159
NOAA  JPSS Bus...................................................   156
NOAA  JPSS Launch Dates.........................................156-157
NOAA  JPSS Sensors..............................................155-156
NOAA  JPSS Transition............................................   157
EDA  Length of Review Concerns................376-377, 413-414, 458-459
NIST  Manufacturing and State's Roles...........................257-259
NIST  Manufacturing Base and NIST's Role Re-Energizing..........256-257
NIST  Manufacturing Focus at NIST...............................250-251
NIST  Manufacturing of Textiles.................................260-261
NIST  MEP.......................................................295-297
EDA  Nash, Texas Economic Development Funding...................347-348
NOAA  National Climate Service..................................121-122
ITA  National Export Initiative...................26-27, 113-115, 21-23
ITA  National Export Initiative--Staffing Requirements........... 68-70
EDA  National Innovation Marketplace............................363-364
NIST  National Innovation Marketplace....................277-278, 45-46
NOAA  National Polar-Orbiting Operational Environmental Satellite 
  System (NPOESS)....................116-119, 138-143, 201-203, 228-229
NOAA  National Polar-Orbiting Operational Environmental Satellite 
  System (NPOESS) Transition to JPSS............................206-211
NOAA  National Weather Service--Aviation Weather................218-219
NIST  NIST & Competitiveness....................................305-307
NOAA  NOAA Catch Share Program..................................203-204
NOAA  NOAA Climate Service...............................187-192, 47-49
NOAA  NOAA Educational Program..................................193-199
NOAA  Office of Atmospheric Research.............................   145
DOC  Office of The Senior Advisor for Native American Affairs.... 95-96
USPTO  Opening Statement By Mr. Kappos..........................462-475
USPTO  Opening Remarks--USPTO FY 2011 Budget Overview...........461-462
    Opening Remarks--Department of Commerce--Commerce, Justice, 
      Science and Related Agencies Appropriations for 2011.......   1-2
    Opening Remarks--Economic Development Administration........313-314
    Opening Remarks--National Institute of Standards and 
      Technology.................................................   233
    Opening Remarks--NOAA FY2011 Budget Overview................123-124
    Opening Remarks--United States Patent and Trademark Office 
      (USPTO) FY2011 Budget Overview............................461-462
    Opening Statement--Ranking Member Wolf.......................     3
    Opening Statement by Assistant Secretary Fernandez..........314-315
    Opening Statement by Dr. Gallagher..........................234-236
    Opening Statement by Dr. Lubchenco..........................124-126
    Opening Statement by Mr. Kappos.............................462-464
    Opening Statement by Secretary Locke.........................   4-6
USPTO  Operating Reserve........................................515-516
USPTO  Optimal Pendencies.......................................477-478
ITA  Other Agencies and Organizations Involved................... 70-74
USPTO  Outcomes.................................................488-489
EDA  Overall Funding Levels--Public Works and EAA...............365-366
NIST  Overseas Counterparts of NIST..............................   260
EDA  Partnerships With Higher Institutions......................418-419
USPTO  Patent Count System......................................517-519
USPTO  Patent Reform.............................................   522
USPTO  Patent Requests: Foreign vs. Domestic.....................   483
USPTO  Patent System Reform.....................................485-486
USPTO  Pendency Backlog Reduction...............................484-485
USPTO  Pendency Reduction Timeline..............................492-493
EDA  Penn Station in Baltimore.............................342, 344-345
NIST  Pharmaceutical Industry and NIST...........................   268
EDA  Planning...................................................414-415
EDA  Planning Funds.............................................377-378
EDA  Planning Grants............................................330-332
EDA  Planning Network...........................................421-424
USPTO  Post Grant Review........................................519-521
ITA  Pre-Petition Process........................................ 64-66
EDA  Process for Working With Local Governments.................342-343
NTIA Public Telecommunications Facilities, Planning and 
  Construction................................................... 36-39
EDA  Public Works and EAA Funding Levels........................335-337
EDA  Public Works Funding Level..........................426-427, 49-51
NOAA  QuikSCAT..................................................167-168
NOAA  Recreational Fisherman....................................179-186
NOAA  Recreational Fishing.......................................   161
NOAA  Recreational Fishing Data.................................225-226
NOAA  Red Snapper...............................................230-232
USPTO  Reductions Necessary Without Authorizations Surcharge.....   496
EDA  Regional Innovation Center.................................. 40-45
EDA  Regional Innovation Clusters...............................349-350
EDA  Reorganization..............................................   323
USPTO  Reserve Fund.............................................507-509
EDA  Revolving Loan Fund.......................................456, 458
EDA  Revolving Loan Funds..............................348-349, 371-373
NOAA  Satellite International Partnerships......................154-155
NOAA  Scatterometer.............................................159-160
NIST  Science Education..........................................   268
NIST  Scientific and Technical Research Services................300-304
NOAA  Seafood Safety............................................226-228
EDA  Second Panel Remarks.......................................427-428
NIST  Smart Grid.................................................   252
NOAA  Southwest Fisheries Science Center........................192-193
Census  Status, Revised Estimates and Media Purchases............ 52-62
DOC  STEM Education.............................................. 34-36
NIST  STEM Education...................................272-277, 278-279
DOC  Stimulus--Broadband Grants.................................106-113
NIST  Stimulus Programs.........................................307-309
USPTO  Surcharge: Interim Fees..................................501-505
USPTO  Telework.................................119-120, 28-29, 514-515
USPTO  Telework--Long Distance..................................496-498
EDA  Timelines of Review Process................................358-363
NIST  Tip Program...............................................282-284
EDA  Trade Assistance...........................................387-389
ITA  Trade Compliance--Enforcement...............................    23
ITA  Trade Compliance--Subsidy Investigation.....................    49
NOAA  Tsunami Detection, Warnings and Forecast..................219-222
USPTO  U.S Patent and Trademark Office........................... 15-16
NOAA  Weather Satellites......................................... 32-34
    Written Statement of Assistant Secretary for Economic 
      Development, John Fernandez...............................316-322
    Written Statement of Dr. Patrick D. Gallagher, Director of 
      the National Institute of Standards and Technology........237-247
    Written Statement of Jane Lubchenco, Ph.D. Under Secretary 
      for Oceans and Atmosphere and NOAA Administrator..........127-137
    Written Statement of USPTO Director David Kappos, Under 
      Secretary of Commerce for Intellectual Property...........465-475
    Written Statement on Commerce Department's FY 2011 Budget by 
      Commerce Secretary Locke...................................  7-12

                                  
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