[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]






                  DEPARTMENTS OF LABOR, HEALTH AND HUMAN
                SERVICES, EDUCATION, AND RELATED AGENCIES
                         APPROPRIATIONS FOR 2020

_______________________________________________________________________

                                 HEARINGS

                                 BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SIXTEENTH CONGRESS

                              FIRST SESSION

                                _________

    SUBCOMMITTEE ON LABOR, HEALTH AND HUMAN SERVICES, EDUCATION, AND 
                            RELATED AGENCIES

                 ROSA L. DeLAURO, Connecticut, Chairwoman

  LUCILLE ROYBAL-ALLARD, California        TOM COLE, Oklahoma
  BARBARA LEE, California                  ANDY HARRIS, Maryland 
  MARK POCAN, Wisconsin                    JAIME HERRERA BEUTLER, Washington 
  KATHERINE M. CLARK, Massachusetts        JOHN R. MOOLENAAR, Michigan    
  LOIS FRANKEL, Florida                    TOM GRAVES, Georgia
  CHERI BUSTOS, Illinois                       
  BONNIE WATSON COLEMAN, New Jersey         


  NOTE: Under committee rules, Mrs. Lowey, as chairwoman of the full 
committee, and Ms. Granger, as ranking minority member of the full 
committee, are authorized to sit as members of all subcommittees.

      Robin Juliano, Stephen Steigleder, Jared Bass, Jennifer Cama,
      Jaclyn Kilroy, Laurie Mignone, Philip Tizzani, and Brad Allen
                            Subcommittee Staff

                                _________

                                  PART 6

                                                                   Page
Impact of the Administration's Policies Affecting the Affordable 
  Care Act........................................................    1 
Reviewing the Administration's Unaccompanied Children Program.....   91
Protecting Student Borrowers: Loan Servicing Oversight............  199
Addressing the Public Health Emergency of Gun Violence............  283
Oversight of For-Profit Colleges: Protecting Students and Taxpayer 
  Dollars From Predatory Practices................................  371
Combating Wage Theft: The Critical Role of Wage and Hour 
  Enforcements....................................................  457
                                    
              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                _________

          Printed for the use of the Committee on Appropriations


                      U.S. GOVERNMENT PUBLISHING OFFICE
                      
37-614                     WASHINGTON : 2019 







                      COMMITTEE ON APPROPRIATIONS

                                ----------                              
                  NITA M. LOWEY, New York, Chairwoman


  MARCY KAPTUR, Ohio                      KAY GRANGER, Texas
  PETER J. VISCLOSKY, Indiana             HAROLD ROGERS, Kentucky
  JOSE E. SERRANO, New York               ROBERT B. ADERHOLT, Alabama
  ROSA L. DeLAURO, Connecticut            MICHAEL K. SIMPSON, Idaho
  DAVID E. PRICE, North Carolina          JOHN R. CARTER, Texas     
  LUCILLE ROYBAL-ALLARD, California       KEN CALVERT, California   
  SANFORD D. BISHOP, Jr., Georgia         TOM COLE, Oklahoma          
  BARBARA LEE, California                 MARIO DIAZ-BALART, Florida        
  BETTY McCOLLUM, Minnesota               TOM GRAVES, Georgia   
  TIM RYAN, Ohio                          STEVE WOMACK, Arkansas  
  C. A. DUTCH RUPPERSBERGER, Maryland     JEFF FORTENBERRY, Nebraska           
  DEBBIE WASSERMAN SCHULTZ, Florida       CHUCK FLEISCHMANN, Tennessee       
  HENRY CUELLAR, Texas                    JAIME HERRERA BEUTLER, Washington        
  CHELLIE PINGREE, Maine                  DAVID P. JOYCE, Ohio  
  MIKE QUIGLEY, Illinois                  ANDY HARRIS, Maryland    
  DEREK KILMER, Washington                MARTHA ROBY, Alabama       
  MATT CARTWRIGHT, Pennsylvania           MARK E. AMODEI, Nevada          
  GRACE MENG, New York                    CHRIS STEWART, Utah  
  MARK POCAN, Wisconsin                   STEVEN M. PALAZZO, Mississippi     
  KATHERINE M. CLARK, Massachusetts       DAN NEWHOUSE, Washington                       
  PETE AGUILAR, California                JOHN R. MOOLENAAR, Michigan     
  LOIS FRANKEL, Florida                   JOHN H. RUTHERFORD, Florida 
  CHERI BUSTOS, Illinois                  WILL HURD, Texas      
  BONNIE WATSON COLEMAN, New Jersey                  
  BRENDA L. LAWRENCE, Michigan                  
  NORMA J. TORRES, California                        
  CHARLIE CRIST, Florida              
  ANN KIRKPATRICK, Arizona                 
  ED CASE, Hawaii                          

                 Shalanda Young, Clerk and Staff Director

                                   (ii)


 
DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, EDUCATION, AND RELATED 
                    AGENCIES APPROPRIATIONS FOR 2020

                              ----------                              

                                       Wednesday, February 6, 2019.

 OVERSIGHT HEARING: IMPACT OF THE ADMINISTRATION'S POLICIES AFFECTING 
                        THE AFFORDABLE CARE ACT

                               WITNESSES

AVIVA ARON-DINE, VICE PRESIDENT FOR HEALTH POLICY, CENTER ON BUDGET AND 
    POLICY PRIORITIES
ED HAISLMAIER, SENIOR RESEARCH FELLOW, THE HERITAGE FOUNDATION
PETER MORLEY, PATIENT ADVOCATE
JOSHUA PECK, CO-FOUNDER, GET AMERICA COVERED
    Ms. DeLauro [presiding]. The subcommittee will come to 
order. It is my pleasure to open the first hearing for Labor 
HHS.
    Congressman Cole has heard this story before but I will be 
very, very quick and anecdotally, I think for me my 
participation on this committee has come full circle.
    It was some 24 or 25 years ago I wanted really to be on 
the--when I was appointed to the Appropriations Committee I 
wanted to serve on the Labor HHS Subcommittee because of my own 
health issues or prior health issues, et cetera. So it was 
very, very important to me.
    But as the pecking order, you go through the--when we 
organize by seniority you go through and you make your 
selections, and I wasn't very senior at that juncture. So that 
there was one slot left on the Labor HHS Subcommittee and my 
colleague, Mr. Serrano, was going to go before me and I was 
sitting there just really praying that what he would do was to 
decide something else other than Labor HHS, and the Lord heard 
my prayer because he did. He went to CJS and I got to be able 
to sit on the Labor HHS Subcommittee of Appropriations.
    So I feel as if I have come full circle, and the debate 
this morning comes at what I view as a critical juncture--the 
changing energy of the country. The changing dynamics of the 
Congress are intersecting. The country has mandated that 
elected officials tip the scale for people who deserve so much 
more.
    First, I would like to say a thank you to our distinguished 
panelists for being here and I will introduce each one of them 
in a few minutes. But I also would like to acknowledge the new 
members of the subcommittee.
    On the Democratic side and my colleague, Lois Frankel, from 
Florida; Representative Cheri Bustos from Illinois, and 
Representative Bonnie Watson Coleman of New Jersey.
    On the Republican side is Representative Tom Graves of 
Georgia. Just as a--in full disclosure, Congresswoman Roybal-
Allard, Congresswoman Lee, and my understanding, Tom, is that 
Congressman Graves are all in a classified briefing for the 
Conference Committee with regard to the Department of Homeland 
Security and that appropriations budget. So they will get here 
as soon as they are able.
    And I will just repeat introductions of Congresswoman Lois 
Frankel--delighted that she is part of the committee--
Congresswoman Cheri Bustos. So welcome to the subcommittee.
    I would also very much like to acknowledge the ranking 
member of the subcommittee, someone who has become a very good 
friend and that is Congressman Tom Cole of Oklahoma, and I want 
to say a personal thank you to you, Tom, for the last 4 years 
where there has been real cooperation and respect and that we 
have shared together on this subcommittee.
    It is my intention to maintain that tradition. I know that 
we will continue to disagree in some areas, and we have done so 
firmly and we have done it repeatedly. But we also manage to 
find common ground and I believe it is because we agree on this 
one principle--it is how central the work that we do in this 
committee can be for people and the difference we can make in 
their lives and that includes health care, which is the subject 
of today's hearing.
    This is an oversight hearing. The subcommittee is going to 
review the impact of the administration's policies on the 
Affordable Care Act, specifically with regard to affordability, 
the increasing number of uninsured, and the quality of the 
benefits available to people.
    Before the Affordable Care Act became the law of the land 
in 2010, the cost of health care was rising at an unsustainable 
rate. Spending was projected to rise to $4,100,000,000,000 by 
2017. More importantly, health care costs were taking up a 
larger and a larger share of the family budget.
    But since the Affordable Care Act went into effect, its 
impact has exceeded expectations. As you can see from the 
slide, national spending on health care is well below pre-ACA 
expectations--more than $600,000,000,000 lower than projections 
for 2017.
    Because of the Affordable Care Act more than 20 million 
people gained health coverage, many for the first time in their 
lives. For families, it meant that insurance companies could no 
longer discriminate against people because of their medical 
history and just being a woman was no longer a pre-existing 
condition.
    Then this administration went to work. The Department of 
Health and Human Services has written new rules to 
intentionally increase premiums and out-of-pocket costs for 
families covered by the ACA health plans.
    For example, the cost-sharing reduction payments to 
insurers who provide plans on the exchange were crucial to 
keeping down costs for families in the exchange. But President 
Trump spent months threatening to eliminate them, and when 
Democrats refused to bargain away this important mechanism for 
affordability, on October 2017 the president eliminated the 
payments outright, dramatically driving up health care costs. 
The Congressional Budget Office estimated that doing so would 
cause premiums to rise 25 percent by 2020.
    Thankfully, as Dr. Aron-Dine points out in her testimony, 
state regulators rushed to protect their state's insurance 
markets and they mitigated the damage. In 2018, repeal of the 
individual mandate was also responsible for helping to drive up 
health care costs.
    Now, let us look at pre-existing conditions. HHS has made a 
concerted effort to shift consumers to, quote, what have been 
commonly called ``junk plans.'' Just for a definition of these 
plans, they impose lifetime and yearly limits. They do not 
cover maternity care, prescription drugs, mental health care, 
preventive care, or other essential benefits.
    They can also retroactively cancel coverage after patients 
file claims and often won't cover hospital room, board, or 
nursing services on the weekend. And this allows then insurance 
companies once again to gauge or deny insurance coverage to 
Americans with pre-existing conditions and the administration 
has also urged federal courts to strike down protections for 
pre-existing conditions.
    Our witness, Mr. Peter Morley, will share his story and 
emphasize how important these protections can be. In many 
cases, it is a matter of life and death.
    If you look at enrollment, we see the administration's 
efforts with regards to enrollment and outreach. HHS shortened 
opened enrollment, reduced the annual budget for outreach and 
advertising by 90 percent, reduced funding by 80 percent for 
the Affordable Care Act navigators. These are the people who 
provide in-person assistance to consumers who need help finding 
a health plan.
    In the administration's first week in January 2017 the 
Department of Health and Human Services announced that it would 
stop planned advertising for the final week of open enrollment, 
typically the busiest period. But, in fact, they were following 
the president's lead.
    On his first day in office, the president issues an 
executive order directing the federal agencies to begin 
dismantling the Affordable Care Act, quote, ``to the maximum 
extent permitted by law.''
    And it goes on, and I will just say that I have here a 
document that was prepared by the Center on Budget and Policy 
Priorities. It has been compiled. It is a list from January 
2017 and I think up to January and maybe further--January 28--
of the actions that the administration has taken to undermine 
the Affordable Care Act, and the list runs for about 18 pages.
    One of today's witnesses, Joshua Peck, will explain that 
HHS made these decisions with full knowledge of the harm they 
would cause. Mr. Peck estimates that HHS's decisions to 
undermine outreach, advertising, enrollment efforts resulted in 
more than 1 million fewer enrollments in 2017 and a similar 
shortfall in 2018.
    In all of these ways the administration has tried to 
undermine the ACA and I would ask to what end. Due to the 
administration's actions, costs for families and working people 
are skyrocketing, and according to the Kaiser Family 
Foundation, premiums in 2018 rose 30 percent, and according to 
analysis by the Center for American Progress, a typical family 
of four will see 2019 premiums increase by more than $3,000.
    In addition, the uninsured rate is up to 13.7 percent from 
10.9 percent. That is the equivalent of 7 million people losing 
health care coverage, and the uninsured rates have increased 
the most among women, low-income people, and those under 35, 
all because of the administration's efforts to undermine the 
Affordable Care Act.
    This committee has the responsibility to stop the 
administration from undermining health care for millions of 
Americans, to stop it from allowing insurance companies to 
discriminate again with Trump plans, and to stop it from going 
after the very mechanisms that would--we have to hold down 
costs for Americans.
    We need to bring down the cost of premiums and deductibles. 
The administration needs to defend the Affordable Care Act in 
the Texas lawsuit, needs to defend those Americans who rely on 
the law's protections for pre-existing conditions, and we need 
to work to close the Medicaid gap. These measures would lower 
health care costs for families so that they can afford quality 
coverage.
    I anticipate today's hearing to be a spirited debate. 
However, I intend it to be an informative conversation and one 
that is fact driven and a positive start to what I hope will be 
a bipartisan effort to strengthen and bolster instead of repeal 
and replace.
    And now it is a pleasure for me to turn this over to my 
good friend from Oklahoma, the ranking member, Mr. Cole, for 
any opening remarks that he cares to make.
    Mr. Cole. Thank you very much, Madam Chair, and before I go 
to my prepared remarks, let me congratulate you on assuming 
this really quite remarkable jurisdiction and that I always 
told people that ask about you--I said that she is the best 
informed member on the committee.
    She is the most passionate advocate for the things she 
believes but she knows the bill. And so I look forward to 
working with you in your leadership. I thank you for your kind 
words. But, you know, I have worked well with you because you 
wanted to work together and you did look for areas of common 
ground.
    And I am particularly proud that in the last 4 years, while 
we always started off in different places--and I suspect we 
will again, in all due disclosure--we always ended up at the 
same place.
    All four times when the bill moved across the floor in 
conjunction with other bills we were voting the same way on 
final passage, and I want you to know from me that is my goal 
again. I want us to be able to do that.
    I want us to be able to find areas that we agree and there 
are vast areas in this jurisdiction where we do agree, where we 
have worked together in a bipartisan way and, frankly, in a 
bicameral way with our partners on the other side of the 
rotunda as well.
    So I know under your leadership that is going to continue 
and I look forward to being your working partner in that--in 
that process.
    Ms. DeLauro. Thank you very much.
    Mr. Cole. You bet.
    Again, I will congratulate you for holding your very first 
hearing as well. I look forward to working with you in the 
coming year on the vital public health, education, job training 
programs funded in the Labor HHS bill.
    Today, we have got an outside witness panel to discuss the 
administration's efforts on implementing the Affordable Care 
Act. Although the Labor, Health, and Education Appropriations 
Subcommittee provides some of the administrative funding to the 
Department of Health and Human Services to carry out parts of 
the Affordable Care Act, direct jurisdiction of the Affordable 
Care Act falls squarely outside of this subcommittee.
    I think we can all agree that improving access to high-
quality affordable health care is a worthy and admirable goal. 
However, I believe the best venue for policy discussions about 
how to achieve this goal is within the primary committees of 
jurisdiction: Energy and Commerce and Ways and Means.
    As I have said before during debates on the American Health 
Care Act, the current health care system is not working for too 
many Americans. Premiums see double digit increases year after 
year. This rate of increase is simply not sustainable.
    Our nation spends more on health care than any other 
industrialized country but receives less quality outcomes than 
most other industrialized nations. Passage of Obamacare did 
little to change that reality.
    After nearly a decade, we find ourselves debating the same 
issue--how to make health care more affordable for every 
American. Today, we focus on the efforts taken by the 
administration to fulfill its duty to faithfully execute the 
law.
    I wholeheartedly support efforts by the Trump 
administration to create more affordable options for consumers, 
protect human life, and respect an individual's right of 
conscience.
    I understand my colleagues' opposition to some of these 
actions but there are consequences for passing vague 
legislation leaving much to be determined by the executive 
branch. The Affordable Care Act includes the phrase, quote, 
``the secretary shall,'' unquote, more than 900 times. A 
Democratic-controlled Congress passed hastily-written 
legislation that gave broad and expansive authority to the 
secretary of Health of Human Services to determine the best 
means of implementation.
    As a direct result of the latitude given to the department 
by the ACA, my side of the aisle had strong objection to 
several decisions taken by the previous administration. It's no 
surprise that decisions taken by a new Republican 
administration also received objections from the opposing 
political party.
    In the last five years, average premiums in the Obamacare 
market in Oklahoma have increased over 225 percent. My 
constituents cannot afford an increase of that magnitude on 
such a short time.
    For the first time in 3 years, Oklahoma will actually have 
two insurance companies offering plans. Just two. For the past 
two years, Oklahoma had just one. One insurance company is not 
a choice. Two insurance companies is barely a choice and not 
what I consider progress.
    Higher premiums and limited options are the daily reality 
of Obamacare in Oklahoma. I know both Democrats and Republicans 
believe we can and should do better for the constituents who 
elected us. I hope, on a bipartisan basis in the appropriate 
venues, we do deliver on the goal of making health care more 
affordable for every American.
    I would like to thank all our witnesses for coming today. I 
had the opportunity to read your testimony and I look forward 
now to actually hearing it as well and to the questions we will 
be able to pose to you and your responses.
    I know you have dedicated much of your careers to helping 
consumers have better health care choices. In the coming year, 
I look forward to a spirited discussion with my chair on 
funding priorities for this bill. I truly believe the programs 
in the Labor HHS bill form the backbone of America's public 
health and social service infrastructure. I am hopeful that we 
will reach bipartisan support in the final spending package.
    And with that, Madam Chair, I yield back the balance of my 
time.
    Ms. DeLauro. Thank you very much, Congressman Cole.
    Let me know--indeed, we have a distinguished panel here 
this morning and let me introduce them.
    Mr. Joshua Peck, who is co-founder of the Get America 
Covered, was the chief marketing officer for the health 
insurance marketplace during the Obama administration. Mr. Peck 
was in charge of outreach and advertising to populations that 
were eligible to enroll in the ACA health plans and to help 
them understand their options and enroll in a health plan that 
met their needs.
    Dr. Aviva Aron-Dine is vice president for health policy at 
the Center on Budget and Policy Priorities. During the Obama 
administration, Dr. Dine served in several senior roles 
including acting deputy director of OMB as well as senior 
counselor at HHS where her portfolio including ACA 
implementation.
    Mr. Edward Haislmaier, senior research fellow at the 
Heritage Foundation, who works closely with state and federal 
policy makers to design health care reform strategies including 
alternatives to the Affordable Care Act. Mr. Haislmaier was 
also a member of the board of directors of the National Center 
for Public Policy Research.
    And Mr. Peter Morley is a patient advocate who advocates on 
behalf of millions of Americans who, like himself, live with 
chronic and pre-existing conditions. This is Mr. Morley's 227th 
meeting with policy makers as he advocates to maintain the 
ACA's strong consumer protections.
    Our first witness, Mr. Peck. Your full testimony will be 
included in the record. You are now recognized for 5 minutes 
for your opening statement.
    Thank you.
    Mr. Peck. Chairwoman DeLauro and Ranking Member Cole, thank 
you for convening today's hearing.
    My name is Joshua Peck. I am the co-founder of Get America 
Covered and I was the chief marketing officer for the health 
insurance marketplace during the Obama administration.
    I was responsible for marketplace enrollment, retention, 
and the $100,000,000 outreach and advertising budget that the 
Trump administration cut by 90 percent. I am here today to 
testify to the impact that these cuts had on enrollment.
    Before I get started, it is important to note that these 
cuts are just a single example of the current administration's 
efforts to undermine the health insurance marketplace. They 
have cut navigator funding by 80 percent, shortened the open 
enrollment period, championed the repeal of the individual 
mandate, encouraged the introduction of junk plans, didn't 
engage with the news media to get out the word about the 
deadline, and much more.
    For these reasons it is no surprise that state-based 
marketplaces are reporting an all-time record enrollment, while 
the Trump administration has overseen three consecutive years 
of decline.
    First, it is helpful to understand just how important 
outreach and advertising are to people who are considering 
health coverage. Outreach provides the needed reminder to apply 
before the deadline or to help people understand that coverage 
may be more affordable than they think.
    Providing basic information is critical to the 
marketplace's operation. In mid-November last year, after the 
start of open enrollment, just one in four people who buy their 
own insurance knew that December 15 was the deadline to enroll.
    Outreach and advertising not only increased the number of 
people who enroll but improve the risk pool by helping younger 
and healthier people enroll. Healthier enrollees lower prices 
for all people with coverage as well as the federal government.
    Cutting outreach and advertising not only hurts the 
American people but makes government less efficient. It is 
common for private health insurance companies to spend between 
$250 and $1,000 per enrollment. During my time at CMS, we were 
able to enroll or renew people for just $25 each. This kind of 
efficiency is unheard of.
    We achieved this not because we had a hip brand but because 
we were a trusted voice, providing basic information about a 
comparatively affordable product with strong consumer demand.
    There is no doubt that marketing is important to increasing 
the number of people who sign up for coverage. During my time 
at CMS, we challenged ourselves to do everything we could to 
make sure people had the information they needed to sign up.
    But it was vital that we spend every dollar wisely. So not 
only did we run experiments to determine what works and what 
didn't, we meticulously measured each tactic. The evidence that 
marketing directly drives enrollment is overwhelming.
    There are numerous studies outside the federal government 
show the correlation between advertising and enrollment. But 
the best evidence that exists is the multiyear study conducted 
by CMS.
    The study demonstrated the causal relationship between 
advertising and enrollment, telling us how many people enrolled 
who would not have if they hadn't been exposed to a particular 
type of outreach.
    A causal relationship is the gold standard for evaluating 
impact and something that is not possible in most analyses of 
marketplace performance, which must rely on correlation.
    We understand the relationship between outreach and 
enrollment because a team of government and private sector data 
scientists spent years developing, executing, and analyzing the 
impact of outreach using individual and market-level randomized 
control trials.
    From these experiments, we were able to establish 
approximately how many people enrolled or renewed because they 
saw a TV ad, received a phone call, a piece of mail, an email, 
saw a Google ad, display advertising, an ad on social media, an 
outdoor sign, and more.
    We also know how much we spent on each of those types of 
outreach. Combining these two numbers, we get a cost per 
enrollment for each type of outreach--an incredibly powerful 
tool when designing a marketing budget if your goal is to help 
people enroll in coverage or, as it turns out, an equally 
helpful guide to an administration trying to do harm to the 
marketplace.
    Thanks to the Freedom of Information Act request submitted 
by Democracy Forward, we have a window into what information 
the administration considered before it made key decisions. In 
the lead up to the 2017 open enrollment period, it is clear 
from the Democracy Forward FOIA request that the administration 
started to learn about the positive impact of marketing. They 
discovered eliminating TV would be especially harmful to 
enrollment.
    Thanks to the same FOIA request, we know that CMS 
Administrator Seema Verma's chief of staff discussed the 
expansive multiyear study with career staff on August 10th, 
2017, and received a PowerPoint deck with these results on 
August 11th, just three weeks before their August 31st 
announcement that they were cutting the budget by 90 percent.
    The same day the administration announced the cut, they 
released an official fact sheet stating, and I quote, ``no 
correlation has been seen between Obamacare advertising and 
either new enrollment or effectuated enrollment,'' end quote.
    The administration hasn't disagreed with the findings of 
the study. Instead, they deny that any of the evidence even 
exists. I respectfully suggest this committee call on CMS to 
make all the results and underlying data available to the 
public so it can be reviewed and evaluated.
    Despite the continued resilience of the marketplace, the 
impact of the administration's actions have been severe. The 
harm has been most acute for new enrolment because people who 
don't currently have coverage or any kind of relationship with 
the marketplace are much less likely to be aware of the 
deadline or the availability of affordable coverage without 
some type of paid outreach.
    Conservatively, we can estimate that a minimum of 2.3 
million new enrollments have been lost on the Trump 
administration's watch due solely to cuts to outreach and 
advertising. That is 2.3 million people, some of whom have, 
unfortunately, gotten sick or unexpectedly had an accident, and 
without insurance some of these people have gone bankrupt or 
foregone needed care.
    Now, the administration would be quick to point out that 
the federal marketplace enrollment isn't down by 2.3 million 
people so, surely, the marketing budget didn't matter, and they 
would be right if marketing was the only factor that impacted 
enrollment. But it is not.
    Factors that help enrollment and hurt enrollment can and do 
happen the same year but that doesn't mean that factors that 
hurt enrollment didn't happen.
    Thank you for the opportunity to testify and I look forward 
to answering your questions.
    [The information follows:]
    
    
    
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    Ms. DeLauro. Thank you very much.
    Dr. Aron-Dine.
    Ms. Aron-Dine. Thank you.
    Chairwoman DeLauro, Ranking Member Cole, members of the 
committee, thank you for the opportunity to testify before you 
today about the administration's stewardship of the Affordable 
Care Act.
    President Trump has been clear from the start of his 
presidency that his goal is to repeal the ACA. With legislative 
repeal off the table for now, the administration is trying to 
achieve a version of repeal through the courts, declining to 
defend the ACA in the Texas v. Azar lawsuit.
    It has also continued to pursue some of the major policies 
of the 2017 repeal bills through administrative actions. Josh 
spoke to the damage done by HHS's cuts to outreach and 
enrollment assistance. I would like to call a few other 
policies to your particular attention.
    First, where the 2017 repeal bills ended or weakened 
various protections for people with pre-existing conditions, 
the administration's short-term plans rule stands up a parallel 
health insurance market that isn't subject to those 
protections.
    Specifically, the rule lets so-called short-term plans, 
which used to be limited to three months, instead last up to 
one year and be renewed. These are plans that can and do deny 
coverage or charge higher premiums based on health status, 
exclude essential health benefits such as maternity care, 
substance use treatment, or prescriptions drugs, and impose 
annual limits on coverage.
    The first problem with expanding these plans is that the 
people who buy them could face catastrophic costs if they get 
sick and need care. Troubling, but unsurprising, new research 
finds that the plans are being marketed with lots of fine print 
and without clear warnings or sometimes any warning at all 
about what they don't cover.
    The other problem with a parallel insurance market, of 
course, is the adverse selection it creates. Because non-ACA 
plans can offer lower premiums to healthy people, they will 
pull healthier people out of the ACA market.
    That means premiums for ACA coverage will rise, and to the 
people who need that coverage but have incomes too high to 
qualify for subsidies, for example, middle income people with 
pre-existing health conditions, will pay more.
    Higher ACA premiums also mean that the federal government 
will spend more on premium tax credits. That is important 
because those additional federal dollars could instead have 
been used to make ACA coverage more affordable for healthy and 
sick people with incomes too high to qualify for subsidies 
without the harm that results from expanding non-ACA plans.
    Turning to a second set of HHS actions, the 2017 repeal 
bills sharply cut financial assistance for marketplace 
consumers. Now HHS appears to be looking for ways to advance 
that objective administratively as well.
    A few weeks ago, the department issued a proposed rule that 
tweaks an obscure formula so as to cut premium tax credits for 
at least 7.3 million people, increasing their premiums. These 
premium increases are relative modest--about $200 for a 
moderate income family of four--but they would cause 100,000 
people to drop coverage each year, according to the 
department's own estimates.
    The same proposal has the effect of raising the ACA's 
limits on consumers' total out-of-pocket costs. That provision 
of the ACA protects people with employer plans, too. These cost 
increases are entirely at HHS' discretion. They are not 
required by any statute.
    The proposed rule also notes that HHS considered and could 
in the future propose additional tax credit cuts, and 
meanwhile, last fall the department issued guidance and a 
discussion paper encouraging states to use Section 1332 waivers 
to much more drastically upend the ACA's whole system of 
premium tax credits reducing costs for lower income people, 
older people, and people with pre-existing conditions.
    The final set of HHS actions I want to highlight are its 
efforts to reduce the scope of the ACA's Medicaid expansion. 
After Congress rejected the 2017 ACA repeal bills, which would 
have effectively ended expansion, HHS started approving waivers 
which, if they are all implemented, will take coverage away 
from hundreds of thousands of expansion enrollees.
    The first of these proposals to take effect, Arkansas' work 
requirement, took coverage away from more than 18,000 people 
over seven months. That is more than one in five of the people 
who were subject to the new policy--a coverage loss rate so 
high it is nearly certain that working people and people who 
were supposed to be exempt from the new rules are instead 
losing coverage due to complex and burdensome reporting 
requirements.
    Research finds that because of Medicaid expansion more 
people are getting primary and preventive care they need, fewer 
people are burdened with medical debt, hospitals and states are 
seeing less uncompensated care, and there have been 
improvements in health outcomes for people with various chronic 
conditions.
    Reversing a large share of the coverage gains from 
expansion means reversing these other gains as well. Given the 
large risks that HHS actions pose to programs that cover 
millions of Americans, this committee's oversight role is 
crucial.
    Thank you for holding this hearing and I hope you will 
continue to closely examine the impact of HHS policies toward 
the Affordable Care Act.
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    Ms. DeLauro. Thank you very, very much, Dr. Aron-Dine.
    Mr. Haislmaier, love to hear from you.
    Mr. Haislmaier. Thank you.
    I presented in my written testimony for the committee, 
Madam Chair, the actual administrative data on enrollment in 
both the public and the private sectors and the trends and 
observations about how the law has performed in that regard. So 
I will reference that if we need to in the Q and A.
    But at this point, I simply want to highlight a few basic 
observations. First, I think it is fairly clear from the data I 
am seeing that enrollment plateaued, starting about 2016. I 
don't find that particularly surprising.
    It was interesting. When the law was passed there was kind 
of a, as often is the case, a disagreement between the 
Congressional Budget Office and the Office of the Actuary. When 
the Medicare Modernization Act was passed, there was a 
disagreement about take-up of Part D. I thought that CBO had 
the better argument then. In this case, I think CMS has proven 
to have the better argument. The actuary--CBO sort of assumed 
that people would come into this over a period of years and 
year and years.
    The Office of the Actuary said, well, no, you are going to 
go out and you are going to basically enrollment screen a lot 
of people and you are pretty much going to get 80, 90 percent 
of this within the first 2 years.
    The data seems to have borne that out not only for the 
Medicaid expansion, which was explicitly what the Office of the 
Actuary was referencing, but also for the exchanges. So my 
second point is I think what we have here today, and I am not 
terribly surprised by it, is a mature market and when I look at 
the data what I see not only for the federal exchange but also 
for the state exchanges and also for Covered California, which 
basically accounts for half the state exchange enrollments and 
it provides some of the most detailed data, what you are seeing 
is that consistently over the last few years new enrollments 
are declining and returning or renewals are increasing and, 
again, that is not surprising.
    I mean, it is kind of like saying, you know, what is the 
trend of new people who have never bought a cell phone buying a 
cell phone versus the number of people who own a cell phone 
buying a new cell phone. I mean, this is--this is classic 
mature market.
    So, from here, I think it is unlikely--and this is my third 
point--that we are going to see much change, plus or minus, 
and, frankly, I think that is regardless of what this or a 
subsequent administration does largely because most of this is 
governed by some forces actually outside the jurisdiction of 
this committee, which are permanent appropriations. The tax 
credit subsidies, the Medicaid expansion money is there. It 
goes out automatically.
    The people who want and need subsidized insurance are going 
to show up and they are going to get it and there is very 
little that, you know, absent Congress changing this or a 
subsequent administration can do about it.
    Now, having said that, I think it is important to 
understand that one of the effects is that the ACA essentially 
created two markets in one. The traditional customers for 
individual market were basically self-employed, small business 
people.
    There was a certain number of people who are between jobs 
and looking for that. These are people who were not looking to 
fund their current medical needs. These were people who were in 
average health. They just wanted something in case something 
bad happened down the road. So they wanted coverage, one, that 
was affordable.
    They weren't particularly concerned about having lots of 
additional benefits on the coverage, and three, for the ones 
who did have health issues, they weren't severe health issues 
but they were used to seeing certain doctors and hospitals and 
they wanted plans that were broad network plans that they could 
go to.
    What happened is that the ACA subsidy system brought in a 
new group of customers and created a significant adverse 
selection against that market. And so the way to understand 
this is to understand that pre-ACA, about 10 percent of the 
private market, was individual coverage and 90 percent was 
employer coverage.
    With the ACA, when you look at, as any actuary will show 
you, there is a distribution of population where at any given 
time 80 percent of people are pretty healthy. Fifteen percent 
have some illness. Five percent are seriously ill.
    What happened is a disproportionate number of those 5 
percent that are seriously ill wound up being put on a very 
narrow base of only 10 percent of the market and that is what 
has driven the cost here. You have tried to merge two very 
different markets.
    And so what has happened is because of the subsidies and 
the changes, the people who really need medical care because 
they have serious medical conditions they are covered. They 
show up. They get covered. They stay covered. Their bills get 
paid. The coverage is comprehensive.
    But for the people who are the old individual market and 
are your constituents who are self-employed and things like 
that, it has become a very unattractive market.
    They can't get the doctors and hospitals they want. They 
can't get the coverage they want. They don't have the insurers 
to choose from. And so that is what needs to be remedied.
    I think what the administration is trying to do is to try 
to provide some assistance to those people, some alternative to 
those people. I would encourage Congress to actually work with 
the administration to do that.
    Thank you, Madam Chair.
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    Ms. DeLauro. Thank you very much.
    Mr. Morley.
    Mr. Morley. Thank you, Chairman DeLauro, Ranking Member 
Cole, and members of the subcommittee. I am so honored and 
humbled to speak with you today about the critical importance 
of the Affordable Care Act and the Trump administration's 
ongoing efforts to undermine it.
    My name is Peter Morley, as you know. I live in New York 
City. In 1997, I had an injury during a lapse of insurance 
coverage. All treatment and medication costs were paid out of 
my own pocket.
    When I later needed surgery, my insurance company 
considered my injury to be a pre-existing condition and all my 
claims were denied. It was a financial burden for years, 
totaling in tens of thousands of dollars.
    In 2007, I was permanently disabled from an accident. I was 
spared the costly medical bills of four spinal surgeries 
because I had continuous health coverage.
    In 2011, I survived kidney cancer and fought my way into 
remission after losing part of my right kidney. In 2013, I was 
diagnosed with lupus, which causes me severe fatigue and most 
days it is a struggle to get out of bed.
    I now manage over 10 pre-existing conditions, take 38 
different medications, and receive 12 biologic infusions to 
slow the progression of my disease. I live on the brink of 
financial ruin and only live modestly, thanks to insurance and 
the fact that I can't be discriminated against because of a 
pre-existing condition.
    Pre-existing conditions are a way of life for me and 
millions of others. Thanks to advances in science and medicine, 
most people like me with chronic diseases can live happy and 
productive lives, but only if we are provided access to health 
insurance that can't be taken away from us because an insurance 
company decides it is in their best interest not to cover 
something, or if Congress decides to repeal my insurance or the 
single greatest threat I face to my health today, the Trump 
administration's continual sabotages of the ACA.
    As someone who spends the majority of my waking time in 
doctors' offices, the Affordable Care Act has meant focusing on 
healing, not bankruptcy. I used to be very private about my 
health. But once President Trump was elected and set to repeal 
the ACA, I could no longer be silent.
    In December 2016, I decided to foster awareness for lupus 
and advocate for health care. My congresswoman, Carolyn 
Maloney, has taken up my cause and for those of people like me.
    From day one I witnessed the Trump administration's 
unrelenting sabotage to the ACA. Short-term plans and 
association plans are an assault on my protections, allowing 
insurers to bend the rules of the ACA and create fine print 
that people like myself just don't have the time to comprehend.
    When the Trump administration refuses to do appropriate 
marketing and research to more people, it affects me directly. 
Fewer people in the risk pool makes my insurance more expensive 
and the administration's reckless support for lawsuits that 
tear down the entire ACA--terminating it, as the president just 
said--is a grave form of subversion. These are just a few 
examples.
    In the last two years, I shared stories because I have 
traveled to DC 14 times to advocate for thousands who have 
shared their health care stories with me. I have met from--with 
anyone from Congress, Democrat or Republican alike. My message 
is simple.
    If you think people don't get hurt when the administration 
doesn't implement the ACA to the best of their ability, think 
again. We do. I do. Millions do.
    If you think pre-existing conditions aren't important, 
remember, someone you love can have an accident, be diagnosed 
with cancer or lupus at any time and that will change how you 
think about this.
    I know firsthand that your health care can change in an 
instant. I appreciate the subcommittee holding this hearing 
today. If the Trump administration can choose not to implement 
this in ways that are true to its intent, citizens like me 
understand that administrations can do that with any law. I 
enjoy legal protections only Congress can create.
    I put myself at great risk to travel hear and share these 
stories with you. I never know if this will be the last time I 
am healthy enough to come to DC.
    But I am here today to ask you to protect the Affordable 
Care Act and to hold the Trump administration accountable for 
trying to sabotage health insurance for millions of Americans.
    Thank you for allowing me the opportunity to testify and I 
am happy to answer your questions.
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    Ms. DeLauro. Thank you very, very much. Thank you for your 
testimony.
    I thank all of you for your testimony and, you know, I just 
appreciate the level of knowledge and, as I say, fact-based 
information that we have the opportunity to listen to today.
    Let me just mention that we are moved to questions and 
answers at the moment, and as in the past, we will proceed with 
five-minute rounds and we will alternate between--back and 
forth by seniority as members were seated at the beginning of 
the hearing, and I just--including myself, be respectful of our 
witnesses and try to give them enough time to respond to your 
questions.
    If I can take one more second and wish our colleague, 
Bonnie Watson Coleman, a happy birthday.
    Happy birthday, Bonnie. Thank you. That is great, and 
welcome to the committee. So that is great.
    I just want to make one quick point. The Labor HHS 
Subcommittee funds the Centers for Medicare and Medicaid 
Services, the program management account as well as HHS's 
Office of the Secretary.
    What that means is that the subcommittee funds the 
personnel who drive the administration's policies affecting the 
Affordable Care Act. So our actions fall squarely under the 
Subcommittee's purview. So I just want to set the record 
straight.
    Yes, Dr. Aron-Dine, your testimony notes that the Trump 
administration released a new proposed rule for 2020, and you 
talked about ``100,000 people drop their health coverage each 
year,'' and that 100,000, as I understand it, comes from the 
administration's own estimates.
    You noted the proposed rule would increase families' 
monthly premiums, out-of-pocket costs without a corresponding 
benefit. Finally, you state nothing in the law requires HHS to 
pursue this new policy.
    I have actually two questions. If it isn't part of the law, 
why is the administration proposing to increase health care 
premiums and out-of-pocket costs?
    Ms. Aron-Dine. The rationale that the administration gives 
for making this formula change is twofold. Part of it is a 
technical justification and part of it is saying that it would 
reduce Federal costs.
    I think we need to look at that reduction in Federal costs 
relative to the burden that is imposed on consumers and also 
juxtaposed with some of the other administration actions.
    I talked about how the administration also estimates that 
its short-term plans rule, for example, will increase Federal 
costs by billions of dollars. And so I think those are funds 
that could be better spent, first, not increasing people's 
premiums by cutting their premium tax credits and also by 
improving affordability.
    Ms. DeLauro. You also said that the administration is 
considering two even more harmful changes: ending or limiting 
automatic reenrollment and attempting to end the silver 
loading, a practice that lowers premiums and out-of-pocket 
costs for millions of people.
    Just--can you just briefly elaborate on those proposals 
being floated for future years? What is the point of denying 
someone the chance to reenroll in their existing health plan 
through the easiest possible process?
    Ms. Aron-Dine. Sure. So automatic reenrollment is, as you 
say, an opportunity afforded to people who are already enrolled 
in coverage. Most returning marketplace consumers do actually 
come back and actively select a plan.
    But some, just like people in employer plans, instead rely 
on being automatically reenrolled, and if we didn't have that 
backstop for those people, it is likely that a million or more 
people would lose their coverage and lose that opportunity to 
remain continuously enrolled.
    The second change you talked about is eliminating silver 
loading. As you talked about, silver loading is how the market 
has managed the elimination of reimbursements for cost-sharing 
reductions and it has actually had the effect of making 
coverage more affordable for people and, according to CBO's 
estimates, increasing coverage by $500,000 to $1,000,000.
    So that, ironically, the unintended consequence of the 
administration's action, which seems to have been intended to 
undermine the market, has counteracted some of the downsides 
from its other actions. And so eliminating silver loading would 
make things more expensive for people and likely further reduce 
coverage.
    Ms. DeLauro. Well, I am going to--I just--you know, it just 
seems that tried stabilize the market, refusing to deal with 
cost-sharing reductions, and now, after states have thwarted 
those attempts, we are trying to go after their work-around 
programs is what it appears to me.
    Let me just move to how would HHS guidance for 1332 waivers 
subsequent discussion paper outlining the administration's 
preferred types of proposals affect people with pre-existing 
conditions and other vulnerable groups.
    You also talked about people losing their health coverage 
under types of Medicaid waivers that HHS is now approving. What 
types of enrollees are at risk of losing their health care 
coverage and how many people would gain health care coverage if 
we move to 50 states in Medicaid expansion?
    Ms. Aron-Dine. Sure. So if the remaining states adopted 
Medicaid expansion, the Urban Institute estimates that more 
than 4 million people would gain coverage.
    So if we are looking for a way to continue the coverage 
reductions from the ACA, that would certainly be one available 
option. With respect to the Medicaid waivers, these are waivers 
that HHS has approved with unprecedented restrictions on 
eligibility including work requirements.
    Ironically, some of the people at risk of losing coverage 
from work requirements are workers--people who have unstable 
jobs, who have variable hours, who can't meet that monthly 
requirement.
    Other people particularly at risk of losing coverage are 
people with serious illnesses who are supposed to be exempt but 
often have particular challenges navigating the paperwork, the 
red tape to claim those exemptions.
    Older people also seem to be particularly at risk because 
they may be early retirees who aren't working, even claiming 
Social Security but relying on Medicaid for their health 
coverage.
    Ms. DeLauro. I am going to do something unprecedented and 
yield back my time.
    Mr. Cole. [Laughter.]
    Mr. Cole. Do I get the extra 16 seconds?
    Ms. DeLauro. No. No. [Laughter.]
    Mr. Cole. Thank you very much, Madam Chair.
    Mr. Haislmaier, I am very intrigued by what you have to say 
about markets really being, as I understand your testimony, the 
driving factor here. Am I right if I--that in your view, 
literally we were going to get most of the people we were going 
to get in this market up front pretty quickly?
    They were going to understand they needed it. They were 
going to mostly continue to re-up and would continuous 
advertising at the same level of the initial rollout of the 
plans make much difference to coverage after that first two or 
three years?
    Mr. Haislmaier. In the--in the individual market, I don't 
see it making that much difference once you have a mature 
market. It is a point of diminishing returns.
    I mean, if you look at the situation the question is do 
people--does an individual believe that he or she needs 
coverage or if they don't think they need it do they still want 
it, and the primary motivators are a medical need would be one.
    The other thing is, well, I am healthy but I have got 
assets to protect. I mean, I don't want to lose my house if 
something happens and I have to pay the bill. Or it might be, 
hey, I have got dependents--you know, what would happen if 
something happened to my kids--things like that.
    Those are the motivators. That is why people buy life 
insurance, et cetera. So those are the people who are motivated 
to buy the coverage. Okay. And depending on how motivated they 
are, you know, nudging them might help.
    Interestingly enough--and Covered California, again, 
provides the most detailed breakout of this--they found the 
most effective thing were, guess what, insurance agents. 
Consistently, since 2014, if you look at the Covered California 
data, over half of new enrollments come from insurance agents 
and another 30 percent are people doing it on their own online.
    I mean, it is all in the Covered California reports. So 
that is what you are looking at. So then what you are left with 
is people who say, well, yeah, do I really need it--nah, I 
don't think so. You know, or I will be okay if something 
happens to me.
    Now, you and I and the others here might think that those 
people are mistaken, okay, and in fact they might be mistaken. 
But the problem is that is what they think, and particularly 
they are looking at other alternatives.
    So, for example, just to--you are from Oklahoma, sir--an 
example of that is if somebody is a member of a tribe in your 
state who has access to the Indian Health Service and is 
treated by the Indian Health Service, that is technically not 
insurance.
    I mean, they are entitled to that. They get--it is free. 
The government pays for it. But that is technically not 
insurance. That individual would be uninsured.
    Now, does that person feel that he or she needs to buy 
insurance? Well, not until there is a problem with getting 
access for the Indian Health Service and at that point then, 
yeah, they will show up on Medicaid or they will buy an 
exchange plan.
    So, again, different people in different situations. We may 
disagree with their choices. But there are people out there who 
say, you know, I don't need it. I don't--I don't have any 
assets. I don't have any income. What are they going to do if I 
show up at the hospital and can't pay the bill? They are going 
to have to treat me. I don't have anything to come after. So, 
you know, yeah, I will sign up then but I won't keep the 
coverage.
    Mr. Cole. Thank you. Let me squeeze in another one here 
while I have got a little time. The nonpartisan Congressional 
Budget Office estimated up to a million people who would 
otherwise be uninsured would seek health insurance coverage 
because of the alternative association health plans and short-
term limited duration health plan options offered by the Trump 
administration.
    Even the Washington Post has noted that several of these 
association health plan options offered on the market have 
premiums lower than the ACA marketplace yet comply with the 
essential health benefit coverage requirements.
    Can you describe some of the benefits these alternatives 
have to middle class unsubsidized consumers?
    Mr. Haislmaier. Yeah. I mean, remember, these are self-
employed people by and large. I mean, you know, I had this with 
a research assistant from--you know, who was from Missouri and 
whose parents had a small contracting business and as their 
choices dwindled and the premiums went up they went to self--
they went to, you know, short-term plans because they are not 
worried that, say, it doesn't cover maternity. I mean, I know 
self-employed people who say, well, heck, you know, we just 
paid cash for having our kids.
    I mean, again, these are not poor people. These are middle 
class people, by and large. Where I see this going long-term is 
I think it is more interesting the association plans because 
that market has dwindled.
    I mean, prior to the ACA there were about 11 million people 
who had unsubsidized individual coverage. The number of people 
with unsubsidized individual coverage is now down to 7\1/2\ 
million. Now, you have added 7\1/2\ million with subsidized 
coverage but the unsubsidized has dropped. I mean, that is very 
clear in the data.
    We don't know exactly where they went. Some of those people 
might go to short-term plans. I think for them it is a short-
term solution because, hey, they are already on the market. You 
can just go and get one.
    Now, longer term I think where that--those people will go 
like that, you know, family that runs a contracting business is 
they are going to go once somebody sets up like NFIB or the 
Chamber sets up an association plan. That is where they are 
going to go.
    Mr. Cole. Thank you, Madam Chair.
    Ms. DeLauro. Mr. Pocan.
    Mr. Pocan. Thank you, Madam Chair, and thanks to the 
witnesses for being here today.
    I guess I want to try to focus I think mostly on pre-
existing conditions in the sense that when we do town halls 
back home this is the issue that comes up the most. You know, I 
did a lot last year in my district, especially the last two 
years. I did five in Paul Ryan's district in the last two 
years, since he was a little busy doing other things, and the 
No. 1 issue that came up was the pre-existing condition issue.
    And while I appreciate the conservative free-market 
theoretical aspects of talking about, you know, what percent 
are severely ill and what percent aren't, I think the flaw in 
all of those arguments comes in--I was in that 80 percent 
healthy category for a long time.
    I spent a night in the hospital when I was born and then 
until I was 53 never spent another night in a hospital. Then 
when I went there I found out I had 70 percent, 90 percent, and 
100 percent blockages and I got to spend an overnight in the 
intensive care part of the hospital, which is why people have 
insurance, right.
    So I would be in that healthy category so I wasn't thinking 
about all the other theoretical--what is the cheapest plan I 
could possibly have. Also, I was a small business owner for 30 
years.
    So I can tell you how most small business owners we don't 
buy--we don't look for a cheap package without benefits. You do 
it because you can't afford something. We want to make sure 
that you have coverage for your family. In fact, more people 
don't start small businesses because they can't get real access 
to health care than otherwise would start businesses and that 
would have an entrepreneurial push.
    So that is why I had people--when I go to small towns--when 
we passed the--the ACA was in place who came to me literally 
crying about the fact that they now have health care.
    So I think it is great on paper. It is a really different 
thing on practice for people, and I am one of those people now 
who has a pre-existing condition. So I get the great privilege 
of if this thing falls apart and I am not in Congress figuring 
out how to get health insurance.
    So I guess what I would really like to focus on is where 
HHS very specifically has done some of the measures, and I am 
talking to Dr. Aron-Dine, about making it harder to have that 
coverage for people with pre-existing conditions, because that 
is what real people talk about not inside the Beltway. We don't 
talk about all the stuff that we talk about around here. Like, 
they are just worried that they have got a kid who is sick.
    You know, you are telling your very personal story. Thank 
you for that. That is what people do at every single town hall 
we have and I would just like to know where we really have to 
plug the holes and make sure that people who have pre-existing 
conditions will never lose coverage.
    I mean, Donald Trump can say Republicans will really 
protect pre-existing conditions. Democrats will not. That falls 
in the category of, you know, obviously, a giant lie.
    We just want to make sure we are actually dealing with this 
and fixing it in a way. So, Dr. Aron-Dine, the exact spots 
where we need to plug the holes to fix this.
    Ms. Aron-Dine. Let me highlight two. The first is the 
short-term plans rule that I referenced earlier, and just to 
talk for a moment about the CBO report that Congressman Cole 
referenced, it found a few things about these plans.
    First, it found that the Trump administration's actions 
will cause a great proliferation in these plans that are not 
subject to ACA rules, both short-term plans and association 
health plans, with 80 percent of the people enrolling on those 
plans being people who would otherwise have had comprehensive 
coverage.
    Second, it found that the short-term plans in particular 
will look a lot like pre-ACA individual market plans. So just 
so we all remember, those are plans that excluded essential 
health benefits like maternity, like substance use, like mental 
health, like prescription drugs, and also imposed annual limits 
on coverage, which meant that in some sense they weren't really 
health insurance at all because what you are looking for when 
you have health insurance is coverage for those very high 
catastrophic costs. If you have a limit on your plan, you don't 
really have insurance.
    The third thing CBO found is that the lower premiums those 
plans provide for healthier people are coming entirely from two 
places. One is the more limited benefits, which is zero sum in 
the sense that people don't have coverage.
    The other is dividing the risk pool, pulling in the healthy 
people and then raising premiums for sick people by the same 
amount in aggregate. So in terms of making like harder for 
people with serious health conditions, pre-existing conditions, 
raising premiums for them by that amount.
    The final thing I would say is that I think that rule 
creates a little bit of a false dichotomy, a sense that the 
only choice is to do nothing for healthy middle income people 
or to split the risk pool and help healthy people at the 
expense of the sick.
    I don't think that is the choice we face and, in fact, with 
the increased federal costs from that rule, one could make a 
start on subsidizing coverage for middle income people and 
making it more affordable for the healthy and sick.
    The second action I would point to, just very quickly, is 
the 1332 guidance and discussion paper, which really invites 
states to come in with very dangerous proposals that could 
undermine their entire ACA market and leave people with pre-
existing conditions without any option other than a market that 
looks like pre-ACA.
    My hope is that states won't take up those options and fact 
there are some real legal questions around that guidance. But 
if any state were to come in with such a waiver, the danger 
could be very great.
    Mr. Pocan. Madam Chair, if I can just finish with saying, 
you know, when we talk about not covering things like 
prescription drugs it is ridiculous. Those people have to have 
coverage.
    I was only on two drugs coming out of the hospital that 
were $600 a month. Forty percent of the people in the country 
can't come up with $400 for emergency expense, much less a 
monthly expense of $600. You know, clearly, that is a necessity 
in coverage.
    Thank you.
    Ms. DeLauro. Thank you.
    Ms. Beutler.
    Ms. Herrera Beutler. Thank you, Madam Chair.
    I had a couple thoughts. You know--I don't know what 
anybody's preconceived notions are before we get started into 
this. But we are here because we care about having access to 
health care for the people we serve. That is the whole purpose. 
That is why we asked to be on this committee.
    This is not the easiest committee to be on. We do it 
because we truly want to get people access to care, and what I 
hear us debating and what is striking me a little bit is, I 
mean--I don't think the Trump administration does everything 
right.
    We can argue about different things--the different changes 
that they have made since they have been in office, right, 
which is, I would argue, mid-way through 2017 they were able to 
start really making some big changes and moving forward.
    But there are a few facts we can't escape. The ACA is still 
the law of the land, and the premiums that my constituents are 
paying in most of my district--most of my counties, where they 
have the privilege of paying them--I have had to step in to 
make sure that a county is even offered a plan on the exchange. 
I mean, we have had major deserts.
    Those have gone up and those were set before he took 
office, right. So right now, I keep hearing because of 
marketing failures or choices to change, how we are 
outreaching, you know, that is why premiums are increasing and 
I have to smile because if you would just look at the timeline, 
we are paying more as a result of the law of the land, which is 
the ACA.
    Now, I wish--I wish that the ACA did everything that we 
were told it was going to do. I really do. I have pre-existing 
conditions in my family. I have people that I serve. My goal 
when I think about this is how do I get them access to care 
that is worth the paper it is written on.
    So right now, in my biggest county only 6.5 percent of 
people are uninsured, which kind of alludes to some of the 
numbers you were using, Doctor. You know, the numbers are going 
in the right direction.
    But when you break that down, you can wait 5 months to 
get--as a child on Medicaid under the exchange to get in to see 
a primary care doctor. It is not worth the paper it is written 
on.
    I have so many people--it is over half in that county who 
are on APPLE Health and the major primary care clinics 
literally stopped taking new Medicaid patients because they 
can't afford them because there is a problem with 
reimbursements.
    Now, this is one of the reasons I think the exchange should 
not have had the expansion because now we are paying to put 
able-bodied childless adults ahead of those poor children and 
those children--those disabled children, those children with 
pre-existing conditions--that is the whole reason--one of the 
main reasons Medicaid was created in the first place. But those 
are the kids who are now waiting to get care.
    So when we say we care about pre-existing conditions, it is 
because we see them not getting the care they deserve under the 
ACA. That is what we are talking about, and I think marketing 
could change some of that, right. Maybe we can get some more 
people in.
    But by and large, your problem is with the ship, not with 
the deck chairs on the ship. You know, I hear you talking about 
you need to get rid of the--I think you call them parallel 
coverage universe. That is so upsetting to me. In Washington 
State, we have the Association of Health Plans, for example, 
and I have had to fight to protect those.
    We have nearly 400,000--people who receive employer-
sponsored health care coverage through AHPs in Washington 
State, many of them union or teachers, small businesses, and 
historically those folks are coming through the small business 
plans and they are--they are kind of a lifeline right now for 
people who are not--they are not--they are not--they are not 
making--they are not getting the subsidy but it is what is 
getting them coverage, right. they can afford it.
    And so in my mind, we have to find a way that allows more 
choice and more options, not less choice and less options, and 
that may mean subsidies for certain folks, making sure we are 
protecting the safety nets in Medicaid Part B. But it may also 
mean that these--you know, this parallel coverage universe is 
part of our solution.
    And to that point, I actually wanted to see if Mr. 
Haislmaier would speak to that as a solution. Association 
health plans as part of the solution to what we are talking 
about.
    The law of the land isn't working. It is just not working, 
and if we want to get more people with access to coverage, I 
was hoping you could--you could maybe elaborate a little bit on 
that.
    Mr. Haislmaier. Sure. Essentially, in states that 
previously tried to do this with the--in some states with what 
they called a group of one where the question is if you are a 
self-employed person are you the business owner.
    Well, yes. Are you the employee? Well, yeah. I guess. You 
know, and so can you be part of an employer plan that has 
better tax treatment and better insurance regulatory treatment. 
Now, that was interesting pre-ACA and this comes back to your 
colleague's question about pre-ex because there is a lot of 
misinformation about it.
    As Mr. Morley actually pointed out, interestingly enough, 
you know, before the ACA, 90 percent of this market pre-ex was 
largely not an issue. That is because it was employer coverage 
and in 1996 they had the Health Insurance Portability Act, 
which is, as Mr. Morley was saying, you know, if you had 
coverage and you wanted to switch from employers or switch to 
another plan, no pre-ex, right?
    And, in fact, I started working on this back in 2003 with 
the D.C. commissioner when we had the situation where those 
rules didn't apply in the individual market and the George 
Washington health plan--university health plan went away, and 
now people who had bought insurance for years were suddenly 
being turned down in pre-ex.
    So there is a way to solve this. The problem was the ACA 
went about it in a sort of ham-handed way. But yeah, this was--
this was, A, a relatively small issue. B, it is largely solved. 
C, we were trying to solve it before the ACA.
    What happens is if you go into an association plan you can 
essentially recharacterize as a large business and you have 
more flexibility in benefit design and you have more choice.
    I think it is interesting. I did some research before 
coming here. Your district and actually Mr. Pocan's district 
are two of the four of you who in your district it is not 
possible to buy anything other than a narrow network plan on 
the exchange in your district. That is true of four of you, and 
you are two of them.
    And so that is the difference. You get alternatives to that 
sort of limited choice.
    Ms. Beutler. Thank you, Madam Chair, for the time.
    Ms. DeLauro. Thank you.
    Ms. Frankel.
    Ms. Frankel. Thank you. Thank you, Madam Chair. It is an 
honor to be on this committee and I want to thank our 
presenters today--thank all of you, really enjoying everybody's 
testimony and I--even--well, I may disagree with some of it. So 
my questions are going to be out of respect and I will try to 
be as kind as possible when I say this.
    I personally think the elimination of the advertising was 
pure evil and I also want you to know that the cell phone 
companies spend billions of dollars to advertise, and I can 
tell you this. I probably get three or four emails every day 
they want me to change my phone. I just bought a phone.
    Anyway, I am going to move on to something that is very 
important to me and that is the effect of these changes or 
these efforts by the current administration, how it affects 
women.
    Here is what I know is that 90 million women ages 18 to 64 
have had health insurance due to the ACA. Sixty-seven million 
women and girls have pre-existing conditions and that the ACA 
was supposed to require health plans to cover a set of 
preventative services without out-of-pocket costs including 
birth control, well-woman visits, and breastfeeding support and 
supplies, and that the ACA was also supposed to allow for 
essential health benefits such as pregnancy, maternity, newborn 
care, pediatric services, prescription drugs, mental health, 
substance use disorder.
    Now, so my first question--I am going to have three 
questions and I am going to give all the questions first. So, 
you know, my first question is how has the administration's 
attempt to dismantle the ACA undermined women's access to 
health, and I think the discussion on the junk policies 
probably could help us with that, and has it, if you know, 
shifted more women to Medicaid, especially for the birth of 
children.
    My next question, and I don't know--maybe one of you can 
answer this. There was an administration--in November the 
administration proposed a rule to require insurers to send 
separate bills to customers for a portion of their premium that 
covers abortion and this month the administration proposed to 
require insurance companies that offer ACA plans covering 
abortions to also offer an identical plan in the same region 
that does not cover abortion, and I am curious if you have a 
comment on how these new administrative burdens impact whether 
insurance companies continue to offer abortion coverage.
    And my next question is thanks to the ACA, 62 million women 
benefit from insurance coverage of birth control without out-
of-pocket costs. In fact, I am not going to go into all the 
effects--good effects of birth control.
    Yet, the Trump administration has issued rules letting 
virtually any employer deny workers this essential health care, 
and curious whether you have a comment on how the Trump changes 
undermine access to contraception.
    Who wants to answer?
    Ms. Aron-Dine. I can address some of the issues that are 
more in my area of expertise and then leave it to others, 
because you raised a number of important points.
    First, on the issue of essential health benefits, I think 
you are correct that women face some particular risks if they 
inadvertently find themselves in a plan that doesn't cover 
these benefits due to aggressively marketing of short-term 
plans, due to confusion about what is covered.
    Mr. Haislmaier mentioned people paying for maternity care 
out of pocket. I will say, I don't know any middle class family 
that can afford to go into a delivery without insurance and 
potentially be exposed to the very, very high costs that could 
accompany a delivery.
    Second, on the question of Medicaid, certainly Medicaid 
coverage also in some ways is disproportionately important to 
women because of coverage for pregnant women, because women 
sometimes are in the position of caring for their families and 
have low incomes and are enrolled in Medicaid.
    So I wanted to just respond to some of the points that were 
made about Medicaid coverage not providing maybe adequate 
coverage. Overall, the research on people who have coverage 
through Medicaid or through the marketplaces find that they are 
able to access care at rates similar to people in employer 
coverage.
    People with marketplace coverage, according to Kaiser 
surveys, report actually high rates of satisfaction with their 
access to physicians, both primary care physicians and 
specialists.
    And people who have gained coverage through Medicaid see 
improvements in access to care as well as improvements in 
various health outcome measures. So not to say that the 
situation is perfect. But Medicaid offers strong coverage to 
millions of people including tens of millions of women.
    Finally, on the contraception rules, as you say, the ACA's 
preventive services requirements included the requirement that 
insurers cover contraception without cost. Again, research by 
Kaiser finds that that has improved, reduced women's out-of-
pocket costs and improved access and adherence, which is really 
important, and the administration's rules, although I am not an 
expert, have poked holes in that benefit mandate by letting 
employers who say they have any kind of moral objection opt out 
with no alternative way for their employees to get that needed 
coverage.
    Ms. DeLauro. We are over time.
    Mr. Haislmaier. Oh, I am sorry.
    Ms. DeLauro. Mr. Harris.
    Mr. Harris. Thank you very much, and let me join the 
ranking member in congratulating you on chairing out of 
committee because we discuss important topics here and this is 
one of them.
    Let me--you know, I have to represent the people in my 
district. That is who I am elected to represent. In Maryland, I 
am going to tell you, we had pre-existing coverage before the 
ACA and it was actually much cheaper than pre-existing coverage 
under ACA.
    Now, in fact, in 2014 the ACA--the high-risk policy on our 
high-risk pool and I think, Ed, you had worked with us in 
Maryland when I was on the health committee there--the high-
risk pooling mechanism did it through a way that I think was 
what you were alluding to, which is it spread the cost of that 
high-risk pool over a large population through a 
hospitalization tax on all, and the problem with the ACA is it 
concentrated it.
    Furthermore, it--you know, and they said, well, you know, 
we did have this 2 percent premium tax or we had the premium 
tax. But the premium tax in the ACA bought up subsidies, didn't 
buy down premium and that is why healthy middle class people in 
my district can't afford ACA policies.
    It is a fundamental policy flaw. You know, had they--had 
they just said, okay, we are going to tax all insurance 
policies and we are going to buy down premiums on the ACA, 
which actually is what happened in the first years of the 
policy because what you did is you effectively had high-risk 
pooling mechanisms.
    So in Maryland--I am 62 now--60-year-olds--last year, Blue 
Cross/Blue Shield suggested a $1,600 a month premium for the 
silver plan. Sixteen hundred dollars a month for a 60-year-old. 
What healthy 60-year-old would say, yeah, I am going to pay 
$1,600. No, they would look for some other.
    The only reason we have got it down is Maryland passed a 
reinsurance plan allowed under a waiver. We passed a 
reinsurance plan that kind of looked like a high-risk pooling 
mechanism.
    So my first question, Mr. Haislmaier, is isn't that we 
should be looking for is actually looking for ways to lower the 
cost on healthy people who are in that ACA individual pool?
    Mr. Haislmaier. Yes, I would agree with you, Congressman. 
That--in fact, I did an entire paper looking at Maryland and 
Oklahoma and seven other states that had done--unfortunately, 
it was Oregon, not Washington but they--you know, next door--
that have done the 1332 waivers.
    And essentially the way to understand this is that the 
ACA--I mean, the thing you have to keep in mind is it wasn't--
there was a lot in the ACA that was just badly thought out and 
badly designed and, in some cases, badly implemented.
    What happened is it is all based on income and it is not 
based on need. And so what the states--from, you know, liberal 
states like New Jersey and Oregon and Maryland to, you know, 
more conservative ones like Oklahoma, though they withdrew 
their waiver because they couldn't get approved in time--have 
done is to say, well, look, if instead of just allocating the 
subsidy dollars entirely on income we shift some of those 
subsidy dollars to focusing on need more. Then we can bring the 
cost down across the board for everybody on the face premium.
    And you are correct, Congressman. That was what they did 
essentially with the temporary reinsurance in the ACA for the 
first 3 years. I have done some work on that as well.
    If I could just follow up on the previous question----
    Mr. Harris. Let me just ask, I take it you are familiar 
with the Medicaid work waivers that are being proposed.
    Mr. Haislmaier. Somewhat. Yeah.
    Mr. Harris. Somewhat. Because my understanding is that, you 
know--that first of all, it is 80 hours a month, which by my 
math is less than 20 hours a week and it is not just work. It 
is work, job training, job searching training, or volunteering.
    Mr. Haislmaier. I mean, yes, it is a pretty broad 
definition.
    Mr. Harris. I have got to say I just--yeah. I mean, for a 
nonpregnant nondisabled nonelderly person, I am not sure asking 
them to volunteer in return for getting a valuable health 
insurance coverage is asking too much.
    Mr. Haislmaier. I think--I think the issue with that is 
that the waivers probably are better for other means tested 
programs. But you are onto something and that is Medicaid is a 
poor fit for that population and this was the point that your 
colleague was making.
    That is a population that you should really do a different 
deal with the states. You should say to the states, look, we 
are going to give you money to help cover that population but 
we are going to give you a lot of flexibility as to how you do 
it.
    These are not the core population that really needs help--
the disabled, the small children, you know.
    Mr. Harris. It is not the original purpose of the----
    Mr. Haislmaier. Right. It is not the original purpose. This 
is a population--you know, 84 percent of these people have no 
dependent children. Half of them are between 18 and 30 years 
old.
    What you want is a system where, yes, you want to get them 
off of dependency, into a job that has benefits and things like 
that. So it is a different path.
    Mr. Harris. Sure. And finally, you know, making Little 
Sisters of the Poor going to the Supreme Court for their 
religious exemption is an atrocity in America.
    I yield back.
    Mr. Haislmaier. I don't know if I have time to answer that. 
[Laughter.]
    Ms. DeLauro. Ms. Watson Coleman.
    Ms. Watson Coleman. Thank you, Madam Chairman, and I am 
very excited to be a part of this subcommittee. I am learning a 
lot. Even in the few minutes that I have been here I have 
learned a lot and I recognize just how complex this issue is.
    I fundamentally believe that access to affordable and 
comprehensive health care is a right, not a privilege. And so I 
am interested in what it is that we need to be doing and what 
we need to be eliminating and what we need to be protecting to 
ensure that those have the insurance that is necessary to keep 
them healthy.
    I believe it is important that we have preventive measures 
so that individuals stay healthy and ultimately cost the system 
less.
    I also think that young healthy people can get cancer any 
moment and that changes the conditions of their existence. What 
does that mean for them because they have not been required to 
have insurance? So they come into the whole equation either 
facing bankruptcy or trying to find something with pre-existing 
conditions.
    I think the education is vitally important. It is vitally 
important as to what is available, when you need to enroll, 
what is appropriate for you. I also think it is important for 
young healthy people to recognize that but for the grace of God 
you could be unhealthy in the very next day.
    So I am interested in these junk plans. They really truly 
concern me. I want to know what is it that they ultimately or 
fundamentally don't cover. I want to--I want to understand the 
impact of extending their viability for 3 months to 12 months 
and I want to understand the impact of taking money out of 
educating the consumers, who are very busy and who don't read 
the fine lines and don't really understand what is all covered 
in their insurance.
    So I guess I want to hear from Mr. Peck and Ms. Dine.
    Mr. Peck. So one of the most important things that the 
Affordable Care Act did was provide a fairly comprehensive set 
of protections to consumers to make sure that they don't need 
to be health insurance experts when they sign up for coverage 
and be surprised when they get sick.
    The--we have talked about a number of them--you know, 
protection against discrimination for having a pre-existing 
condition, annual or lifetime limits, the 10 essential health 
benefits, which make sure that you have--you are covered if you 
go to an emergency room, if you need to get prescription drugs.
    Ms. Watson Coleman. Let me ask you this question about the 
junk plans. Do they allow for lifetime limits to be include?
    Mr. Peck. Yeah. So all of these protections are permissible 
through short-term plans. They have eliminated that requirement 
and by making short-term plans acceptable--you know, by making 
them last for 12 months they make them a viable alternative for 
people looking for coverage because it means you can go from 
one open enrollment period to the next with a short-term plan.
    The danger with short-term plans, and one of those things 
is they don't even have to provide the same information that 
Affordable--that ACA-compliant plans need to provide.
    So it is very easy for consumers, particularly, you know, 
do to a lot of very aggressive marketing tactics by short-term 
plan insurance companies--it is very, very likely that 
consumers will sign up for short-term plans and not understand 
that they are being scammed.
    And they will one day get in an accident or get a sickness 
that they weren't expecting and find that the coverage that 
they thought was going to be there for them wasn't.
    Ms. Aron-Dine. I would only add to answer your specific 
question about what these plans look like, researchers at 
Kaiser took a look at the plans that are currently offered that 
are short-term plans of which none offered maternity coverage, 
fewer than half covered substance use treatment, and fewer than 
a third covered prescription drugs. So it is a concrete 
problem.
    Ms. Watson Coleman. The issue of maternity coverage is 
vitally important to me. I have got a bill called the Healthy 
Moms Act, which is--allows women who find themselves pregnant 
to be able to enroll at that time into an insurance plan, and 
that is very important, particularly in communities of color 
like African-American communities where the mortality rate is 
so much higher.
    I thank you for this--for this hearing, Madam Chair, and I 
hope we have more discussions about what do we really need to 
do to ensure that the appropriate health care is accessible and 
available to all that need it.
    Thank you. I yield back.
    Ms. DeLauro. Mr. Moolenaar.
    Mr. Moolenaar. Thank you, Madam Chair, and it is a pleasure 
to serve with all of you on this subcommittee and appreciate 
the opportunity to hear from our witnesses today.
    I had a couple areas that I wanted to explore and, Mr. 
Haislmaier, I wanted to especially get your insights on this 
with the short-term plans.
    One of the things that seems to me is that we want to 
provide alternatives--affordable options for people. I was 
listening to Mr. Morley. There was a point where, you know, you 
didn't have coverage.
    You know, obviously, there are people in all different 
situations in life don't have coverage. To me, it would appear 
that you would want something that is flexible, affordable, and 
Mr. Peck, you know, you made some compelling statements about 
the importance of information for consumers and consumer 
protection, and I think that is a big part of what we need as 
well because you don't want people to be a victim to scams. You 
don't want the small print to be there and then don't find it 
out until you are in a situation.
    You know, at the same time, it just seems that we use 
rhetoric like junk plans or terms like essential benefits, and 
what strikes me is at some point you want to empower the 
consumer to decide what is an essential benefit from that 
consumer rather than the federal government saying it is 
essential that you have this and you are forced to buy it.
    In the same way, like, I ought to be able to figure out 
with the right information what is important and valuable 
versus what is junk, and to me it seems like we ought to be 
hitting on that.
    So I am curious, Mr. Haislmaier, with the short-term plans 
I understand they are 50 percent less in some cases, which gets 
to this affordability. So if people aren't buying something and 
it is too expensive, then they are in that situation where they 
don't have coverage.
    But this idea of offering flexibility seems to me to be 
pretty appealing, and I am just kind of wondering with the 
administration making more of these plans available are there 
ways to have safeguards for consumer protection?
    We have talked a lot about pre-existing conditions. I think 
that is an important criteria. The president mentioned it last 
night. As mentioned, the law of the land.
    Are short-term plans--do they have coverage for pre-
existing conditions or is that something we should address? So 
I want to get your perspective on that.
    Mr. Haislmaier. Let me--you know, one of the benefits or 
misfortunes of having been at this as long as I have is I 
actually remember where all this stuff came from. So let me 
give a little background here because there has been some 
discussion today that doesn't, you know, reflect the origin of 
this.
    Short-term plans were a category created in the 1996 HIPAA 
legislation where the legislation said that we are going to 
impose regulations on the group market and the individual 
market.
    They did not impose--they imposed the restrictions on use 
of pre-existing in the group market, as I said, but they did 
not do it on the individual market and I think they should have 
copied the same rules over but they didn't.
    But what they did say is short-term plans don't count as 
individual coverage. Then they wrote regulations saying, well, 
what is a short-term plan--anything of 12 months or less, and 
that was in place for 20 years--20 years before the Obama 
administration, in November 2016, said, oh my god, as premiums 
are going up people are fleeing and they are going into these 
short-term plans--let us kill off the short-term plans by 
making them three months, et cetera.
    So what the Trump administration is just doing is reversing 
that regulation, going back to where it was for 20 years 
before.
    The second thing to point out to your question is that on 
short-term plans they are required--and this was something the 
Obama administration added in their revision of the regs that 
the Trump administration has kept--to have disclosure notices 
about them.
    The short-term plans can medically underwrite. They are not 
subject to pre-existing condition exclusions. That is true. But 
they are a possible solution for some people, not for 
everybody.
    The other point that I would make is as much attention as 
has been devoted to this, I actually access the insurer market 
data--all of your states, the insurers, have to file regular 
reports and that data gets aggregated up by the National 
Association of Insurance Commissioners.
    So when you go into the market data you can actually see 
what is going on. We have 175-plus million people with private 
insurance coverage between employer, group, individual, et 
cetera, and I am talking full benefit coverage, not the 
supplemental Medigap, stuff like that.
    Of that, about a couple hundred thousand have short-term 
plans. So it is a really, really small market. As I said, I 
think it will have maybe a little uptick in the next few years 
as some people grab it as a life raft until they can get to a 
bigger boat called association plans.
    But I don't see it as a major thing. The only other point 
that I would make, if I could diverge a bit, is on some of the 
other comments that were made here, the formula change in the 
subsidies that the administration--that Dr. Aron-Dine referred 
to, that was the so-called fail-safe provision that was 
included in Speaker Pelosi's Manager's Amendment in 2009 to the 
final bill to keep the score below what they thought they were 
going to get from CBO.
    So that is the origin of that and the question is when 
the--when it says that it has to be adjusted for the growth in 
premium, the previous interpretation had been premiums in the 
large employer market, not premiums in the market you are 
talking about subsidizing, which is the individual market.
    So, you know, the other point is and, again, the history of 
this--yeah, the other point is simply the aggregation on 
abortion funding was in the bill.
    Ms. DeLauro. Thank you.
    Ms. Clark.
    Ms. Clark. Thank you very much. A pleasure to be back with 
all of you and with our new chairwoman. Congratulations, and 
thank all the panelists for coming.
    As we talk about short-term plans, junk plans, whatever our 
moniker for these plans, I think it would be helpful have a 
little bit more history.
    I appreciate going back to 1996 and individual markets. But 
how did pre-existing conditions play out across the country as 
far as insurance coverage?
    Ms. Aron-Dine.
    Ms. Aron-Dine. Yeah, I think that is a very helpful 
reminder because what short-term plans are taking us back to is 
a parallel market that would look a lot like the pre-ACA 
individual market.
    In that pre-ACA individual market people with serious pre-
existing conditions--Kaiser estimates about 50 million people--
were uninsurable if they needed individual market coverage.
    Others could face rate ups, so higher premiums. And 
individual market plans often didn't cover basic essential 
health benefits, and that is because--just to respond to one 
other point that was made--you can't really have essential 
health benefits a la carte.
    If people can decide for themselves whether to buy 
maternity coverage, for example, men will not buy maternity 
coverage. But that means that the cost of plans marketed to 
women will be higher because only they will reflect the cost of 
maternity coverage.
    Similarly, if you let only people who need mental health 
care buy plans that cover mental health care, the cost of those 
plans will essentially equal, you know, the cost of mental 
health care. They won't have bought insurance. They will just 
have to pay for their care in the form of a higher premium.
    So when it comes to benefits, it is sort of appealing to 
say that we should just let people choose for themselves what 
kind of coverage to buy. But insurance just doesn't work that 
way.
    If we want robust coverage to be available to anyone at an 
affordable price, then we need to mandate some level of robust 
coverage for everyone.
    Ms. Clark. And, you know, I think that that point also 
carries into one of the real public health crises that we have 
in this country, which is the opioid epidemic.
    Having worked with many, many families in my district and 
across the country and having worked across the aisle to 
address this crisis, it doesn't care if you are in a red state 
or blue state.
    I have not met the person in the throes of opioid addiction 
who is saying, now I am going to go out and get a health care 
policy that is going to give me the coverage that I need.
    I am very concerned about this and our ability to access 
health care, and what can be--come under the guise of 
flexibility can take us right back to why we so needed the ACA.
    I don't know if Mr. Peck or Mr. Morley want to comment on 
that patient perspective.
    Mr. Peck. So, you know, substance abuse services or 
something, they are one of the 10 essential health benefits 
that all ACA plans, you know, need to cover.
    Consumers, when they are applying for a plan and, more 
importantly, when they are picking between the plans they have 
to choose from, research shows that that choice is 
overwhelming.
    The amount of information somebody needs to know to be able 
to conceive of every possible thing that could happen in their 
life, it is impossible and, frankly, even health experts 
struggle to make the best decisions they can in choosing a 
plan.
    Asking normal people to factor all of these sort of crazy 
hypotheticals is totally unreasonable. So, you know, I think 
the substance abuse services that ACA-compliant plans are 
required to provide are, you know, vital much like so many of 
the other 10 essential health benefits.
    Ms. Clark. Great. I want to also go back to sort of the 
shocking statement that was made that zero percent of these 
short-term plans offer maternity care. And what is the impact, 
the other sort of on the opposite end of the spectrum, the ACA 
was able to provide coverage for birth control. What are you 
seeing under the Trump administration and the impact on the 
ability of women to access birth control?
    Ms. Aron-Dine. So I should say this is a little outside my 
area of expertise. But as I noted, there is evidence that the 
ACA's requirement to cover contraception as one form of 
preventive services has improved women's access, has reduced 
their out-of-pocket costs for contraception and has likely 
improved adherence.
    And so I think our expectation would be that if you carve a 
lot of holes in that mandate some of those gains will be 
reversed. That said, all of this is still under litigation and 
so I don't think we have seen it play out as yet.
    Ms. Clark. Thank you.
    Ms. DeLauro. Thank you. We will begin a--I want to thank 
all of you--we will begin a second round of questions, and let 
me begin.
    Mr. Peck, Mr. Haislmaier suggested that ongoing advertising 
would be subject to diminishing returns. You were in charge of 
advertising for healthcare.gov. What is the value of continuing 
to advertise and is it important?
    I also would note and have you answer this question that in 
your written testimony you say it is no surprise that state-
based marketplaces are reporting all-time record enrollment, 
while the Trump administration has overseen three consecutive 
years of decline.
    Can you discuss the enrollment trends in states that are 
continuing to invest in outreach and advertising? How do the 
trends compare to the direction of the federal marketplace?
    Can you walk us through your projections? Do states have 
access to lessons you learned at CMS about the benefits of 
different types of outreach?
    Are states conducting random controlled trials or is it too 
onerous to do at the state level? And can you walk us through 
your projections of ACA enrollment if the administration was 
implementing the law in good faith?
    I believe you have estimated as many as 2.3 million 
additional ACA sign-ups.
    Mr. Peck.
    Mr. Peck. So Coca-Cola has been selling the same product 
for over a hundred years----
    Ms. DeLauro. Amen.
    Mr. Peck. [continuing]. And it is one of the most well 
known brands in the world. They spend about $4,000,000,000 a 
year on advertising. I am not familiar with any mature market 
where advertising doesn't play a central role in keeping it 
healthy.
    If Coca Cola stopped advertising we wouldn't all forget 
what Coca Cola was. But we would buy a lot less Coke. And every 
year that went by without advertising we would buy even less 
and that is what is happening in the federal marketplace.
    The ACA was passed to improve people lives and marketing is 
necessary for it to succeed. You know, I think Mr. Haislmaier 
he sort of speculated that consumers who hadn't purchased 
coverage were not going to. They weren't interested in it.
    And the consumer research simply shows that that is not 
true. Most consumers in America who don't have coverage want. 
There are obstacles to coverage. One of them is cost.
    But every year there is a very substantial portion of the 
population that is considering whether or not the coverage that 
is available for them is affordable and right for them, and 
advertising plays a central role in helping them to consider it 
and, ultimately, to make a decision by the deadline.
    So advertising--and we have really seen this play out 
actually in the state-based marketplaces when we look at their 
performance versus the federal marketplace.
    The state-based marketplaces have collectively--their 
enrollment is at an all-time high while marketplace new 
enrollment has seen three consecutive years of decline.
    Again, Mr. Haislmaier suggested that renewal had been 
increasing. But I think he actually misunderstands the data 
because retention has increased. If you look at the number of 
people who are renewing their coverage during open enrollment, 
the percentage is effectively the same.
    What is different is the amount of people who stay in the 
marketplace between the end of open enrollment and the start of 
the next open enrollment has increased substantially. We 
believe that is likely due to people being very satisfied with 
their coverage, not wanting to leave it.
    So what we--what we are seeing, though, is that new 
enrollment, which is highly dependent on paid advertising, has 
been declining. State-based marketplaces, which run their own 
outreach and education campaigns, have overall taken marketing 
fairly seriously.
    In some cases, like in the case of California, they have 
very substantial budgets. California and New York have very 
substantial budgets devoted to marketing and we have seen that 
those states have both easily outperformed the federal 
marketplace during the--since 2016 when the Trump 
administration initially cut outreach for federal marketplace 
enrollment.
    Ms. DeLauro. [continuing]. With your responsibility 
safeguards that are built into the ACA system for enrollment in 
the marketplace. What kind of safeguards are there?
    Mr. Peck. You know, the most important safeguards are the 
ones we have discussed. It is the 10 essential benefits, the 
requirement to disclose information. Those--we could spend the 
remainder of our time talking about those protections. But they 
are very substantial.
    Ms. DeLauro. Let me just interrupt you for one second. With 
the role of the navigator in this--how can you--assure that 
that person is going to help you select the right plan?
    Mr. Peck. Yeah. So under the Obama administration 
navigators would provide assistance to consumers. They would--
you know, they had to--they were required to give them unbiased 
information about the plans that are available to them.
    Under this administration, one change that has been made is 
that navigators are now being required to also offer short-term 
plans as options and they are not allowed to tell consumers 
that this is not a good decision for them even though in most 
cases it is.
    Ms. DeLauro. I am going to say this but I want you to think 
about this. How do we deal with unscrupulous insurance 
companies that try to fool people into buying junk health 
plans?
    With that, let me yield my time to my ranking member.
    Mr. Cole. Thank you very much, Madam Chair.
    Mr. Haislmaier, as you know, I am sure, better than me, 
over half of American counties have just one insurer, and in 
2018 eight states had just one exchange insurer for the entire 
state.
    Can you explain why so many American counties have just one 
insurer and why we are seeing so little competition in some of 
these exchanges?
    Mr. Haislmaier. Well, the good news, first, is that you 
have actually seen that flatten out and in 2019 it is sort of 
returning to 2018--2017 levels, which is, you know, well off 
the high but it is about a third of counties, not half of 
counties and, you know, you have gone up from 37 to 40 counties 
having--percent having two insurers.
    Essentially, and this was alluded to earlier by a 
colleague--essentially, the way to think about this is the ACA 
turned this into a fairly--turned the bulk of this--the ACA 
turned the market for this coverage into largely a market 
dominated by low-income people who were heavily subsidized and 
were thus not sensitized to the price.
    So and this is--we have seen this with--you know, is that 
you can raise the price, and that was deliberate. That was the 
way the bill was designed is that if the premium went up the 
enrollee didn't pay more. The taxpayer did.
    And so it achieved what it set out to achieve, which is you 
got a whole bunch of lower income people with health conditions 
getting comprehensive insurance at little or no cost to them.
    And I remember back in when I was first looking at this 
prior to the first open season in the fall of 2013 and the CEO 
of Molina, which was--the then CEO, which was a Medicaid 
managed care company, said, look, we looked at the market and 
it looks a lot like Medicaid so we went into it.
    Well, that is essentially what you have seen evolve is you 
have seen that the plans that are making money, that are 
working, that are expanding are basically recognizing that this 
is a lower income Medicaid-like population with health 
conditions and as long as the government is willing to keep 
subsidizing the increased premiums they are fine.
    And, you know, that is what it is. That is the way the law 
was set up. That is an inevitable consequence. The problem is 
that you have added that onto a very different market for whom 
that is not a good solution. The other people are not 
interested in that sort of a solution.
    Now, I would simply make the observation I don't understand 
where Mr. Peck's numbers come from because I looked at the 
numbers. The total enrollments in state-based exchange from 
2016 to 2018--we don't have 2019 data--has declined.
    The new enrollment declined. The returning enrollment 
increased. Same thing was true of Covered California. Same 
thing was true with the feds. Yes, there is an argument that in 
percentage terms the feds--the federal exchange may have been 
somewhat larger. But the data shows that that his happening in 
all of these.
    And, finally, with respect to the point I was making about 
advertising, I am not saying that companies aren't going to 
advertise--whether they shouldn't. I am not saying that at all.
    What I am saying is you see all sorts, as your colleague 
said, ads for cell phones, right. What you don't see is 
somebody say, hey, ever heard of this? It is a cell phone. It 
is really cool. You can take it with you. You can make calls. 
You can do all sorts of other stuff. You really ought to get 
one.
    You don't need to do that anymore because AT&T and T-Mobile 
and everybody else will sell the cell phones.
    So my point is yeah, you are going to have advertising. You 
have it by, you know, Blue Cross and whoever, and we see it all 
the time, just like FEHB, the federal employee benefits. You go 
around DC during open season in November you see all the plans 
advertising on buses.
    What you don't see is the need for the Federal Government 
to send out--they send out some notices to their employees but, 
you know, everybody knows where to get it.
    Mr. Cole. Let me ask you one more quick question because I 
only have about a minute left.
    Mr. Haislmaier. Sorry.
    Mr. Cole. No, it is quite all right. It is all very 
helpful. But I did want to get this one in.
    I mean, the kind of complaints that I tend to hear the 
most, and I suspect my colleagues, are not from people that are 
getting subsidized. They are the people right above it, you 
know, who have seen their premiums skyrocket, who have seen 
these incredible deductibles, and it is sort of like--you know, 
I hear this all the time at town hall meetings. I am working, 
you know, hard and all of a sudden my deductibles are $5,000 or 
$10,000 if I am a family. I can't afford this.
    And it seems like by helping some people we have really 
hurt a lot of others.
    Mr. Haislmaier. Exactly. And the other thing that I would 
point out, because money isn't the solution to everything. The 
other thing that you probably hear is the only plans I can get 
don't cover my doctors or my hospital, right.
    Okay. That you are going to have to do something different. 
You can't just fix that with more subsidies to more people.
    Mr. Cole. Thank you very much. Thank you, Madam Chair.
    Ms. DeLauro. Ms. Clark,
    Ms. Clark. Thank you.
    The Trump administration has also been approving Medicaid 
waivers for states that wish to impose work requirements. 
Currently, these waivers have been approved in Arizona, in 
Arkansas, Indiana, Kentucky, Michigan, Maine, and Wisconsin.
    Only a few have implemented so far and I certainly 
understand that disabled individuals are supposed to be exempt 
from Medicaid work requirements.
    But I noticed in your testimony, Dr. Aron-Dine, that you 
mentioned the work requirements could still impact the 
disability community, and I wish you could explain that part of 
your testimony a little more.
    Ms. Aron-Dine. Certainly. It is the case that people who 
qualify for Medicaid by virtue of receiving SSI or other 
federal disability assistance aren't subject to these policies.
    But among the people who gained Medicaid coverage under the 
Affordable Care Act many of those low-income adults have a 
disability and those people are subject to these policies.
    States are saying that they are creating exemptions that 
will mean that those populations will be protected but that is 
not what we have seen in Arkansas and it is not what we should 
expect to see in other states because the reality of these 
policies is they are not just about the requirements. They are 
also about the additional reporting and paperwork they impose 
on people, and people with disabilities often face particular 
challenges in complying with those requirements and, therefore, 
can be at particular risk of losing coverage.
    This is somewhat related to another point that came up, 
which was, you know, is Medicaid coverage the right form of 
coverage for this population.
    And I would posit that it is very much--has very much been 
the right form of coverage for the expansion population partly 
because many of the people in the expansion population are 
themselves people who have disabilities, people who have other 
serious health care needs and have benefitted tremendously from 
having Medicaid coverage.
    But also I think all the evidence we have shows that the 
expansion has improved access to care, has improved financial 
outcomes, and has improved health outcomes for the broad 
population of low-income adults who gained coverage.
    Ms. Clark. Great.
    I wonder, Mr. Morley, if you had anything to add on that.
    Mr. Morley. I just want to go on record in saying I have 
had the chicken pox twice. So if anything could go wrong it 
would happen to me. [Laughter.]
    Mr. Morley. So just now that is entered into the 
Congressional Record.
    Anyway, thank you. Thank you for the lending of your 
microphone. I just want to say actually I just--before I say 
that, I just--I just wanted to just to make a--to what Mr. 
Haislmaier had said earlier.
    I was actually--in 1997, I was actually not covered for a 
pre-existing condition. So I just wanted to make that clear if 
there was any--like, I just thought about that because--of an 
injury that I had sustained.
    But in answer to your question, you know, I hear from 
people all over the country and, you know, in different parts 
of the country and I have heard from people in the states that 
have had Medicaid work requirements imposed on them.
    I mean, from what I know, from what I have read, in 
Arkansas people have--17,000 people have actually lost their 
health insurance because of the work requirements and these are 
people who, you know, in all good faith have gone out and tried 
to, you know, find positions.
    But I think I can speak best to the stress that is caused. 
I mean, you know, as someone who lives with lupus, stress is a 
huge factor in my life and stress is a huge factor in the lives 
of people.
    I have had the fortunate--you and Chairwoman DeLauro--to 
work with both of your offices and, you know, there is someone 
in your district who has a daughter who is chronically ill and 
he is not able to work because he has to be full time 
caregiver.
    His name is Ben Jackson, and, you know, it is really--
people are extremely stressed and when you live with chronic 
illness or you are a caregiver to somebody with chronic 
illness, I mean, it is not something that you need to be 
thinking about.
    So it just adds that extra layer and it is--I mean, for me 
it keeps me up at night. For other people it is--you know, as 
bad as, like, you know, my story is and, you know, bad is 
relative. But people have--there is always somebody worse. 
There is always somebody who has--who has more issues and more 
problems.
    So it has been quite tortuous, I have to say, for the last 
two years since the administration has taken over. There has 
been a lot of sleepless nights.
    Ms. Clark. Thank you.
    Ms. DeLauro. Ms. Herrera Beutler.
    Ms. Herrera Beutler. Thank you, Madam Chair.
    And I guess I would--I would--just hearing that last piece, 
for those of us who are on the exchange who have the chronic 
conditions in our families and the pre-existing conditions, I 
look around.
    I am, like, every time you try and choose a plan you do 
hours to research on the exchange. You have to figure out--you 
have to read the fine print and then you overlay the 
prescriptions that you need.
    You overlay the different diagnostic tools you know you are 
going to need. You overlay how much it is going to be in 
premium. You overlay all of that.
    It is not any--it is not better under the exchange. That is 
my frustration. I want it to be better. I don't--this is 
ridiculous that anybody has to do that. That is insane. It is 
just absolutely asinine.
    I think about the single mom in my district who has four 
kids and two or three of them have major, major health needs or 
behavioral mental health needs. She can't do that. That is 
insane to ask her to do that, and that is under the exchange.
    So my hope is that a little bit more--a little bit more 
realistic assessment of what is currently the law. I know 
there--politics out of it. You know, you were mentioning--you 
were citing, Doctor, studies about the overall--you know, how 
many more people--I think in kind of a response on the Medicaid 
how many more people are getting coverage and what their 
coverage looks like and they are generally satisfied.
    I mean, that may be true. Maybe those are--I don't know 
what is behind those studies. But I can tell you in Washington 
State, which is--we used to have a high-risk pool that covered 
everybody with pre-existing conditions and then we got a basic 
health plan more for the lower middle income folks that was 
subsidized. Worked really well.
    And then we had Medicaid, which was that safety net, and it 
worked well. As a result of the ACA, all those things got 
pretty much outlawed. So now what we have, Medicaid 
reimbursement for pediatric care, which is--so the reason I 
bring up Medicaid is most of the exchange in our state is 
Medicaid. It is not people who got private plans. It was a vast 
majority got pushed onto Medicaid.
    So here they are thinking, hey, I am going to get a private 
plan. They got put into waiting lines because we have had at 
least a 35 percent decrease for pediatric care in terms of 
reimbursements.
    In fact, Medicaid pediatric reimbursement is two-thirds of 
what Medicare is. Medicare in Washington State is pretty 
crummy. Nearly one in two children in the state relies on 
Medicaid through this coverage, right. So it is pretty 
important to use.
    Waits for appointments on Medicaid in Washington State are 
one to two months. Currently, since March, 435 children and 
adolescent clinic patients who live in Vancouver, which is my 
biggest county, have had to travel outside of the country to 
Longview for care. That is, like, 40 miles one way, depending 
on where you are at in the county.
    Yet, our uninsured number is only 6.5 percent. So it sounds 
good. But when you drill down, it is not worth the paper it is 
written on, and I think one of the things that we have to think 
about is how we substantively change the policy to make sure we 
are subsidizing that we have to, making sure--shoring up those 
safety nets.
    We have to let the marketplace become more robust and open 
up. That is where it was before, and it wasn't amazing. It has 
been a blue state for decades, longer than I have been on this 
earth it has been a blue state.
    So I am not--I kind of laugh because I think I am pointing 
back to that same--we actually had a more free market type of 
proposal that had different offerings for different subsets of 
people.
    Like you were saying, you know, 80/20--80 percent of people 
were in a certain type or need a certain type of coverage. That 
is how we get them into the system. That is how we get them 
paying. We don't say we are going to fit every single person 
into a one-size-fits-all box.
    That is what I see has been the biggest problem with the 
ACA. So far, not the Trump administration. They haven't been 
successful in their number-one claim, which was to get rid of 
it. It is still the law of the land and it is not working.
    I welcome any comments you had.
    Mr. Haislmaier. I would just make one brief on and that is 
I am always reminded that my instructions are not to bring up a 
problem unless I have got some kind of a solution to it.
    One of the things that I suggested, and Dr. Harris may 
remember this from when he was in the Maryland legislature and 
I was working with him--though I don't remember, so it has been 
for a long time--is that insurance agents be paid as buyer's 
agents, not as seller's agents. You saw that change in the real 
estate market.
    And I continue to recommend that to the state level and I 
think, you know, I don't know if the federal government--if the 
exchange has the authority to do that.
    But the data is quite clear. The answer to the point that 
you just brought up, Congresswoman, is that is what insurance 
agents do. They help people navigate that. They help them 
figure it out and they service the policy.
    By that, you know, when you get some kind of problem with 
your insurance company they go to bat for you. And so I have 
been telling them for years--and, in fact, agents were somewhat 
reluctant to go this way--they should all be paid a flat fee 
per member per month regardless of what the policy holder picks 
so that they are not biased to do that.
    The navigator is really not able to fulfill that role. They 
don't have the expertise. The navigator is more like a county 
welfare officer saying, well, based on your income you qualify 
for this and not this or maybe this.
    So it is a different role.
    Ms. Herrera Beutler. Thank you, Madam Chair.
    Ms. DeLauro. Thank you.
    I want to just take a moment of personal privilege which 
has to do, which I think Congresswoman Herrera Beutler has 
pointed out. It is a very complex effort, you know, to go 
through this.
    And I just wanted to ask you, Mr. Peck, because the point 
is well taken. This issue just came up about the role of 
individuals and navigators, would you be able to provide that 
kind of assistance to an individual trying to, in fact, 
navigate the system.
    I don't care who you are and I don't care what level of 
education you have. It is a very difficult process. If you 
would just take a moment to do that and then we will go to 
Congressman Harris.
    Mr. Peck. Yeah. You know, I very much agree that it is--it 
is a more complicated process than it should be and I support 
any effort to simplify that process for consumers.
    I disagree with the idea that it is not easier today and 
the big difference is----
    Ms. DeLauro. Are you on the exchange? I'm sorry. No--no. I 
am just--sorry, I am asking.
    Mr. Peck. No, I am not. But I have friends and family who 
are so--the reason it is easier because there are these 
safeguards in place. There are guardrails for consumers that 
protect them from making catastrophic decisions.
    So it is absolutely true that a consumer might take just as 
much time as they did previously in evaluating what plan is 
best for their family and their family's budget and medical 
needs.
    But the protections for them are fundamentally different 
than before the ACA. But to your question on navigators, you 
know, the--first of all, navigators are just as qualified as 
agents and brokers to help people navigate the process of 
selecting a plan.
    They do incredible work and they literally get no incentive 
if a consumer, you know, picks a plan or not or certainly which 
plan they pick. So they are already closer to the model that 
you are suggesting would be ideal.
    I think it is really, really important to understand that 
people who have never had coverage they often really struggle 
with making such a significant financial commitment without 
feeling like experts in this very complicated space.
    So, again, I support changes to simplify it. But I think 
these people who are helping people enroll are doing really 
important work and it is very sad that that work is being 
compromised.
    Ms. DeLauro. Thank you very much, Mr. Peck.
    Congressman Harris. Thank you.
    Mr. Harris. Thank you very much, Madam Chair.
    Yeah, I think, you know, clearly, health insurance is 
pretty complicated. But it is not only purchasing. It is 
actually using it and I think that is Mr.--probably Mr. 
Haislmaier's point that, you know, the original ACA kind of cut 
out the agents--the agent acting on behalf of the patient.
    Now you are--you know, someone had a plan but who acts on 
their behalf? When you got a problem, you call Blue Cross/Blue 
Shield and you think they are going to act on your behalf?
    They are not going to act on your behalf because nobody has 
a financial interest in acting on your behalf. So that was the 
real problem with the ACA that won't be dealt with, you know, 
if you just increase the number of navigators.
    But, you know, Maryland is one of those state-run plans and 
I agree the state-run plans have not all seen increases, even 
though we advertise heavily in Maryland.
    Fact of the matter is that from 2016 to 2017--I am sorry, 
2017 and 2018 we were down 2.6 percent in enrollment despite 
advertising. Now with the reinsurance bringing down the 
premiums now we are going to see whether it is advertising or 
actually making a more consumer-friendly product that is really 
going to be the--be the determinant.
    And because, you know, I basically believe in federalism 
there is certainly nothing--and correct me if I am wrong, Mr. 
Peck--there is nothing that stops a state from picking up the 
federal role and advertising the exchange. Is that right?
    I mean, a state could do it. They don't--where they have a 
state-run exchange, right? So and there is a reason I am asking 
the question because, you see, I am already paying for 
advertising in Maryland. Why should I support advertising in 
some state that chooses not to advertise?
    See the question? So nothing stops a state from advertising 
the healthcare.gov in their state.
    Mr. Peck. Funds are one thing that that stops.
    Mr. Harris. Well, yeah. But funds stop us, too. We actually 
run under a budget, too. So there is nothing that stops it 
legally, right? The ACA doesn't say a state cannot advertise 
healthcare.gov plans.
    So what you are asking me to do is to not only pay for 
advertising in my state but to pay for advertising in states 
that choose not to advertise to their citizens.
    I got to tell you, I am elected to represent the people in 
Maryland, one, and if I tell people that I voted not only to 
pay for advertising in my state but to pay for it in other 
states that choose not to spend their funds, I wouldn't be in 
office very long.
    Let me just bring--Mr. Haislmaier, let me just ask a point 
about the appropriateness of that population--Medicaid 
expansion--I am sorry, the ACA-subsidized population.
    Because one thing that has always bothered me, you know, if 
you create a high-risk pooling mechanism specifically and the 
state runs it, you can kind of direct it to perform intensive 
disease management because the way it is now you go on the ACA 
marketplace you are just buying a commercial policy, and that 
commercial policy may or may not make disease management as an 
essential part of that policy.
    Now, Medicaid in Maryland makes disease management an 
essential part of Medicaid coverage and if we really want to 
get costs down, because Mr. Haislmaier said 5 percent of people 
have, you know, this serious illness--they are the ones that 
consume a huge amount of money--and the data shows pretty 
clearly that intensive disease management actually works very 
well at bringing down the cost for that most expensive part of 
the population.
    So is that--I mean, is that kind of what you are indicating 
how we should tailor--we should look at what that population 
needs and when we are--when we, the taxpayers, are paying the 
bill we should insist on the most efficient way of dealing with 
them, which is good for the--it is win-win. Disease management 
is good for the patient, good for the taxpayer.
    Mr. Haislmaier. Yeah. I see evidence that the market is 
sorting itself out in that direction. One of the interesting 
things about the insurers going in and out of the exchange is, 
you know, the big brand name insurers like the Aetnas, Uniteds, 
Humanas, they are gone. They are not coming back, and the 
reason is this is a really small piece of their business. Their 
business is elsewhere. You know, and Cigna--I mean, 80 percent 
of Cigna is self-insured employer plans like mine.
    The ones that are going into the exchange--and it is 
interesting, this year when we saw a number of expansions in 
states, there are two kinds. One is the sort of more disease 
management focus--Medicaid managed care insurers.
    The other kind that we have seen a growth of is the local 
insurer that is vertically integrated with the hospital system 
and those are the ones that have gone in.
    So, yeah, they recognized, I think, sort of what the 
population is and what they need to do and some insurers are 
better at that than others and the ones that are better at it, 
you know, don't lose money and they stay in the marketplace 
where they actually expand their footprint.
    So I think you are seeing some signs of that happening 
already.
    Mr. Harris. Good. Thank you.
    Thank you, Madam Chair.
    Ms. DeLauro. Thank you. What we will do from here is I am 
going to--I know the ranking member has an additional question. 
I have an additional question and then I will sum up and then 
we will bring the hearing to a halt.
    Mr. Cole. Thank you very much, Madam Chair.
    And Dr.--Mr. Haislmaier, I want to go back and give you a 
little more time because I want to focus in again on this 
population that is not getting subsidized care, that is sort of 
just above the line, and that is where I think all of us get 
most of the concerns that we hear from.
    I have often used the line, look, there is no question in 
my mind that ACA has helped millions of people. But it has cost 
millions of people a lot, too.
    So it is that population. Nobody is trying to take anything 
from the people that it is helping. It is just how do we do--if 
you have some suggestions, what would make a difference for 
that family that is just above--you know, not going to get a 
subsidy. But they have seen their rates skyrocket.
    They have seen their deductibles go up and they are really 
the ones caught in the vice here and, you know, what I haven't 
seen is much in the way--and, again, I don't pretend to be an 
expert in this area, but I haven't seen a lot in the way of 
suggestions.
    What do we do to help that population so that this stays 
affordable? What are the kinds of changes? Because we are not 
going to repeal the ACA anytime soon.
    So but what would be the sorts of things that would help us 
reach that population and make sure that health care is 
affordable for them?
    Mr. Haislmaier. Well, this is where the experience with 
other states and the 1332 waivers comes in because, 
essentially, as I mentioned, what they are doing is they are 
shifting more of the available subsidy dollars to focusing 
those on the people with the greatest need.
    They are also putting in some of their own dollars, by the 
way. I mean, Maryland, for example, is putting in some of its 
own dollars. What they are able to do is to concentrate the 
assistance on where it is needed most and then bring down the 
premiums who are low income.
    If you think about it, if--you know, if you put somebody on 
who has low income and is healthy but the government is paying 
100 percent of the premium or 90 percent or 95 percent of the 
premium, we now have free bronze plans for those people because 
of the silver loading so it could be 100 percent of the 
premium.
    And then that person doesn't use the coverage but those 
dollars go to subsidize somebody with a major medical 
condition, well, why go through that rigmarole when you just 
subsidize the person with the major medical condition and let 
the other person buy with their own money something much 
cheaper?
    So that is kind of what is going on with the 1332 waivers 
that states have looked at. Now, the advantage of this is 
states are doing it differently.
    I mean, most--of the state applications, seven of them, 
including Oklahoma's, were on a dollar basis. Alaska is 
interesting, as they do it on a condition basis--a medical 
condition basis.
    So, you know, some states might do one way, some states the 
other.
    Mr. Cole. Is that something we would need to work on 
legislatively or is this just something that the market is 
figuring out?
    Mr. Haislmaier. Well, this is something the Trump 
administration is trying to--and this was the Trump 
administration's guidance is to give them more flexibility on 
doing this and ways around that.
    And, again, I think part of this is waking up to the 
reality and facing the reality that you really have two 
different markets here and it is not horrible that you would 
treat them differently. In fact, it is probably a good thing to 
treat them differently.
    Mr. Cole. Thank you very much.
    Thank you, Madam Chair.
    Ms. DeLauro. Thank you very much.
    What I want to do is if I can, before I--so I will wind up 
actually with two questions. I would like to ask Dr. Aron-Dine 
if you could briefly address Congressman Cole's question about 
what the next steps might be.
    Ms. Aron-Dine. Yes. Thank you. And if you don't mind, can I 
just say a word about premiums because that has been sort of a 
central issue in this hearing.
    Ms. DeLauro. Go for it.
    Ms. Aron-Dine. So I just want to share one fact, which is 
that in 2017, which is before Trump administration policies 
that raised premiums, but after premiums came in line with cost 
for insurers, so after insurers were basically sustainably 
priced, premiums in the ACA marketplaces were, roughly, in line 
with premiums for comparable employer coverage.
    That is according to an Urban Institute study, taking into 
account the full cost of employer coverage, the part the 
employee pays out of pocket and the part that their employer is 
paying.
    I think that is really important. Not to say that 2017 
premiums were affordable for unsubsidized people. But I think 
it helps us focus on what the challenge actually is, and the 
challenge is that health care is expensive, not that there is 
some particular flaw in the ACA marketplaces.
    Now, the individual market used to sort of mask that fact 
because since sick people couldn't get coverage and since lots 
of benefits were carved out, that makes health insurance seem a 
lot cheaper and so individual market premiums used to look 
cheaper.
    But they weren't really delivering better value. They were 
just shutting some people out of care altogether. Short-term 
plans and some of the other administration actions take us back 
in the direction of that pre-ACA market.
    I think the better place to go to help the unsubsidized 
people would be first to reverse administration actions that 
have raised sticker price premiums like short-term plans; 
second, of course, to keep working to reduce system wide health 
care costs.
    But then the third option is just to address some of the 
gaps in the ACA subsidy structure. One way to do that is 
reinsurance. I think a better and more targeted way to do that 
would just be to make premium tax credits available to people 
above 400 percent of the poverty line so that they also didn't 
have to pay more than 10 percent of their income for health 
insurance.
    And that may seem like an impossible or too expensive 
proposal. Rand actually analyzed it and found that it would 
cost $5,000,000,000 a year. CBO, I imagine, would estimate a 
somewhat higher cost. But for context, the administration 
estimates that the short-term plans rule is costing about 
$3,000,000,000 a year.
    So these are not giant unaffordable policies. This is a 
realistic way to plug some of those gaps rather than doing it 
in a way that benefits healthy people only at the expense of 
sick people.
    Ms. DeLauro. Thank you. I just want to try to wrap up.
    The ACA and putting an end to annual and lifetime limits on 
care----
    Mr. Morley. Yes.
    Ms. DeLauro [continuing]. For someone like yourself.
    Mr. Morley. Yes.
    Ms. DeLauro. I am a cancer survivor. What would happen if 
the health plans would return to those lifetime--annual and 
lifetime limits?
    Mr. Morley. Well, I am going to answer your question but I 
also wanted to--I want to address something after that as well, 
if that is okay. Something that was brought up earlier. In the 
short answer is over the last 10 years I have amassed 5 to 10 
million in claims. I lost track. I would--I mean, I have--
between lupus and the cancers I have had, the spinal surgeries, 
I would not be testifying before you right now, and that is the 
short answer.
    What I really want to speak about is I want to enter the 
testimony of a friend of mine named Mina Schultz because I 
think what has been overlooked here today is the fact that one 
of the things that the Affordable Care Act has given us is 
coverage under parents' plan until age 26.
    My friend, Mina Schultz, developed osteosarcoma when she 
was 24 years old and she was a graduate student and thought she 
was one of those healthy people who didn't need insurance, and 
her mother said, hey, there is this new thing called the ACA 
and I can cover you under my plan.
    So she did, and because she did her life was saved because 
she got the care that she needed and she is here today, and it 
changed her whole life. She just got her Master's--her MPH and 
she also was an assister in West Virginia and she helped 
thousands of people.
    And there are people in West Virginia who do need that help 
and there are people in many states who need help navigating 
the ACA.
    And whether it is the ACA, whether it is Medicaid, whether 
it is Medicare, any help is always appreciated. I mean, there 
are lots of nonprofits that are set up that are not funded by 
the government that help these people.
    But she happened to be part of--she was an assister in West 
Virginia and not only did she--not only was her life spared 
because of the ACA, not only did it change the course of her 
life, but she has helped many people save their own lives, and 
I thought it needed to be heard.
    Ms. DeLauro. Let me just, before I just--we conclude, I 
think it has been a very good discussion and I appreciate 
everyone's testimony and everyone's point of view. I think this 
is the way we need to move forward in terms of making a 
determination of how we address the cost of health care and the 
access to health care.
    And I think that the issue does stem around a cost and the 
increases that people are facing--those families that 
Congressman Cole spoke about.
    But I think, overall, we are looking at a time here where 
we are now seeing that costs are increasing. The level of 
people who are uninsured is increasing and we are looking at 
diminishing the benefits.
    We can call them essential or we can call them whatever we 
want to call them, but the benefits that people need in order 
to survive and thereby just tampering with the kind of quality 
of care that we need to try to achieve.
    I also believe that--concerning the costs that we have 
heard different points of view. But I think that we have to 
look at what in fact was happening before the Affordable Care 
Act, what happened with the Affordable Care Act, and that 
bending of that cost curve, seeing the drop in people who were 
uninsured, and now we are seeing absolutely the opposite.
    And one has to take a very, very hard look at what the 
administration's policies have been over these last several 
years in being a driver of increased costs when you take a look 
at the cost share reduction payments, when you take a look at 
the individual mandate, when you take a look at what has 
happened with enrollment and outreach and advertising and 
getting more people into the thing.
    You look at waivers and where it is going and what kinds of 
policies are looking to in fact do what the president said on 
his first day was to maximize within the confines of the law 
any way to look at dismantling the Affordable Care Act.
    That is not the goal of this committee. This committee is 
to take a look at how we can provide access to health care. So 
we have got to take a look at those policies that have 
increased cost and weaken benefits and move forward to look at 
how we reduce costs for families.
    We need to look at, in my view, how we want to achieve 
universal health care and let us stop moving backward and start 
to work together to ensure every American has access to 
affordable health care.
    And with that, I am going to draw this hearing to a close. 
Thank you all very, very much.

                                      Wednesday, February 27, 2019.

     REVIEWING THE ADMINISTRATION'S UNACCOMPANIED CHILDREN PROGRAM

                               WITNESSES

JONATHAN MULLIGAN, CLINICAL FELLOW, UC DAVIS SCHOOL OF LAW--IMMIGRATION 
    LAW CLINIC
JENNIFER PODKUL, SENIOR DIRECTOR OF ADVOCACY AND POLICY, KIDS IN NEED 
    OF DEFENSE
MICHELLE BRANE, DIRECTOR OF MIGRANT RIGHTS AND JUSTICE PROGRAM, WOMEN'S 
    REFUGEE COMMISSION
ANDREW ARTHUR, RESIDENT FELLOW IN LAW AND POLICY, CENTER FOR 
    IMMIGRATION STUDIES
ALTHA J. STEWART, M.D., PRESIDENT, AMERICAN PSYCHIATRIC ASSOCIATION
    Ms. DeLauro. The subcommittee will come to order.
    Let me just say good morning to everyone, and we would like 
to welcome you to the Labor, HHS, and Education Appropriations 
Subcommittee, the oversight hearing on Reviewing the Trump 
Administration's Unaccompanied Children Program.
    Before I start my opening remarks, I want to just make sure 
that we are all working from the same set of facts, which is up 
in this chart. It is a little small in type, but you may have 
in front of you a copy of what I am about to say.
    So as I say, before I start the opening remarks, I was 
struck by a timeline that KIND assembled to highlight the way 
the administration has systematically targeted and dismantled 
protections for children. You will see it up on the screen. I 
do not think my colleagues are familiar with the timeline. So 
let me just walk through quickly some of the major elements.
    March 2017, only 2 months after being in office, the 
administration publicly discussed separating parents and 
children as a means of deterring future asylum-seeking 
children.
    June 2017, ICE began to target the parents and relatives 
who came forward to sponsor unaccompanied children.
    June 2017, Customs and Border Patrol began a pilot of a 
``zero-tolerance'' family separation policy.
    November 2018, the administration terminated the Central 
American Minors Program.
    April 2018, ORR finalized a memorandum of agreement with 
ICE to conduct background checks on potential sponsors of 
unaccompanied children, including fingerprinting all members of 
a sponsor's household.
    May 2018, the Attorney General announced a new official 
policy to refer all immigrants that were apprehended at the 
border for criminal charges and to transfer children to HHS 
custody as unaccompanied children, which led to thousands of 
children being taken away from their parents.
    June 2018, the administration opened influx shelters at 
Homestead and Tornillo. At its height, Tornillo held nearly 
3,000 children, while Homestead is currently at 1,600 and has a 
plan to reach 2,350.
    By December 2018, the Unaccompanied Children Program had 
nearly 15,000 children in custody, an all-time high.
    I share that before I begin the opening remarks because I 
think it is important to provide an overall framework for the 
discussion. That way, we understand the scope and the breadth 
of the administration's actions that are causing harm to 
unaccompanied children.
    So, with that, let me just welcome again everyone, and let 
me just say a thank you to our panelists here this morning. We 
have J.J. Mulligan of the UC Davis School of Law Immigration 
Law Clinic, Jennifer Podkul of Kids in Need of Defense, 
Michelle Brane of the Women's Refugee Commission, Andrew Arthur 
of the Center for Immigration Studies, and Dr. Alta J. Stewart 
of the American Psychiatric Association. I will do a brief 
introduction for each of the panelists before your oral 
presentations.
    Thank you so much for offering your testimony this morning 
and for helping us to identify both the root of the problem and 
the solutions that we need to be advancing.
    This morning, we are here to fulfill this committee's 
oversight responsibility, demanding accountability. That is one 
of the core components of our work here. The American people 
deserve answers and actions, not evasion and excuses.
    There was late-breaking news yesterday about the instances 
of sexual abuse with regards to unaccompanied children, and all 
the more reason that--we need to have the ability to look into 
this. Today, we are here to examine the impact of the 
administration's policies with respect to unaccompanied 
children. My view, intentional policies, but in the words of 
our witness Michelle Brane, and I quote, that are ``exposing 
children in Government custody to lasting and to irreparable 
harm.''
    This is the question before us, and this ought to be the 
question that we need to ask ourselves. And I say that with 
maybe some scripture, et cetera. We need to look into our souls 
on this issue. Are the actions of the administration producing 
Government-sanctioned child abuse? And I think that is 
something that we have to take a look at.
    For the last 2 years, senior officials in this 
administration have twisted and perverted the mission of the 
Department of Health and Human Services, specifically its 
Unaccompanied Children Program. Statute requires the Office of 
Refugee Resettlement to ``promptly place children in the least 
restrictive setting that is in the best interests of the 
child.'' They are responsible for reunifying them with parents 
or family in the U.S. as soon as possible.
    Executing this lawful mission has not been this 
administration's approach, however. Instead, it has attempted 
to turn Health and Human Services into an immigration 
enforcement agency. This is not about administrative agencies 
going above and beyond to ensure the law is upheld, but it is 
about senior officials in this administration turning suffering 
children and overwhelmed caseworkers into pawns in the 
administration's immigration deterrence policy. And as we know, 
based on legal precedent, that separation as deterrence policy 
is illegal.
    We requested the testimony today of two senior HHS 
officials who were in charge during the start and execution of 
the administration's family separation policy. That is the 
former Acting Assistant Secretary of the Administration for 
Children and Families and the former Director of the Office of 
Refugee Resettlement. We wanted to ask them key questions 
because my colleagues on both sides of the aisle need to assess 
the treatment of unaccompanied children, the effect of the 
family separation policy, the costs, and so much more.
    Unfortunately, the administration declined to make these 
senior officials available, but we will continue to press for 
them to appear before the subcommittee. So, yes, we will hold 
future hearings. We need to question those who directly 
implemented this policy.
    As we know, the administration intentionally separated 
thousands of children from their parents, and just last month, 
we learned from the Inspector General that the Trump 
administration's family separation policy began much sooner, as 
soon as 2017, with the result that thousands more children were 
separated. And what we are going to do is to demand a full 
accounting of these children from the administration.
    Family separation is only one element of this 
administration's ongoing sustained abuse of these children. As 
our witnesses can attest, this administration did not 
prioritize the health and safety of the children in our care. 
Instead, through a memorandum of agreement, the administration 
directed HHS to collect immigration information for ICE, which 
forced tens of thousands of children to spend additional weeks, 
sometimes months, in Federal custody rather than in safe, 
supportive homes with family members.
    What was the result? The average length of time each child 
spent in Federal custody nearly tripled, from about 35 days 
during the Obama administration to 60 days last year, to almost 
90 days this year. One of today's witnesses, J.J. Mulligan, met 
several children who had been detained at the Homestead influx 
facility for over 7 months.
    As children spent additional weeks and months in Federal 
custody, the overall number of children in the system swelled 
to nearly 15,000 in December, a record number. As a result, HHS 
began to move thousands of children to overflow facilities, or 
influx shelters. These are under protected, nonpermanent 
facilities. Since they are on Federal property, they are not 
licensed by the States, which are normally tasked with 
overseeing safety and security standards.
    The 1997 Flores settlement sets national standards for the 
detention of vulnerable children, and yet, as our witnesses can 
attest, there have been many instances of violation of Flores. 
We know of two such influx facilities.
    The administration detained as many as 2,800 children at 
Tornillo, again for potentially months at a time. However, 
there was no education program, and for an alarming period of 
time, there was not adequate background checks or 
fingerprinting being conducted on the staff. They had an 
insufficient number of mental health personnel.
    Despite this, the administration offered a no-bid contract 
worth up to $1,000,000,000 to the site operator that would 
expand Tornillo to 4,000 children--$1,000,000,000. We shined a 
light on the conditions and the standards at Tornillo, and it 
has now closed. And I look to my colleague Congresswoman 
Lucille Roybal-Allard and her efforts in this effort.
    Yet there are 1,600 children in Homestead, Florida, today 
that cost taxpayers $775 per child per day for children to stay 
there. So with the average length of stay around 70 days, this 
temporary holding facility is costing taxpayers $55,000 per 
child.
    Influx shelters and costs will be the subject of a future 
hearing. Where is the money going? To whom is it going? How 
much is being wasted?
    This is why this matters. By law, the administration should 
be quickly placing children in safe, supportive homes with 
family members, and HHS's role is to do what is best for the 
children. Instead, as part of an anti-immigration push, the 
administration is trying to turn HHS into an extension of ICE, 
leaving children languishing in Federal custody to their 
detriment, and they are willing to spend $1,000,000,000 to do 
it.
    Studies have repeatedly shown that prolonged detention 
inflicts serious mental trauma, depression, anxiety, post-
traumatic stress disorder, developmental delays, and compounds 
trauma experience in the home countries, including trauma from 
gang violence or sexual violence.
    Now the administration is asking for an additional 
$220,000,000 for this program. There has been no accountability 
with the use of these funds. It cannot go on as it currently 
is. That really is unacceptable.
    What we have to do is to understand how this happened, why 
it happened. Who was responsible? What is happening now? What 
has been the impact on our children? What are its long-term 
consequences, including mental health and trauma? How do we 
stop this? How do we fix it, and what resources are necessary?
    I am happy and I think people on this subcommittee would be 
happy to provide resources. What we cannot do is condone the 
policies that put children at grave risk at considerable cost 
to taxpayers. We cannot throw good dollars after bad.
    And of course, the failures of this administration as they 
relate to the Unaccompanied Children Program are not because of 
an unprecedent surge of children. In fact, the number of 
unaccompanied children referred to ORR was higher in the Obama 
administration. 2016, 59,000 children. 2018, 50,000 children. 
The failures and the trauma we are seeing are a result of this 
administration's cruel policies.
    Let me quote Michelle Brane, one of our panelists this 
morning. ``It is a crisis at the border. It is a crisis of 
policy.'' And I add this in my own words that this is a 
manufactured crisis.
    As the Congress, we have an obligation to ensure the 
executive branch is fully and faithfully upholding the law of 
the land. Turning HHS into an immigration enforcement agency 
and inflicting harm on scared children is neither of those.
    What happened and what continues to happen is inexcusable. 
It is indefensible. I am committed to uncovering the truth, but 
what is more important, what are we going to do about it?
    I am grateful for the solutions and the recommendations 
that our panelists have offered. We look forward to working 
with you, and we look forward to your testimony.
    Let me now turn this over to my good friend from Oklahoma, 
the ranking member of the subcommittee, Mr. Cole, for any 
opening remarks that he cares to make.
    And I also want to welcome the ranking member of our full 
committee, Congresswoman Kay Granger of Texas. Thanks for being 
here this morning.
    Mr. Cole. Thank you very much, Madam Chair.
    And I want to first begin by thanking you for, one, holding 
the brief that we had with the Inspector General last week, 
which was very helpful--or 2 weeks ago, I suppose now, and for 
holding this hearing. I think it is an important subject, and I 
think you are to be commended for bringing it up.
    You will forgive me if I disagree a little on your timeline 
because I would start mine in 2014, not 2017. This isn't a new 
problem, and you mentioned the--and I agree with you, by the 
way, the inexcusable problems that we had in terms of sexual 
assaults at centers. The majority of those actually occurred 
under the last administration, not this one. And I will submit 
this for the record.
    Frankly, and it is sad to say, and this would be lack of 
supervision. Most of them obviously were by other minors that 
were there themselves, not by members of the staff or 
caregivers. That was true under President Obama. It is 
certainly true today under President Trump. So I think we have 
got a serious problem here that has been festering for a long 
time, not somehow magically arrived in the last 18 months.
    I want to thank, too, all of you that are here for the 
hearing. I read your testimony last night, and it is 
heartbreaking and compelling and interesting. And I think, you 
know, in your very different roles really showed a lot of the 
complexity of the problem that we have got in front of us, and 
it is going to take some real serious work to try and get this 
situation to one that we can all find acceptable.
    Today, we have an outside witness panel to discuss the 
oversight over the Unaccompanied Alien Children Program 
operated by the Administration for Children and Families, an 
agency under the Department of Health and Human Services. I 
want to start by saying again I take our congressional 
responsibilities of oversight seriously. Congress' primary 
function is to serve as the branch of Government responsible 
for writing and passing legislation, and understanding how the 
executive branch is implementing that legislation is critical 
to fulfilling our constitutional duties under Article I.
    And I want to add parenthetically, I certainly agree with 
you about the separation of families. That was something I 
actually condemned at the time and glad to see the 
administration, I think under public pressure, quite frankly, 
backed off on.
    When people think of this subcommittee, they often think of 
biomedical research, support for public schools, or job 
programs. Responsibility for the care of unaccompanied children 
is relatively new. This duty came to HHS as part of the 
Homeland Security Act of 2002. Federal law requires the 
Department of Homeland Security transfer to HHS any 
unauthorized minor not accompanied by a parent or legal 
guardian.
    The legal requirement means that when Customs and Border 
Protection or Immigration and Customs Enforcement apprehend a 
minor with an uncle, an aunt, a grandmother, grandfather, an 
older brother or sister, the law defines that minor as 
unaccompanied and requires the transfer of that child to HHS. 
HHS and the Office of Refugee Resettlement, which oversees the 
Unaccompanied Alien Children Program, does not separate 
children from parents.
    Let me repeat that. HHS does not separate children from 
their parents and has not done so in the past. HHS is only 
responsible for the care of children who are unaccompanied, and 
this is a statutory responsibility given to them by Congress.
    I think it is obvious to everyone here that there are 
significant disagreements between the President and the House 
majority on matters pertaining to immigration policy. I know my 
Democratic colleagues are concerned about the administration's 
actions in this area, and I share in many cases those concerns. 
But disagreements over the interpretation or implementation of 
immigration policy frankly falls squarely under the Departments 
of Justice or Homeland Security. These policy discussions are 
largely outside the scope of this subcommittee.
    In 2014, President Barack Obama requested a supplemental 
appropriation to address ``the urgent humanitarian situation on 
the Southwest border.'' He went on to request ``a sustained 
border security surge.'' This year, HHS made that request--the 
year HHS made that request, 2014, HHS cared for over 57,000 
unaccompanied children, an unprecedented number, because I 
dealt with it as chairman of this committee and trying to make 
sure that the funds were available.
    In 2018, last year, the Trump administration cared for 
nearly 50,000 children. His administration inherited a 
humanitarian crisis on the Southern border. Numerous reports by 
the Office of Inspector General have highlighted the challenges 
administering this program, and these reports have documented 
concerns under both President Obama and President Trump.
    I believe oversight is necessary to ensure the program 
continues to care for children in accordance with the law. Last 
year, as chairman, I accepted over half of all amendments 
offered by the minority to address oversight and reporting 
concerns regarding Unaccompanied Alien Children Program. I 
continue to work closely with the chair to ensure the final 
appropriation for fiscal year 2019 addressed those provisions 
from the House bill and report, and I appreciate the 
opportunity to evaluate this program through our oversight role 
as appropriators.
    Again, I would like to thank our witnesses for being here 
today, and I yield back the balance of my time, Madam Chairman.
    Ms. DeLauro. Thank you very much, Congressman Cole.
    And it is a pleasure to really--once again to welcome the 
ranking member of the full Appropriations Committee, 
Congresswoman Kay Granger of Texas.
    Ms. Granger. Thank you very much.
    I would like to thank Chairwoman DeLauro and Ranking Member 
Cole, who also serves as the vice ranking member for the full 
committee, for holding this hearing today. The treatment of 
children entering our country unaccompanied by an adult is one 
that concerns everyone in this room.
    I have been engaged on this issue since 2014 when our 
country experienced a really unprecedented surge in the number 
of unaccompanied children, mostly teenagers, coming across our 
Southern border. At the time, I was chair of the State and 
Foreign Operations Subcommittee, and the Speaker of the House 
asked me to lead a congressional task force to identify the 
root causes of the problem and recommend solutions.
    We took several trips to the Southern border, as well as to 
countries in Central America to talk to their leaders 
firsthand. Our recommendation at that time was that we should 
keep these children near the border, determine where they came 
from, and try to reconnect them with their families. We didn't 
recommend sending them all across the United States in the care 
of sponsors. We wanted them reunited with their families as 
soon as possible.
    Unfortunately, the violence and hopelessness driving 
parents to send their children on the dangerous journey to the 
United States has not disappeared since then, but it also did 
not begin with this administration. The number of border 
crossings by Central American youth continues to create 
tremendous challenges for both border enforcement officials and 
the Department of Health and Human Services, who have the 
responsibility for caring for most of the children after they 
enter the country.
    It is unfortunate that our Government has not always done 
right by these children. For example, we learned that officials 
in the previous administration placed children with sponsors in 
Central Ohio who were later discovered to be human traffickers 
using forced child labor. This is terrible. We must work 
together, all of us, to ensure that every child placed in the 
custody of the United States Government is treated humanely and 
with compassion.
    This hearing should be an opportunity for us to learn the 
facts, get the data, and help improve program operations in 
order to better protect our children. We have proven that we 
can work across the aisle on difficult situations and issues. I 
know we continue to rise above our partisan divisions, and when 
we do, we solve most of the difficult problems facing our 
country.
    I look forward to hearing from the witnesses today--all of 
you experience this firsthand--and working with members of the 
subcommittee on this very important issue.
    Thank you. I yield back.
    Ms. DeLauro. Thank you very, very much.
    Let me again thank our panelists, and let me just do some 
introductions. J.J. Mulligan is a clinical fellow at the 
Immigration Law Clinic at UC Davis School of Law; Fulbright 
Scholar at the University of Granada in Spain, focusing on 
unaccompanied minors crossing the Mediterranean; and is the 
author of No Human is Illegal: An Attorney on the Front Lines 
of the Immigration War.
    Jennifer Podkul, senior director of advocacy and policy for 
KIND, Kids in Need of Defense. She is a national expert on 
issues affecting immigrant children and has published numerous 
articles, handbooks, and reports on U.S. immigration law.
    Michelle Brane is director of the Migrant Rights and 
Justice Program at the Women's Refugee Commission. She is an 
expert on U.S. asylum protections and detention policies for 
migrants and in 2012 won the Daniel Levy Memorial Award for 
Outstanding Achievement in Immigration Law.
    Andrew Arthur is a resident fellow in law and policy at the 
Center for Immigration Studies. Before that, he served as an 
immigration judge at the York Immigration Court in York, 
Pennsylvania, and served as senior staff for multiple 
congressional committees.
    And Dr. Alta Stewart is president of the American 
Psychiatric Association. Dr. Stewart is an associate professor 
of psychiatry and director of the Center for Health and Justice 
involved at the University of Tennessee Health Science Center.
    Again, thank you all for being here, and we will start with 
our first witness, J.J. Mulligan. Your full written testimony 
will be included in the record. You are now recognized for 5 
minutes for your opening statement.
    Thank you.
    Mr. Mulligan. Chairwoman DeLauro and Ranking Member Cole 
and members of the committee, thank you for the opportunity to 
testify before the subcommittee today. I am the clinical fellow 
at UC Davis School of Law's Immigration Law Clinic, and I am 
honored to be here.
    As part of Flores counsel's legal team, we have been 
granted access to any and all facilities where children are 
detained. This is important because congressional and media 
tours of detention facilities rarely reveal the full story. As 
our co-counsel through National Center for Youth Law Leecia 
Welch put it, ``We see a very different picture. We see 
extremely traumatized children, some of whom sit across from us 
and can't stop crying over what they are experiencing.''
    This distinctive insight we obtain is the difference 
between believing a detention center is a ``summer camp'' and 
knowing that it is a house of horrors. Throughout the course of 
these visits to facilities, we have uncovered numerous 
violations of the Flores settlement agreement through our 
countless conversations with detained immigrant children.
    The children also described policies that prolong their 
detention. These misguided policies that have rapidly expanded 
the population of detained immigration children, which swelled 
to a record of 15,000 in late 2018, before a policy change only 
requiring the fingerprints of the sponsor and not everyone in 
the home resulted in more than 4,000 children being released 
from ORR custody within a span of 4 weeks, the largest decrease 
in the program's history.
    The change in policy also displayed a clear causal link to 
ORR policy. Once fingerprints for every household member were 
no longer required, the Tornillo influx facility was no longer 
needed and promptly closed.
    For the unaccompanied minors that we speak with, these are 
children that have suffered intense trauma and abuse either in 
their home countries, on the journey here, or both. This is a 
population that has much in common with the forced child 
soldiers of civil wars past across the globe, and the Federal 
Government is responding to their PTSD with steel cages, 
causing them to act out until they are detained under even 
harsher conditions, creating a continuum of trauma that these 
children are ill-equipped to endure.
    One child told us he was waiting to be reunited with his 
mother. ``My mom has done everything the Government has asked 
her to do. My case manager has told me that they are waiting on 
the fingerprints for my brother to clear because he lives with 
my mother. It has been a month since the fingerprinting was 
done.''
    A mother told us that her son's caseworker ``kept asking me 
for more and more documents. Among them, files from doctors to 
verify that my cancer would not hinder me from taking care of 
my son. These caused me great sorrow, and they did not seem 
necessary to have my son. I believe that a mother has the right 
to take care of her child even though she is incapacitated, 
although I am not. It occurred to me that they were looking for 
an excuse to deny me my son.''
    In addition to these examples, we have heard from sponsors 
who were told that children will not be released to their care 
unless they comply with the following requirements--that they 
move to a different neighborhood, move to a larger apartment or 
house, reduce the total number of children living in the house, 
or produce a photo establishing a prior relationship with the 
child, despite the fact that many families do not have access 
to this technology.
    There is also the memorandum of agreement, which Chairman 
DeLauro mentioned, between ICE, CBP, and ORR, which provides 
for the information collected by ORR on potential sponsors to 
be shared with ICE. This had a chilling effect on sponsors and 
has serious consequences.
    I spoke with one youth detained at Homestead whose father 
was picked up by ICE shortly after being fingerprinted by ORR 
and whose detention was being prolonged by his father's own ICE 
detention. I cannot stress enough the courage and selflessness 
that it takes for an undocumented immigrant to submit to 
fingerprinting under this administration.
    In response to its inability to release children to their 
family members, ORR has established unlicensed temporary 
``influx shelters,'' first in Tornillo, Texas, and now in 
Homestead, Florida. These facilities have held thousands of 
children.
    At Homestead, the facility director has told us that 
capacity there will be 2,350, even though some rooms that we 
visited already held over 200 children in the same room. Both 
Tornillo and Homestead are unlicensed facilities that do not 
meet the standards of care in the States where they are 
located, nor do they comply with the Flores settlement 
agreement. These include the failure to perform basic 
background checks on facility staff, at times leading to cases 
of sexual abuse, as we learned yesterday.
    The harm to children, first at Tornillo and now at 
Homestead, goes further and includes the denial of basic 
freedoms and the human contact vital to developing children. 
The treatment of detained immigrant youth at these facilities 
is not an issue of immigration law or policy, but of human 
dignity.
    Deterrence by mistreatment should no longer be the leading 
immigration policy of this administration. The children I 
interviewed at Homestead commented on their inability to have 
any freedom of movement. All youth, including 17-year-olds, 
have to get escorted to the bathroom. Youth move throughout the 
campus walking in single-file, military-style lines led by a 
youth care worker.
    A girl at Homestead told us, ``I also get huge headaches 
because I don't feel like I can cry here. I wish I could cry 
here, but I can't cry comfortably. I have to hold my tears 
because, if not, they send me to the clinician. I don't want to 
go to the clinician because they don't want to help my case. I 
also want to hug my girlfriends when they are crying, but staff 
won't let me.''
    Previous court rulings interpreting the Flores settlement 
have set the grace period for detaining children in unlicensed 
facilities at 20 days. According to ORR, the average length of 
detention at Homestead is 69 days, and as Chairman DeLauro 
mentioned, I spoke with multiple youth who have been at 
Homestead for over 7 months.
    Unlike someone in the criminal justice system who will 
usually know the length of their sentence and can ``do their 
time,'' immigrant children detained by ORR have been told they 
will be released in next week, and that was 3 months ago.
    The harmful practice of detaining children in huge 
unlicensed facilities could be ended if ORR would simply abide 
by the Flores agreement and release children to sponsors 
without unnecessary delay. The constant calls to revoke the 
Flores agreement by those within the Trump Administration in 
order to ``protect children'' are misplaced and disingenuous. 
We would not tell a soldier in battle that they are safer 
without armor.
    The Flores settlement agreement plays a critical role in 
protecting the safety and welfare of unaccompanied children in 
Federal immigration custody. While Flores counsel and other 
legal organizations will continue to investigate conditions of 
confinement and bring actions to enforce the letter and spirit 
of the Flores agreement, we urge Congress and it is vital that 
Congress play its role to ensure that the Government of the 
United States lives up to its legal and moral obligations to 
the children in its care.
    Thank you.
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    Ms. DeLauro. Thank you.
    The second witness is Jennifer Podkul. Ms. Podkul, you are 
now recognized for 5 minutes for your opening statement.
    Ms. Podkul. Thank you, Chairwoman DeLauro, Ranking Member 
Cole, and members of the subcommittee. I am grateful for your 
invitation today.
    I am here to represent Kids in Need of Defense, a national 
organization dedicated to promoting the rights of child 
migrants and ensuring that every child has access to high-
quality legal representation. KIND serves both children who are 
in the custody of ORR, as well as children who have been 
released and reunified with a sponsor while they are going 
through their immigration process.
    KIND attorneys work to help children, children who have 
undergone unimaginable horrors, to explain heartbreakingly 
difficult and complex stories. They work to gain the trust of 
children who have been hurt by adults in their country of 
origin or even at the hands of our own law enforcement agents. 
Many children have suffered in detention, and some have been 
separated from the only caregivers they have ever known.
    This has always been a difficult job, but it has only 
gotten harder over the last 2 years by changes affecting the 
way our Government is processing these children. Despite the 
detention and removal process already being incredibly complex 
and adversarial, the administration has implemented policies 
that make it harder for children to be able to tell their 
stories.
    Among these is a memorandum of agreement between ORR and 
DHS that enables the agencies to use information about 
potential sponsors for immigration enforcement. This policy has 
led to significant delays in the release of children from ORR 
and the administration's increased use of large-scale and 
costly influx facilities.
    Our Government should be working to find ways to make the 
process more fair, less expensive, and more efficient. Instead, 
it is stacking the deck against these children. This does not 
make our country more safe, it does not make our justice system 
work better, and it does not further any enforcement goals. 
These policies not only harm children, but they limit our 
Government's ability to efficiently and fairly decide which 
children are in need of humanitarian protection and which 
children may safely return home.
    KIND recently represented an 8-year-old. His reunification 
was needlessly delayed by ORR. The child began engaging in 
self-harm, and he asked to be returned to his country of origin 
out of desperation because of the prolonged detention despite 
his mother's insistence that it was not safe for him to go 
back.
    In another case, a KIND attorney watched a 16-year-old girl 
give up her strong asylum application because she was not able 
to access an attorney in Tornillo, and she had no reunification 
option.
    To stop tragic stories like this and to fulfill its 
obligation to serve the best interests of unaccompanied 
children in its care, ORR must immediately end the MOA with DHS 
to stop sharing status information about potential sponsors for 
the purposes of immigration enforcement. ORR should focus on 
finding the best sponsor for a child who will provide a safe 
home and support that child during the removal proceedings. 
Permanently ending the MOA will allow ORR to again prioritize 
child welfare over immigration enforcement.
    Secondly, ORR must only rely on emergency influx facilities 
to house unaccompanied children when it is faced with caring 
for an unexpected influx. ORR should use permanent, small, and 
State-licensed facilities to house children only as long as 
needed to approve an appropriate sponsor. Children must not be 
held any longer than necessary.
    Should an emergency present itself, ORR must have public 
standards for its emergency facilities to ensure the provision 
of legal, medical, and educational services within a reasonable 
timeframe. There should also be limits on how long ORR can use 
an emergency facility.
    Finally, ORR should prioritize children's access to high-
quality legal representation. Children are in ORR custody 
because of the immigration removal proceedings. Everything 
possible should be done to ensure that children are fairly--can 
fairly and efficiently tell their story. Having children 
represented during the removal proceedings not only helps the 
children access meaningful due process, but increases 
efficiency in a sorely overwhelmed system.
    Child protection must be a priority in the enforcement of 
our immigration laws. Congress assigned responsibility for the 
care and custody of unaccompanied children to the Office of 
Refugee Resettlement because of its expertise in child welfare. 
The basic tenets of child welfare must be reflected in the 
agency's policies, and the agency must always act in the best 
interests of the children.
    I am happy to answer any questions.
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    Ms. DeLauro. Thank you. Thank you very much. And giving 
back some time as well, thank you.
    Michelle Brane. Ms. Brane, you are recognized for 5 minutes 
for your opening statement.
    Ms. Brane. Good morning, and thank you for the opportunity 
to present to you today.
    The Women's Refugee Commission is a nonprofit organization 
that works to protect the rights of migrant women and children. 
As the director of the Migrant Rights and Justice Program, I 
have monitored dozens of immigration detention facilities and 
ORR children's facilities and interviewed Government officials, 
children, detainees, service providers, and asylum seekers 
about policies, practices, conditions of custody, and access to 
protection.
    Over the past 2 years, the administration has focused on 
deterring migrants, especially children, from seeking 
protection in the United States. Unfortunately, these policies 
endanger children.
    My colleagues here today have told you some tragic and 
heart-wrenching stories about children in custody. I can tell 
you those in answer to your questions, but now I am going to 
focus on two policies that jeopardize children's welfare and 
have obstructed the ability of the Office of Refugee 
Resettlement to comply with its responsibilities. The first is 
family separation, and the second the memorandum of 
understanding--of agreement that Jennifer referred to.
    Thousands of children migrate to the United States each 
year. Most of these children are fleeing horrific violence and 
abuse. In 2003, the Homeland Security Act transferred custody 
of unaccompanied children to the Office of Refugee Resettlement 
with the deliberate intention of separating the care and 
custody of children from enforcement activities in compliance 
with our child welfare laws and with the Flores settlement 
agreement.
    ORR was designed to care for and reunify children who 
arrived in the United States unaccompanied. Yet we now know 
that under the administration's family separation policy, 
thousands of children who were separated from their parents at 
the border were transferred to ORR custody.
    By now you have heard a lot about family separation and the 
brutal manner in which it has been implemented. There was no 
coordinated effort to track children who were separated or for 
how to reunite them afterwards. To this day, the Government is 
unable to give a total number of the families it separated.
    In addition to causing trauma, separations put multiple 
burdens on ORR and affects the safety of all the children in 
its care. These large numbers of separated children in ORR 
custody required a sudden and immediate increase in bed space. 
And despite the reality that this had been discussed for over a 
year by the administration, ORR was unprepared and opened--
scrambled to accommodate these children.
    The facilities they went to were inappropriate for 
children, unlicensed, and temporary in nature. Supposed to be 
temporary in nature.
    In 2009, I expressed concern in a review of ORR facilities 
that they were considering the use of facilities that housed 
over 100 children. Today, that seems quaint as we see that 
Homestead is housing--will be housing over 2,000 children, and 
the recently closed Tornillo held almost 4,000 when it closed.
    No facility of this size is appropriate for children. Yet 
Homestead is still not licensed, even though it has been open 
for over a year.
    At that point, it is no longer an influx or an emergency, 
especially since, as the chairwoman already commented, this was 
a manufactured crisis that they knew was going to lead to the 
need for additional bed space.
    The repercussions don't end there. The costs, both 
financially and in terms of manpower, of this policy were and 
continue to be exponential. Emergency facilities cost up to 
$750 a day per child. These are resources that could and should 
be invested in actual services and appropriate care for 
children, but they have been wasted because of a bad policy 
intended to harm children and families.
    In May 2018, ORR implemented a memorandum of understanding 
with DHS. As you have heard, the very intent--one of the very 
objectives of this policy was to identify, detain, and remove 
adults who come forward to sponsor children. The MOA represents 
a dramatic change in practice, replacing the best interests of 
children with immigration enforcement.
    The Women's Commission conducted a survey that found that, 
indeed, the MOA has succeeded in frightening parents from 
coming forward, resulting in longer length of stay and, for 
some children, permanent lengths of stay or, as Jennifer 
mentioned, withdrawing of their case out of desperation. The 
MOA and family separation, like other policies of this 
administration, are using children as bait and undermine family 
reunification, a fundamental principle of child welfare law, by 
turning safe placement screenings into a mechanism for 
immigration enforcement.
    This runs counter to Flores. It violates the Trafficking 
Victims Protection Act. It runs counter to child welfare 
principles and standards, and it is illegal. It is also against 
the Government's fiscal interests.
    Let me be clear. Seeking asylum is legal. Flores and TVPRA 
are not loopholes. They are policies thoughtfully and carefully 
considered by the court, child welfare professionals, and a 
bipartisan Congress, designed to ensure basic child welfare 
standards in Government custody and to protect children from 
the risks of trafficking.
    The MOA and family separation have jeopardized the quality 
of care and compliance with general child welfare standards and 
practices and, in doing so, has endangered children.
    Thank you again for the opportunity to speak to you today, 
and I can take questions later.
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    Ms. DeLauro. Thank you.
    Our fourth witness is Andrew Arthur, and Mr. Arthur, you 
are recognized for 5 minutes for your opening statement.
    Judge Arthur. Thank you.
    Chairman DeLauro, Ranking Member Cole, and members of the 
subcommittee, thank you for inviting me to appear today.
    The demographics of migrants apprehended at the Southwest 
border has changed significantly over recent years, and it is 
important to understand that in the context of this hearing. 
Before fiscal year 2011, 90 percent of all apprehended migrants 
at the border were single males, mostly male and mostly 
nationals of Mexico.
    In just the first 4 months of fiscal year 2019, on the 
other hand, just less than 60 percent of all apprehended 
migrants were UACs or aliens traveling in family units, mostly 
from the so-called Northern Triangle countries of Central 
America, or NTCA. That is El Salvador, Guatemala, and Honduras.
    And despite claims to the contrary, the numbers are 
increasing, with UACs up 40 percent in the first 4 months of 
fiscal year 2019 compared to a year before, according to 
Customs and Border Protection, and family units up 290 percent. 
This has created three resource issues for the U.S. Border 
Patrol, or USBP.
    First, Border Patrol processing centers were built to 
accommodate single adult males, not minors or families 
traveling with children. The recent influx has strained the 
physical plant available for processing as groups must be kept 
separated, especially UACs from unrelated adults. Border Patrol 
attempts to keep family units together, but space constraints 
can make that impossible.
    Second, processing times for family units and UACs from the 
NTCA are much longer than for Mexican nationals, who could be 
quickly returned across the border. The relationship between 
purported parents and children must be established, as must 
legal guardianship where an adult traveling with the minor is 
not that minor's parent.
    Attempts are made to identify family in the United States. 
In Yuma sector of the Border Patrol, where I traveled late last 
month, processing times per alien increased from 8 hours in 
2005 to, get this, 78 hours in 2018 as a result of these 
changing demographics.
    The changing demographics have also increased the cost of 
care for those migrants. Diapers, formula, food, blankets, and 
medical care are now staples. Some migrants come into custody 
sick and injured, some with highly infectious diseases--mumps, 
measles, resistant tuberculosis. Estimates range as high as 
$1,200,000,000 this year alone for Border Patrol to provide 
such humanitarian aid.
    Further, the journey from the NTCA to the Southwest border 
is a harrowing one. International smuggling networks from 
Central America are some of the worst criminal enterprises on 
the Earth. In 2018, the U.N. put the value of smuggling routes 
to North America from the Southern border in 2014 to 2015 at 
between $3,700,000,000 and $4,200,000,000 a year.
    According to Doctors without Borders, 68.3 percent of those 
migrants were subjected to violence, and almost one-third of 
women are sexually abused during that journey. Migrants are at 
the mercy of smugglers. This does not even account for the 
physical difficulties of transiting over 1,000 miles, often in 
hostile desert terrain in the heat without water.
    Current border policies are intended to deter travel by 
UACs and families with children because of those hazards. This 
continues an effort by the Obama administration to dissuade 
UACs and adults with children from undertaking this dangerous 
trip. Loopholes in our laws encourage these migrants, however. 
UACs must be turned over to HHS within 48 hours, usually for 
release to family in the United States. That is what this 
hearing is about.
    This gives an incentive to parents to have their children 
smuggled into this country by criminals, with the Federal 
Government a co-conspirator in the smuggling scheme when it 
delivers those children.
    Further, even accompanied children must be released within 
20 days, Mr. Mulligan will tell you. Migrants know this, and 
they also know that the U.S. attempts to keep families 
together, giving those migrants an incentive to bring their 
children with them to hasten their own release.
    HHS, which places and finds sponsors for UACs in the United 
States, faces a daunting task. In fiscal year 2018, it kept 
UACs in 1 of 100 shelters for an average of 60 days. We 
discussed that earlier. Most of those UACs were subsequently 
released to sponsors in the United States. Often their own 
parents, which is confusing because that appears to be contrary 
to Section 462 of the Homeland Security Act, but we will 
discuss that later, I hope.
    HHS has found suitable sponsors after performing background 
checks for more than a quarter of a million UACs, as of 
December 2018. Those UACs are supposed to appear in court, but 
many don't.
    In fiscal year 2018, half of all final orders issued for 
UACs in immigration court, where I serve, were in absentia, 
meaning the UAC did not appear, twice the in absentia rate for 
removal cases as a whole. While the total number of in 
absentias is low compared to the total population of UACs, 
these numbers are still significant.
    Thank you for your time, and I look forward to your 
questions.
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    Ms. DeLauro. Thank you very, very much, Mr. Arthur.
    And let me just have our fifth witness, Dr. Altha Stewart. 
Dr. Stewart, you are recognized for 5 minutes for your opening 
statement.
    Dr. Stewart. Thank you.
    Chairwoman DeLauro, Ranking Member Cole, and distinguished 
members of the subcommittee, thank you for inviting me to 
participate in today's hearing.
    My name is Dr. Altha Stewart, and my testimony today is on 
behalf of the American Psychiatric Association, for which I am 
the current president. The APA was among the first 
organizations to speak out when it became clear that the zero-
tolerance policy would result in widespread separation of 
children and families. As the physician experts in mental 
health, we will continue to oppose such family separation 
policies.
    From my perspective as a psychiatrist, the APA's position 
is grounded in an understanding of the brain science that 
frames the toxic stress caused by these separations. All 
children separated from family caregivers will experience 
stress. And according to the work of the Harvard University 
Center for the Developing Child, the biology that the adversity 
takes in any individual child is based on three very specific 
risk factors.
    First, their age. Younger children are more vulnerable and 
less able to adapt usually and primarily because of their 
underdeveloped brain circuitry. Second, the impact of any 
previous adversity. The piling on or cumulative effect of these 
types of experiences and traumas shifts the odds away from 
there being any successful and positive outcome related to 
their normal development. And finally, the duration of the 
separation. It is as if there is a ticking clock, and these 
things increase over time to the point where the child can no 
longer adapt, adjust, and be able to tolerate the stress.
    Children depend on their parents or other trusted adults 
for their comfort, safety, and support. Any forced separation 
is highly stressful for children and can cause the lifelong 
trauma, as well as an increased risk of mental illness, such as 
depression, anxiety, substance use, and post-traumatic stress 
disorder.
    As a physician who has dedicated her career to promoting 
the importance of trauma-informed care, my goal here today is 
to give you a brief overview of the inherent trauma associated 
with any forced separation and the potential for lasting 
negative outcomes. However, for some, the incidence of these 
traumatic experiences has an even more significant impact on 
the trajectory of their future life experiences. For children, 
for example, this impact can be especially profound and usually 
the result of events over which the child had no control.
    It is our understanding, as physicians and scientists, that 
childhood experiences, either good or bad, can determine one's 
future health status as it relates to a longstanding body of 
knowledge called Adverse Childhood Experiences. These common 
examples include physical, sexual, emotional abuse; neglect; 
and household exposure to a variety of things in parents and 
caregivers, including incarceration.
    We also know that children are more susceptible because 
their brains are still developing. In these situations, 
although stress may be a common element for all of us in life, 
when children are exposed to such chronic stress and trauma, 
their underdeveloped brains remain in a very elevated state, 
and ultimately, this consistent exposure to this heightened 
stress and trauma changes their emotional, behavioral, and 
cognitive functioning.
    We promote for stress trauma-informed care. It shifts the 
dialogue from ``What is wrong with you?'' to ``What has 
happened to you?'' and we do this by first realizing that there 
is, in fact, something called trauma and understanding how we 
get from that trauma to a path for recovery. We recognize what 
the signs and symptoms of trauma are. We respond using the full 
knowledge that we have of trauma-informed care, this evidence-
based practice, so that we can integrate this into our 
policies, procedures, and practices. And we, most importantly, 
work to avoid retraumatizing these children.
    When we fail to incorporate these concepts into the care 
that we provide for children who are forcibly separated, we are 
using an outdated approach to addressing the symptoms instead 
of identifying and addressing the root cause. It is also 
shortsighted to not embrace the notion that these childhood 
events are impactful in relation to one's future life 
experiences.
    The characterization--and I want to take the opportunity 
here to note that these are facts that are relevant beyond the 
specific focus for today's hearing. We need to all ensure that 
healthcare addressing increasing rates of substance abuse, 
heightened mental health needs, and criminal justice reform all 
overlap in the work of this Congress, the administration, an 
average American, and anyone who seeks to build a better life 
in this nation.
    I want to thank you for the opportunity to share these 
things with you today, and I look forward to answering your 
questions later.
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    Ms. DeLauro. Thank you all very, very much, and we are 
really all grateful for your very thoughtful and powerful 
testimony. We really appreciate the effort in all of your being 
here.
    As in the past, what we will do now is proceed to 5-minute 
rounds, alternating back and forth by seniority as Members were 
seated at the beginning of the hearing.
    I would just say, and I have to say this to myself over and 
over again, we want to be respectful of witnesses, try to give 
you enough time to respond to questions.
    And I am told I have to do this housekeeping thing here. To 
my colleagues, please be sure to turn off your microphone after 
your remarks. So there we go.
    Let me just open it up with questions. At the beginning of 
the hearing, I laid out the timeline of actions taken by the 
administration to roll back legal protections for children. One 
of the most egregious actions is the memorandum of agreement 
between ORR and the Department of Homeland Security. You have 
demonstrated that the MOA has resulted in children spending 
additional months in Federal custody, and yet, as HHS finally 
acknowledged in December, the MOA has not improved the safety 
of unaccompanied children.
    For me, it is a crystal-clear example of the 
administration's effort to keep kids in Federal custody instead 
of following the law, placing them in the least restrictive 
setting possible.
    They may have scaled back fingerprint policy, but in my 
view, until they rescind the entirety of the MOA and the 
requirement that HHS share any data with DHS, HHS is still 
acting as an entity of law enforcement. I am going to read the 
question.
    Ms. Brane, can you expand on your remarks about the MOA 
between ORR and DHS? How did ORR move away from its core 
mission to care for children and place them with sponsors, 
instead becoming an extension of ICE? I view this as child 
abuse but leave you to speak about that.
    Ms. Podkul, can you talk about the effects on children, 
specifically effects of being held in Federal custody for 
prolonged periods that you have encountered in your experience 
working with kids?
    Mr. Mulligan, if we can get to you, you have recently 
worked with kids at Homestead. I would like to hear about what 
you found in your conversations with children being held there. 
Does the Flores settlement apply to children at Homestead?
    Ms. Brane.
    Ms. Brane. So really quickly, to give my colleagues an 
opportunity to respond, the memorandum of agreement requires 
continuous sharing of information that children provide in a 
private setting without any due process on the part of the 
child or the parent who may in the end be--bear the 
consequences of that information sharing.
    We have seen in a survey that we conducted that it, indeed, 
did prevent parents from coming forward, and it also led to 
some parents withdrawing an application for sponsorship. This 
drives children to either stay, always stay in the ORR custody 
for longer, sometimes indefinitely throughout their proceedings 
because nobody else can come forward. Or leads to further, more 
distant relatives or individuals coming forward to sponsor the 
child, which also increases risks to that child.
    And I will say also that while we have seen that effect, 
the effect of longer detention or custody, we have not seen a 
decrease in arrivals, right? It has not served as a deterrent 
because what we have found over and over again is that for 
people who are fleeing violence, deterrence and discouragement 
in the form of punishment does not work.
    Ms. DeLauro. Ms. Podkul.
    Ms. Podkul. Thank you, Chairwoman.
    I think, you know, there are two things. I think it affects 
the child's mental and physical health, which my colleague 
described so well. But also it really affects the child's 
ability to move forward with their legal case, right?
    In some of these facilities, for example, in Tornillo, 
children were not given attorneys. They didn't have access to 
attorneys to help represent them in their case. So they 
couldn't move forward in their case.
    Prolonged detention has encouraged many children to give up 
valid claims for protection because of detention fatigue. They 
can't take it being in detention anymore. And then for some 
forms of relief, you need to be in a permanent setting, and so 
they are not able to access, for example, a form of protection 
called special immigrant juvenile status for children who have 
been abused, abandoned, or neglected. So it has significant 
consequences for their physical health as well as their legal 
case.
    Ms. DeLauro. J.J.
    Mr. Mulligan. Yes. So you had two questions. One was what 
goes on at Homestead? I would like to say that there are some 
very difficult things that happen there. There are two 
campuses, the north and south campus. Kids are separated by age 
from 17-year-olds on the north side and 13 to 16 on the south 
side.
    Siblings are separated and can only see each other once a 
week for an hour and a half. The schools are in tents, where 20 
or 30 classrooms all together in one tent. And kids complain 
about they can't even study because of the noise that goes on. 
There are so many other things I could share, but I am running 
out of time on this.
    As far as the Flores settlement applying in the Homestead 
facility, it unequivocally does. The Government has said that 
because it is on Federal land, it does not apply, but it is not 
exempt simply because of that.
    Ms. DeLauro. Okay. So it does apply here?
    Mr. Mulligan. Absolutely.
    Ms. DeLauro. If you are done, I am just going to yield a 
second, give a little bit of time to my colleague, Ms. Roybal-
Allard, who worked on the Department of Homeland Security bill 
that recently passed.
    Ms. Roybal-Allard. Okay. I would just like to point out 
that in the 2019 Homeland Security bill, in a bipartisan way, 
we were able to put in language that prohibits ICE from using 
information provided by the Office of Refugee Resettlement 
about sponsors or potential sponsors of unaccompanied children 
to arrest, detain, or remove those individuals unless that 
information reveals the individual has a dangerous criminal 
background.
    So I just wanted you to be aware that we were able to get 
that language into our bill and hope it--now it is going to be 
about oversight.
    Ms. DeLauro. We also referenced in the Labor, HHS bill and 
the chair at the time, Mr. Cole, accepted the amendment, the 
committee accepted the amendments. One of them was not to 
separate siblings so that they could not be in the same 
facility. So if that continues to happen, that is something 
that we ought to follow up on.
    And with that, the ranking member of the committee, 
Congressman Cole.
    Mr. Cole. Thank you very much, Madam Chair.
    If I may, Judge Arthur, in your written testimony, you 
highlight some of the criminal elements and organizations that 
participate in trafficking and smuggling across our Southern 
border. A series of questions, if you would. Just roughly what 
is the size of the industry? What role do the cartels play? How 
does immigration policy interact with the criminal element? And 
do our policies discourage or incentivize the transportation of 
unaccompanied minors?
    Judge Arthur. Well, let me start with the cost. Secretary 
Kirstjen Nielsen last year, I believe in May, talked about 
$500,000,000, but quite frankly, I think that is a gross 
underestimation. It is based upon $5,000 per alien from Central 
America and 100,000 aliens, which just isn't the numbers.
    As I mentioned, the U.N. had said it is a $3,700,000,000 to 
$4,200,000,000 a year industry for people coming from the 
South. That is a huge amount of money. A lot of this is done by 
small smuggling groups, and in fact, that puts individual 
migrants in danger because they don't want to cross onto other 
territory where migrants could pass through more easily.
    So when I was in Yuma, they were talking about kids being 
passed under the river, under accordion wire because that was 
the area of the border they controlled. And these kids would 
come up lacerated and gasping for breath. And there is no cost 
to the smugglers because the laws that we have right now, they 
don't need to enter the United States at all.
    Thanks to Flores, thanks to TVPRA, thanks to the credible 
fear standard, they don't need to actually bring these folks 
into the United States. They could just let them off at the 
border. They don't run the risk of being prosecuted in the 
United States, and that is what we have seen happen in Yuma.
    With respect to the criminal element, are some of these 
groups tied to the cartels? Probably. Maybe. But the fact is 
that when they cross cartel territory, they have to pay.
    In fiscal year 2019, Rio Grande sector saw 8,685 UACs. I 
was down there a couple of years ago, and I was followed around 
by Mexican navy in jeeps. The police are too corrupt to 
actually be allowed to be around anymore because there are two 
groups of the Gulf Cartel, Los Metros and Los Ciclones, who are 
fighting for territory down there.
    You don't cross their territory without paying them. The 
smugglers have to pay money. That money goes into the pockets 
of the people who grow the heroin, who make the methamphetamine 
that flows into the United States. They make the fentanyl that 
flows into the United States.
    The smuggling industry cannot be separated from those 
cartels. Fiscal year 2017, most dangerous year in Mexican 
history because of cartel violence. That is where the money 
comes from.
    And the worst part about all this, and this was something I 
didn't know, and I only found out when I went to Yuma, that the 
payment to these criminals doesn't end once they get to our 
side of the border. I was told about a system of debt bondage 
in which these individuals actually have to work for another 2 
years and send money to their smugglers in the United States.
    This is happening in this country because of the smuggling, 
because of the laws. Yes, the laws encourage it.
    Quite frankly, Flores, you are going to get released after 
20 days. You can talk to any Border Patrol agent, and they are 
going to tell you people are bringing their kids because they 
know they are going to get out.
    Because of TVPRA and HSA, Homeland Security Act, if you are 
a parent in the United States and you want your kid, why not 
pay a smuggler? Because you know that child is going to be 
delivered to you in the United States. I mean, I am a father. I 
want to be united with my child. Dr. Stewart talked exactly 
about that. So, quite frankly, why wouldn't I pay a smuggler to 
bring my kid to the United States, and there is no cost to the 
smugglers, as I mentioned.
    Mr. Cole. I may--one additional question. Obviously, as you 
point out in your testimony, we treat Canadians and Mexican 
nationals differently than we do others. Can you tell me why we 
do that, and what the impact of that is?
    Judge Arthur. I wasn't around when the TVPRA was passed, 
but with respect to Mexicans, we can quickly return them back 
across the border after a summary screening. The question 
becomes why we don't use that summary screening for all 
children that come to the United States? Because again there 
are three bases for getting immigration relief in the United 
States. You got a job, you got a relative, or you have a 
humanitarian claim.
    We can easily screen for those things. Take them out of the 
removal proceedings, not have to worry about any of this time, 
and actually have an administrative officer do this quickly and 
easily. But we don't. We insist that they go through removal 
proceedings. I was a judge. And again, thanks to groups like 
KIND, we get advocates for those kids, but there is no reason 
that it can't be done administratively, consistent with due 
process.
    Mr. Cole. Thank you very much.
    I am out of time so I will yield back, Madam Chair.
    Ms. DeLauro. I would now like to yield time to the ranking 
member of the Appropriations Committee, Congresswoman Granger.
    Ms. Granger. Thank you all for being here, although your 
testimony was heartbreaking.
    You talked about, Mr. Arthur, about the changes in our laws 
and our rules and how that encourages. Can you go back and talk 
a little bit about the other thing, the changes--the Northern 
Triangle. We know those three countries. That is where by far 
the majority come from.
    So the changes in those countries, is that encouraging or 
discouraging? Do you see any change in the most recent years 
about why they are coming to the United States?
    Judge Arthur. You actually make a lot of good points. Let 
me just--you make a lot of good points. Let me just refer to a 
couple of them.
    One of my colleagues actually wrote about a study that was 
done in Guatemala. This was back in 2017. It is captioned 91.1 
percent of Guatemalans migrate to the U.S. for economic 
reasons. Fewer than 1 percent leave because of violence or 
gangs.
    Violence and criminality really hasn't changed terribly in 
any of these countries, and yet we see an influx of people from 
these countries coming to the United States. So in reality, you 
know, we can't really attribute it to that.
    We talk about push factors and pull factors when we talk 
about immigration. Pull factors are things like the laws that I 
discussed with Ranking Member Cole. Push factors are factors in 
the country like crime or, you know, a desire for better 
economic conditions. By the way, the study was actually done by 
the International Organization for Migration, not exactly a 
fairly well-known and nonpartisan organization.
    So with respects to the push factors, you know, are they 
there? Case-by-case basis, I was a judge, and I would take the 
case that I get before me. But we also get a lot of people 
coming from Honduras, and we saw these caravans coming from San 
Pedro Sula, which is a town I think in the state of Atlantida, 
but my knowledge of Honduran states isn't very good.
    Atlantida is the 26th most dangerous city on the face of 
the Earth, according to a Mexican NGO a couple of years ago. I 
live in Baltimore, Maryland. Dr. Harris, I think, represents 
part of Baltimore, Maryland. It is the 21st most dangerous city 
on the face of the Earth, and St. Louis, Missouri, is the 14th 
most dangerous city on the face of the Earth.
    If a Baltimorean were to go to Canada and make an asylum 
claim based upon harm from the crime--in fact, we had, what, 12 
people shot, 5 killed the other day in the City of Baltimore, 
and this is commonplace. But if they were to go to Canada and 
make that claim, they wouldn't be able to.
    The laws in Mexico as related to asylum are actually more 
lenient than they are in the United States. But we don't see 
this population of individuals actually applying in Mexico. The 
violence, that crime, that insecurity that they have would 
probably make them eligible under Mexican law for asylum, but 
they are not--most are not stopping there to apply for asylum.
    There are five factors for asylum relief in the United 
States--race, religion, nationality, membership in a particular 
social group, and political opinion. Very strict standards. And 
again, I have argued thousands of asylum cases. I have heard 
thousands of asylum cases. And--at least 1,000 asylum cases. 
And you know, again, these are pretty strict rules, and yet 
individuals come to the United States. They make these claims 
based upon crime, based upon violence, and it doesn't really 
help.
    Based upon economics, they are not going to be eligible at 
the end of the day. But if you stay in custody, your case is 
going to take about 40 days. If you are released from custody, 
according to the Associated Press, your case is going to take 8 
years. Two years is what you hear about when the case gets 
scheduled, but the fact is we get numerous continuances. GAO 
wrote about that last year. And you know, cases get continued.
    In fact, I can't quite figure out, maybe one of my 
colleagues could explain this to me. UAC cases are supposed to 
be expedited, and yet the number of UAC cases that are actually 
decided is astoundingly low compared to the population. I don't 
know why that is.
    So, again, with respect to insecurity in these countries, 
it really hasn't changed a whole lot. But we have seen the 
numbers increase. We saw them drop in 2017 when Donald Trump 
was--just after his inauguration. In fact, I think 25,000 of 
the 41,000 we saw in 2017 occurred up to January, UACs. And you 
know, thereafter, it dropped off.
    And then, when the smugglers realized that there was really 
nothing the Trump administration could do to talk about the 
laws we discussed--Flores, TVPRA, credible fear--the numbers 
started to bump back up again, and now people know that, you 
know, these laws aren't going to apply. We are on track right 
now for about 60,000 UACs coming into the United States this 
year, which is actually going to top our number in fiscal year 
2016, which was the previous high, as the chairwoman noted 
previously.
    So, anyway, that is sort of a round-about way of answering 
your question.
    Ms. Granger. Thank you.
    Ms. DeLauro. Thank you very much. Thank you.
    Congresswoman Roybal-Allard. You are recognized.
    Ms. Roybal-Allard. Well, I am going to deviate a little bit 
from the questions that I had because all the reports that we 
have gotten, the travel advisories and others, is that violence 
has, in fact, increased in the Northern Triangle. And I just 
want to give an example about why some people are coming here, 
and it has nothing to do with loopholes or anything else in our 
immigration laws.
    In visiting one of the detention centers, I visited with a 
gentleman whose daughter was separated from him, had no idea 
where she was. And he had been in detention for some time. And 
we asked him, is knowing what you know now, that you would be 
held in detention and that your daughter would be taken away 
from you and you would not even know where she was at, would 
you still come to the United States?
    And his response was, ``Congresswoman, you don't 
understand. My daughter was threatened with rape and murder if 
she did not become the girlfriend of this gang member.'' He 
said, ``Yes, I would come again because at least I know she is 
alive.''
    So we can't put all the different reasons that people come 
to this country into one basket.
    So, with that, I was asked by the American Psychological 
Association to submit their letter for the record, and it talks 
about the impact of detention on children and need to keep them 
together.
    Ms. DeLauro. Without objection.
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    Ms. Roybal-Allard. Ms. Brane, first of all, thank you for 
your efforts to reunite children who are suffering from these 
reprehensible policies and practices of this administration. In 
June of 2018, the President issued an executive order that 
shifted its immigration policies from family separation to 
family detention.
    Family detention facilities, as you know, lack the support 
and care that children require in crucial developmental years. 
And as chair of the Homeland Security Subcommittee on 
Appropriations, I included funding to expand the Family Case 
Management Program as an alternative to family detention.
    Although this is outside the jurisdiction of this 
committee, can you speak to the benefits of the Family Case 
Management Program and why detention is never an appropriate 
option for a child?
    Ms. Brane. Thank you.
    Yes, I have done extensive research and monitoring for 
family detention centers and thought about this for a long 
time, and I can tell you that we have struggled in finding 
humane ways to detain families in an effort to keep them 
together and have not been able to find them. Inevitably, the 
detention of children is harmful to their development and their 
physical and mental health.
    I could go on for a very long time about the problems of 
family detention. They parallel what you heard today about 
detention and custody of children generally, but what is really 
frustrating is that there are options. There are alternatives 
that work.
    The Family Case Management Program that you mentioned was 
implemented under the Obama administration and was very 
successful by all accounts in ensuring appearance to both court 
and ICE appointments, but also for removal. So in the period 
that this program was operational, not very many cases went to 
the end of their case because of these delays that we all hear 
about. But in several cases, families, after meeting with 
attorneys and representatives, decided that they were not going 
to win their case and actually left voluntarily.
    Ninety-nine-point-eight percent of the people in that 
program complied with all of the requirements put on them, and 
this was a finding consistent with the Office of the Inspector 
General, ICE's own report on the program, and the contractor's 
report on the program. So it is a very successful program and 
much more affordable than detention.
    Ms. Roybal-Allard. And yet it was ended. Why was it ended?
    Ms. Brane. The Trump administration ended that program in 
the summer of 2018. They terminated the contract early. They 
gave no explanation. But it is very much in synch with their 
then separation under the claim that they had no option if they 
wanted to ensure appearance.
    Ms. DeLauro. Mr. Moolenaar.
    Mr. Moolenaar. Thank you, Madam Chair.
    And I appreciate the witnesses' presentation this morning, 
and you know, it is clear to me that from the testimony we have 
heard we have got a very untenable situation where men, women, 
and children are making a dangerous journey to the United 
States, just from start to finish.
    And you know, there is a number of circumstances, and I 
think you have identified a lot of those, and some are escaping 
dangerous situations in their countries. Some are hoping to 
join family members here in this country, but all are coming 
because in this country, we have freedom. We have got the rule 
of law, and it has made our country a desired location.
    And you know, right now, our Nation's success and the 
prospect of being here has also attracted people who would do 
harm here, have created a whole market for people who are doing 
harm to the victims who are coming here. And you know, the 
cartel violence, and I am horrified to hear these stories of 
families affected by that, that violence can also fall on this 
side of the border.
    And the drugs that are coming across, the heroin, meth, 
fentanyl, I mean record numbers, and I am hearing more and more 
about that in my own district in Michigan, in the Fourth 
Congressional District. Over 100 people die across the country 
every day from opioid overdoses, and that is coming through the 
ports of entry, through the miles of border between those 
ports.
    And for the women and children, it is very clear--who make 
that journey--it is a perilous trip. It involves drug 
smugglers, human traffickers, and those who are harming women. 
You know, the 30 percent number in the journey is incredible. 
You know, I am not an expert in our legal process of coming to 
this country, but my understanding is, you know, we would want 
people to come to the ports of entry to come to the country 
legally, especially when it comes to asylum claims.
    You know, I think in this room, we could agree that it is 
important to have a secure border. At the same time, parents 
who break the law and enter the country illegally, I think it 
makes sense that they would remain with their children while 
the judicial system works.
    And we have heard a lot about that today, although I do 
recognize that it is difficult to with certainty identify that 
they are, indeed, safe even in that situation. You know, my 
hope is that we can use our resources to make the border a 
safer place for people coming here, protect the American people 
from drugs and violence, and use best available technology.
    You know, I have been talking to border agents in my 
office. You know, they need the cameras and sensors, more 
border agents, and they are taxed in terms of their resources 
at the border. And I do believe that we need a physical 
barrier. I don't see how anyone could say that that doesn't 
make sense.
    But it is really unfortunate that these larger solutions 
aren't even being discussed. It is like each people are making 
their point on some issue, and unfortunately, the issue doesn't 
get solved on a comprehensive way. And so my hope is that we 
could move forward on this, and this committee could be part of 
that.
    My grandfather came to this country as an immigrant, was a 
laborer, farm laborer across the country, and then saved up 
money to buy a farm. And that is what I hope, you know, other 
people who would want to come. But he came legally, and I think 
we need to improve our system to encourage legal immigration 
because this truly is a great country, and we want to make it a 
welcoming country for people.
    I am very concerned, though, that we are--you know, we have 
critiqued different policies. One of the policies I think is 
disastrous is a policy that creates false hope for people, that 
tells people if you can just get to the border, you are going 
to be here. And it is creating these caravans and people who 
are harmed along the way and even at our border.
    And somehow we need to send a message, whether it is, you 
know, working with Northern Triangle countries to improve the 
situation there or somehow work with Mexico, but I just think 
this is an untenable situation. And I have learned a lot today, 
and so I appreciate your testimony. I don't have a specific 
question, but I very much appreciate your testimony today.
    Thank you, Madam Chair.
    Ms. DeLauro. Thank you very much, Mr. Moolenaar.
    Mr. Pocan.
    Mr. Pocan. Thank you very much, Madam Chair, and thank you 
to all the witnesses for being here.
    I do have to admit I am disappointed that ORR is not here. 
I understand they were invited, and they said they couldn't 
prepare it in time. I am looking forward to--I would have liked 
them to have heard from the witnesses here. I think it would 
have been really powerful for them to have heard from that.
    Mr. Mulligan, one of the things you said that I really 
appreciated was, as you mentioned, many of us have tried to go 
down to the border, and you said a trip to the border isn't 
going to give us the full knowledge we need. And I totally 
acknowledge that.
    I think we visited four facilities when we were down there. 
One of them was the Super Walmart detention center that, you 
know, 1,500 kids. They get out 2 hours a day out in the 
sunlight. The sleeping area they had was 6-by-10 that is 
allocated for them. A supermax prison cell is 8-by-12.
    You know, when you are--if you lose your parents in a mall, 
it is traumatic. If you are there for days or weeks or months, 
you can fully imagine the type of trauma that is created in a 
facility like that.
    We talked to the people. They had just hired 860, I think, 
new staff for another facility, but they couldn't hire 90 
mental health staff they needed that were bilingual for the 
current facility, and that was part of the experience.
    But you know, clearly seeing that, it is not a situation 
that is going to provide any kind of decent environment for the 
children who are there. And again, we are doing it to ourselves 
by doing that.
    And I have to admit, I thought it was a rather strange and 
false comparison to say the conditions in Baltimore or St. 
Louis are worse than these countries. Quite honestly, Mr. 
Arthur, I thought that was s disservice to your testimony. I 
enjoyed much of your testimony, but that was so bizarre and so 
not based in reality.
    I have been to El Salvador and been to these neighborhoods. 
You know, to try to compare it, you know, I don't think did you 
a great service.
    I think my question specifically would be for folks to 
think about if ORR was here, since you are the professionals 
who deal with this the most, what would be the question you 
would have for them? Whether it be a question about policy, a 
specific case you want to highlight, whatever that specific 
question is, when they get here, I will be glad to ask your 
questions because you are the ones dealing with this every 
single day.
    And I would just be curious what questions you have. 
Although just while you are thinking about it, I will add, you 
know, one of the problems I have with the MOA and why I am glad 
that we got the language that we got in there, I have been 
waiting 138 days on a Freedom of Information Act request with 
ICE, and they won't even tell me about 79 people that were 
arrested in my district, what they were arrested for.
    They released 4 of the names of the 83. They were people 
that should be deported. But I know of people in my district 
that have done nothing that supposedly is the criminal element 
they are going after that were apprehended on that. So I could 
certainly understand the situation why that would be a 
deterrent for families to want to even go in, knowing how ICE 
is operating under this President.
    But let us start with you, Mr. Mulligan, what is a question 
that you would like to ask ORR that I can ask for you?
    Mr. Mulligan. Well, I appreciate you bringing it back to 
ORR because I think we sort of lost track of what we are 
talking about here. This is the Committee on the Health and 
Human Services. It has nothing to do with building a wall, with 
drug smugglers. There is nothing about that that HHS has any 
jurisdiction over.
    And so while we are throwing out these red flags about 
those issues, we are losing sight of the fact that there is 
over 10,000, 12,000 children detained in this country right 
now, many of them in facilities. I mean, the Homestead facility 
is an old Job Corps building that has just been refurbished as 
a warehouse for kids. Like I said in my testimony, this is 
about human dignity of the children.
    Mr. Pocan. So I do appreciate that, and thank you for 
bringing us back to that.
    Mr. Mulligan. Yes, right.
    Mr. Pocan. But I have got about 20 seconds a person, if I 
can?
    Mr. Mulligan. All right. So the question I would ask for 
ORR is why can you not reunite someone with a sponsor, and why 
are we holding these children in these conditions?
    Mr. Pocan. Okay. Next, Ms. Podkul.
    Ms. Podkul. Thank you.
    I would ask them about prioritizing the resources that you 
all have given them. You know, they are spending a lot of money 
on these influx facilities to hold children for very long 
periods of time, and how can they be better prioritizing how 
they are spending their resources. You know, reducing detention 
times, using cheaper facilities, and increasing more services 
and post release services for the children.
    Mr. Pocan. Great. Thank you.
    Ms. Brane.
    Ms. Brane. Similarly to that regarding prioritization of 
resources, I would ask them about efforts to license and get 
into compliance the facilities that are not and why it is 
taking so long. Why an emergency influx facility is open for 
over a year, for example. And what is being done about post 
release services and legal services for children that we know 
are really critical in both ensuring their appearance for court 
procedures later and their general well-being?
    Mr. Pocan. Okay, thank you. Mr. Arthur, you got enough time 
before. So let me go over to Ms. Stewart since I have 3 
seconds.
    Dr. Stewart. Well, as the person on the panel probably with 
the least understanding of what their official role is in this 
process, I cannot give you a specific question, but what I can 
ask you to think about asking is related to the obvious trauma 
that children experience in these settings. How trauma-informed 
is everything that they plan in terms of services and supports, 
on the reunification aspects, on the what is happening while 
they are here with us aspects, what kind of staffing, training 
for that staffing, other resources? What kind of clinical care 
is available for these children as they are going through 
whatever their process is?
    Mr. Pocan. Thank you all very much. Appreciate it.
    Ms. DeLauro. Mr. Harris.
    Mr. Harris. Thank you very much, and thank you, Madam 
Chair, for calling this hearing.
    Let me just start with just a question about the Women's 
Refugee Commission. Are you aware that it opposes America's 
efforts to cut funding to Palestinian agencies that support the 
rewarding of Palestinian terrorists that killed Jewish children 
with lifelong pensions, and their families get paid for that? 
Are you aware that your commission does that?
    Ms. Brane. That is not part of the area that I am 
responsible for. So I am not going to get involved in that----
    Mr. Harris. Okay. So do you disagree with the commission on 
that, or do you think that the United States should be funding 
Palestinian terrorists who kill children just because they are 
Jewish?
    Ms. Brane. It is not my area of responsibility and not 
relevant----
    Mr. Harris. Okay. Again, I just find it interesting that 
you come and testify on children's--you know, the benefit of 
children, and here you are, you know, with an agency that 
actually opposes U.S. efforts to stop Palestinians from paying 
their terrorists who kill children. I just--I just don't get 
it.
    Anyway, Judge Arthur, and I do want you to comment on 
Section 462 because I know you said you might bring it up 
later. But the unaccompanied children is what bothers me 
because unaccompanied children by definition are not separated 
by us at the border anywhere. I mean, the bottom line is they 
come in unaccompanied.
    And I assume some of them are sent by a parent to the 
United States, presumably for a better life, maybe to live with 
relatives. But that seems like--it seems like that our policy 
should be actually to discourage as much as we can 
unaccompanied children coming to our border by whatever means 
necessary in order to keep them united with their families that 
they are leaving. Am I missing something here?
    Judge Arthur. A couple good points there, Dr. Harris. One 
is with respect to who pays for them. If we are talking about 
children of tender years, and I think about 72 percent of these 
people are between 15 and 17, of the UACs, I could pretty 
safely assume that they are not paying for the journey 
themselves. So, logically, someone in the United States is, and 
all the anecdotal information that I have ever seen has 
indicated that that is exactly what is happening.
    That the parents are or the relatives are paying the money 
to bring these people to the United States. There was a big New 
York Times article about that a few months, talked about an 
individual and his uncle.
    But with respect to that, and this sort of goes to the 
danger that these people--that, you know, are faced in these 
countries. Imagine, you know, you are a father, I am a father. 
That we, you know, had a situation so perilous where we lived 
that we had to escape it. Would we leave our kids behind?
    I mean, that sort of would indicate, too. You know, it says 
in the Book of Luke, what father if asked for a fish by his son 
would give him a snake or if asked for an egg would give a 
scorpion?
    If the danger is really that keen, logically, you would 
bring the child with you, or alternatively, you would not make 
the journey yourself. And so, you know, it sort of does go to 
the danger that they face.
    With respect to, you know, again, money flows from these 
individuals into the pockets of the smuggling groups, the 
cartels. It just goes to fund more crime.
    Mr. Harris. Sure. So, because Dr. Stewart did mention--and 
it is good to be in a room with another physician--did mention 
the idea of how traumatic a separation is. And just to, I mean, 
an unaccompanied child has always been separated from their 
adult family. Am I correct? That is the definition of a UAC, 
right?
    Judge Arthur. Absolutely. And----
    Mr. Harris. So our policy objective should be to not 
encourage separations, I imagine, right, because it is 
traumatic. So we should pursue policies by whatever means to 
discourage, and apparently, we didn't do that, right, because 
we had a surge of unaccompanied children. So I would imagine 
that that is--you know, that is true.
    And I was just going to give you the last minute because 
you said something about Section 462, you hoped we would bring 
it up. So this is your opportunity.
    Judge Arthur. Thank you so much.
    I was actually in the room when we passed this, and I 
really don't even know why ORR was given the responsibility. 
There wasn't a whole lot of debate.
    6 U.S.C. 279(g)(2) defines unaccompanied alien child as a 
person not lawfully present in the United States not 18 years 
of age, with respect to whom there is no parent or legal 
guardian in the United States or no parent or legal guardian in 
the United States available to provide care and physical 
custody.
    But we know that 58 percent of these kids are reunited with 
parents and legal guardians. So my question becomes----
    Mr. Harris. Let me just interrupt you there for a second. 
We know that that is the claim made. Because I understand, we 
can't even test the families to see--and look, as a doctor, I 
know. You do a swap, you know, 2 days you got a test of whether 
that person really is a relative or not. My understanding is we 
can't even test for that.
    Judge Arthur. Well, one of the most egregious things is we 
don't fingerprint children under the age of 14 by policy. So, 
quite frankly, you could recycle the same child over and over 
again if you want to get to the United States and be released 
as a family member. I don't really even know why we have that 
policy.
    Mr. Harris. Thank you very much. Yield back.
    Ms. DeLauro. I just might add that the point of this 
hearing is that by law we take in unaccompanied children. We 
have to deal with that, and it is about what Mr. Mulligan said, 
the conditions that these children are being held in and 
whether or not we believe that those conditions are such that 
we condone, that we believe are the right way to treat 
children.
    It is not about the separation. The separation only added 
to the list of unaccompanied children by virtue of the policies 
of this administration. Let us keep our eyes on the focus of 
the jurisdiction of this committee, which is to protect the 
welfare, the child welfare of these children that we take in as 
unaccompanied. No one is talking about immigration law, 
immigration policy, as Mr. Mulligan pointed out, but we are 
charged with taking care of these children.
    Congresswoman Bonnie Watson Coleman.
    Mrs. Watson Coleman. Thank you, Madam Chairman, and thank 
you for having this hearing.
    And let me associate myself with what you said about this 
being child abuse, and that is exactly what it is.
    A major concern of mine has been the use of private prisons 
in our criminal justice system, where private companies make 
money performing the public function of incarcerating people. 
And I have introduced legislation to end that practice.
    So it is even more horrific that there are for-profit 
companies getting rich off of detaining immigrant children, and 
that is exactly what is happening in Homestead where 
Comprehensive Health Services, Inc., charges $750 a day to 
detain children, which is triple the cost of the typical 
nonprofit facilities that HHS normally uses. And I am not even 
speaking to the conditions at the HHS facilities.
    Seven fifty a day sounds more like the cost of a luxury 
hotel rather than the detention camp you described, Mr. 
Mulligan. In fact, they make so much money their parent company 
cited this administration's immigration policies as reason for 
``significant growth.''
    Mr. Mulligan, first, I want to thank you for the work that 
you are doing trying to protect these children. From your visit 
to the Homestead facility, do you see any evidence that this 
tremendous amount of money we are spending on this for-profit 
facility is really going to ensure the best care of these 
children rather than just making stakeholders rich?
    And are you also aware of the article that came out about 
the 4,500 and some sexual abuse allegations that these children 
have apparently been exposed to?
    Could you put your mike on?
    Mr. Mulligan. Yes, thank you for the question, 
Congresswoman.
    So the first question, in terms of my visit to Homestead, 
because it is a temporary facility and it was an old Job Corps 
site, there was a cost of millions of millions of dollars to do 
buildouts, to build tents. You see these huge air conditioning 
units pumping in air conditioning relentlessly. They have told 
me, and I think the physicians could answer this better, but 
they said cold temperatures, really cold temperatures stops the 
spread of germs and bacteria. So the kids are freezing all day, 
but apparently, they are not getting sick, I guess. I don't 
know.
    But I do not see that money going to the kids. I see it 
going to making what was a Job Corps office building into a 
place to house children temporarily, but it is not temporary 
anymore. And I am sorry----
    Mrs. Watson Coleman. Because Job Corps tend to be 
residential in nature, too.
    Mr. Mulligan. The one half of the campus is residential, 
and the other half is just the office buildings. Where the 17-
year-olds were housed is the office buildings, and that has 
required buildouts for bathrooms, showers, everything.
    And I am sorry. Your second question again was?
    Mrs. Watson Coleman. Yes, there was an article on the news 
just last night about thousands of allegations of sexual 
misconduct and sexual abuse of the children that are detained, 
and I think it highlighted Homestead?
    Mr. Mulligan. Yes. We have heard of allegations for 
Homestead as well. We haven't----
    Mrs. Watson Coleman. I need to know who--it is very 
important that we do have the Government officials here to talk 
to us about what is happening, what they are doing about that.
    And Dr. Stewart, you discussed how traumatizing family 
separation can be for these kids. Can you further discuss the 
importance of proper after care, after they have been separated 
and how the conditions at Homestead and Mr. Mulligan described 
exacerbates children's trauma?
    Dr. Stewart. Thank you.
    Mrs. Watson Coleman. Would you turn your mike on? Thank 
you.
    Dr. Stewart. Thank you for that question, Mrs. Watson 
Coleman.
    I think the most important thing is what I suggested 
earlier, that any facility where children are being housed who 
have been through these kinds of traumas has to be trauma-
informed in the care and support that they provide. That means 
up and down the chain from the leadership understanding how not 
to create policies and practices that retraumatize, to the 
staff being trained and understanding and being aware of how to 
recognize the symptoms, how to address those problems, how to 
understand behaviors that are trauma-related but that express 
themselves in aggression, fighting, reckless behaviors of some 
kind, challenges to authority. These are manifestations of 
children who are expressing their traumatic illness.
    Mrs. Watson Coleman. Excuse me, but does anyone know 
whether or not there is that kind of personnel on staff all the 
time at Homestead?
    Mr. Mulligan. So what we were told was that there is 19 
clinicians--or sorry, 19 children for every 1 clinician. And to 
speak with a clinician or mental health person, you are in a 
room with 20 other people at the same time. And so--at the same 
time. So you are not sharing your intimate stories, your 
traumas in a safe space. You are sharing it in a room, a small 
room with very basic cubicles. The clinicians have cubicles 
where someone is sitting next to them, and they are conducting 
their mental health intakes with them in that way.
    Mrs. Watson Coleman. There is so much more we need to know. 
Thank you.
    Ms. DeLauro. Congresswoman Barbara Lee.
    Ms. Lee. Thank you very much.
    I want to thank all of you for being here and just have to 
say that, first of all, this is the most despicable policy this 
administration and any administration that I have seen in a 
long time. Secondly, I am reminded that this is the 400th year 
of the first slave ships coming to this country from Africa, 
where children were snatched from their parents only to learn 
of generational DNA changes which are still with us in many 
ways.
    And so this is a violation of children's human rights. It 
is child abuse, it is kidnapping, and it is downright morally 
wrong. And it is something that as a mother and a grandmother 
that it is something that is hard to even fathom, and being an 
African American.
    And so--and I am a clinical social worker by profession, 
Dr. Stewart. So I wanted to drill down just a little bit about 
this. First of all, we are learning of the sexual assault of 
these children and the trauma that this adds to the trauma that 
they have experienced.
    Secondly, I want to ask you just in terms of treatment 
modalities, I mean, you know an intake, one or two sessions, 
just as a clinician, I know this is a going to take a heck of a 
long time for these children to recover, if ever. And so I 
wanted to ask you kind of with trauma-informed care, what is 
the treatment process?
    Also how does anger fit into this? Because I swear I am 
concerned about these kids growing up being angry at the United 
States for doing what they did, for us doing what we have done 
to them. And so how does anger fit into this, and what does a 
treatment modality look like in terms of trauma-informed care? 
Because this is really something that it is another stain on 
this country.
    Someone said it was ``a stain.'' It is another stain. And 
so we have to get to the bottom of this and stop it as soon as 
we can and take care of these kids and change these policies.
    Dr. Stewart. Well, thank you for that question, Ms. Lee.
    Let me start with trauma. It is a specialized area of 
treatment. Not every mental health professional treats trauma 
or is trained to recognize and provide treatment for trauma, 
and not every trauma treatment specialist has the level of 
criteria--of qualifications that I do as a psychiatrist.
    The National Center on--the National Center for the 
Traumatic Stress Network trains hundreds of clinicians and 
other people around the country specifically to work with 
children and adults who have been exposed to some level of 
trauma. What we are talking about in terms of trauma-informed 
care can run the gamut. It can be along a continuum.
    There are evidence-based treatments like trauma-focused 
cognitive behavioral therapy, which is very structured. Twelve 
weeks of very structured, clearly defined, evidence base of 
well-researched and studied and validated across multiple 
populations and with multiple kinds of exposure to trauma that 
is very effective in working with children of a certain age. 
There are trauma-informed treatments that have more 
effectiveness with younger populations. There are treatments 
that are available to families.
    The bottom line is that there are a range of treatments 
that can be made available depending on the need, depending on 
the severity, depending on the willingness and responsiveness 
of the individual or the family to engaging in those treatments 
with the treating professional.
    The anger that you describe is very often a manifestation 
of how that trauma in the young child especially can be 
expressed. Children, while they are adaptive and resilient, do 
reach a point where enough has gone too far. And when they are 
at that point, they no longer have the neurological capacity to 
continue to take in the trauma. It has to come out. It has to 
be expressed.
    And what we see often, and I am assuming--I have not made a 
visit to any of the facilities. But what I would assume is that 
some of what has been described as aggressive behavior, hostile 
acting out, crying and being uncontrollably able to stop that, 
and not being able to be comforted even when comfort might be 
around, has to do with the level of trauma that they have been 
exposed to and the fact that there is nowhere to take it.
    They have no one to comfort them that they are familiar 
with and can trust. They don't recognize what is going on--
everything from sights and sounds and smells and people 
approaching you and how they talk can trigger these kinds of 
behaviors. These are normal responses to abnormal situations.
    Ms. Lee. And God knows how they are going to react as 
adults.
    Dr. Stewart. What we know about trauma and especially about 
Adverse Childhood Experiences is that as an adult--in fact, the 
original work to study this was done decades ago by two 
doctors, Vince Felitti at Kaiser Permanente and Bob Anda at the 
CDC, who were looking at adults who were recounting experiences 
from their childhood and began to put the pieces together and 
say there is a connection here between what happened then and 
what is going on now. And they connected those things to 
chronic medical problems, to mental illness, to domestic 
violence, to a range of things.
    So we will be able to see the manifestations of untreated, 
unrecognized and untreated Adverse Childhood Events, serious, 
intense trauma in these children as they age.
    Ms. DeLauro. Congresswoman Clark.
    Ms. Clark. Thank you, Madam Chairwoman, and thank you to 
the panel for coming today.
    Mr. Mulligan, I would like to start with just a baseline 
legal question. Is it a crime to enter this country seeking 
asylum?
    Mr. Mulligan. No.
    Ms. Clark. Anywhere that you enter, seeking asylum?
    Mr. Mulligan. Well, I believe the Trump administration 
tried to make it a crime for a while and not allow you to apply 
for asylum if you were not applying at a point of entry. But 
that has been an injunction by the courts.
    Ms. Clark. That is right. So, currently, it is not a crime 
to enter this country seeking asylum?
    Mr. Mulligan. That is correct.
    Ms. Clark. Are you aware that children at Homestead who are 
staying in this influx center, when they turn 18 are being 
shackled and sent to Federal prison?
    Mr. Mulligan. Yes. As we were told, that is their birthday 
present.
    Ms. Clark. And that this applies to both, you know, girls, 
boys, turn 18, you are sent to Federal prison. Why would that 
be if there is no crime of illegally entering this country?
    Mr. Mulligan. In my understanding that there is nowhere--
there is no transition facility. When someone turns 18, they 
are considered an adult under the law, and so they go to an ICE 
detention center.
    Ms. Clark. Dr. Stewart, you were just talking about trauma-
informed care, and I know that you are not ORR. But do you have 
any sense of the quality of counseling, given the expertise 
that is needed to treat these children for the trauma that we 
have inflicted upon them in these--at Homestead or throughout 
the ORR system?
    Dr. Stewart. I have no specific and direct knowledge, only 
what has been reported from people who have made visits, who--
the American Academy of Pediatrics and who talked about that. 
The original person who wrote one of the letters identifying 
the challenges facing these children was--is a psychiatrist in 
Louisiana, and she--she identified some of the problems with 
the kinds of services that were being provided. But I have no 
personal knowledge of that.
    Ms. Clark. Do you happen to know if ORR in the past was 
able to manage the unaccompanied children through the use of 
nonprofits? Has it always been such a private, heavily private 
industry?
    Ms. Brane. I can say that, generally, it has been operated 
by nonprofit or not-for-profit institutions. But the focus has 
been on locating facilities that are shelter-like, home-like 
environments in the past. That was the focus, and I think what 
we have really shifted to now is these large institutional 
settings that, as you heard, have very large profit margins and 
are not focused on the well-being of children and are not 
licensed.
    I am very concerned about the licensing, including that 
some of these facilities, ORR does not consider them permanent, 
and therefore, they don't even fall under the requirement for 
Prison Rape Elimination Act audits, which goes to this issue of 
safety.
    Ms. Clark. And not only is there a startling number of 
sexual assaults reported from staff members, but also child-on-
child assaults, which goes to your very point and the need for 
licensing and regulation.
    Do you have any understanding from ORR what they are doing 
to improve the background checks of the staff at these 
facilities?
    Mr. Mulligan. Well, we have talked with people in the FBI, 
and apparently, background checks do not take 1 month or 2 
months or 3 months, as they are taking now. When we visited the 
Homestead facility, they actually conducted background checks 
on us before we could talk with the kids, and they finished 
that within the same morning. So I don't know what ORR is doing 
in terms of why the background checks take so long.
    Ms. Clark. Yes. Words fail me at how we are failing these 
children and these families. And I do want to ask you, just 
briefly, with the Flores decision, 1997, has been around, what 
was the point of that--of that decision? Was it to make sure 
that children were cared for and released as quickly as 
possible to family members?
    Mr. Mulligan. To be clear, it is not a decision. It is an 
agreement between the Federal Government----
    Ms. Clark. That is right.
    Mr. Mulligan [continuing]. And the children detained. So 
the Federal Government agreed to this. It is not like a court 
enforced them to it. The Federal Government entered into this 
contract and said we will treat children in this way, and there 
has been various court decisions interpreting it since then, 
but it is still a binding settlement agreement on the Federal 
Government.
    Ms. Clark. And do you believe that this agreement is 
responsible for increase in human and drug trafficking across 
our Southern border?
    Mr. Mulligan. I don't. I don't think we can blame legal 
protections for migration. I mean, if we go down this line, at 
some point, we are going to be saying the Constitution is 
attracting people to our country, so let us not apply that to 
undocumented immigrants. It is a slippery slope, and I hope we 
don't fall down that.
    Ms. Clark. Thank you. Thank you, Madam Chairwoman.
    Ms. DeLauro. Thank you very much.
    I am going to try to move quickly through some questions. I 
just want to mention to you that, Dr. Stewart, that the--I have 
been pleased at really the National Child Traumatic Stress 
Network is really fantastic. What we did in the last bill was 
$4,000,000 for the fund specifically to work with children who 
were separated from their families. And we have tried to 
increase the funding in that program every year, and we are 
going to continue to try to do that this time.
    So thank you very, very much for your comments and your 
testimony in this area. I have got to tell my friends at Yale 
Child Study, my God, you guys are great.
    I want to, just a couple of things. Ms. Brane, Mr. Arthur 
discussed the dangers of traveling to the U.S. border. Your 
testimony, you noted the administration's termination of the 
Central American Minors Program. Was this an opportunity to 
apply for asylum without undergoing a dangerous trip to the 
border? Just very briefly, what was the Central American Minors 
Program?
    Ms. Brane. So the Central American Minors Program allowed 
children to apply for relief for entry into the United States 
from outside of the United States and from their region. So 
from their home country or close by. And the point of it was 
exactly to prevent children from having to make this dangerous 
journey because one thing that has not come up today is that 
there is really very--there are very few options for children 
who are fleeing violence to get here.
    Ms. DeLauro. Is there more violence now in some of these 
countries? Mr. Arthur doesn't think so. You think so?
    Ms. Brane. There is. We have seen--since 2012, the Women's 
Refugee Commission has been looking at this issue, and we have 
found increases in violence in each of those countries that are 
very much in synch the increased arrivals.
    Ms. DeLauro. Well, we know they did away with case 
management. They did away now with Central American Minors 
Program. So opportunities to be able to alleviate and relieve 
the system they have put aside because the issue is about using 
this as of enforcement. That is it.
    So you take away and strip away all of the opportunities to 
create a more efficient way of proceeding, which was being done 
by the past administration, but to make it much more difficult.
    Mr. Mulligan, a couple questions here. Is the Trump 
administration using influx shelters to get around the 20-day 
maximum mandated in Flores? What other ways is the 
administration disregarding the protections mandated in the 
Flores settlement? Should we codify Flores?
    Mr. Mulligan. Several questions, Congresswoman. First, yes, 
we have heard several arguments. There is an exception in the 
Flores settlement agreement for influx or emergency facilities. 
But there is no exception, importantly, as I say in my written 
testimony, for self-created emergencies or fabricated influxes. 
And so they are using the Homestead facility as a way to get 
around the Flores settlement and saying it doesn't apply to 
that facility, and it absolutely does.
    And I am sorry, your second question was?
    Ms. DeLauro. Does it appear the administration is 
disregarding the protections mandated in Flores?
    Mr. Mulligan. Absolutely. And it is not just this 
administration, but since 2000--we filed a motion to enforce in 
2015, 2017, 2018, and the----
    Ms. DeLauro. I frankly don't care what administration it 
was--
    Mr. Mulligan. Yes.
    Ms. DeLauro [continuing]. If we are obligated to abide by 
Flores.
    Mr. Mulligan. You are absolutely--yes, the Federal 
Government is--it is a contract. No matter what President Trump 
as an individual does with contracts, the Federal Government 
does abide by contracts, and it needs to.
    Ms. DeLauro. Should we codify Flores?
    Mr. Mulligan. The Flores settlement agreement has a 
stipulation that it will go out of force once there are 
regulations that are promulgated that are consistent with the 
letter and the spirit of Flores. The Trump administration last 
year tried to implement regulations on the Flores settlement 
agreement that had nothing to do with the Flores settlement 
agreement. So it should be codified, but with the spirit and 
letter of the law as it----
    Ms. DeLauro. Of the law. Okay.
    Let me then just ask Ms. Podkul, just briefly, the 
appearance rates of unaccompanied children who are placed with 
sponsors. Do most of them show up to the hearings?
    Ms. Podkul. When children are represented by attorneys, 
they overwhelmingly are showing up because the attorneys can 
explain to them what are the requirements? What is it that they 
have to do?
    And let me be clear. A question came up about are the 
courts adjudicating their claims? Are they not showing up? The 
majority of children are applying for humanitarian protection, 
and those applications go to USCIS. So the courts are kind of 
managing the cases to maintain and see what is going on with 
the children, but it is USCIS who is ultimately oftentimes 
adjudicating the child's claim for protection.
    Ms. DeLauro. There is the suggestion that children choose 
to leave their homes and travel to the U.S. because our 
policies are too lenient. Are our policies too lenient? Why are 
people being driven to do what they do?
    Ms. Podkul. Look, the kids that I have talked to, they know 
how dangerous the journey is. They know they could die on the 
journey.
    They know when they get here, they are going to be thrown 
in what is called ``an icebox.'' They know they are going to 
be----
    Ms. DeLauro. We have all visited--some of us have visited, 
and it is freezing cold.
    Ms. Podkul. Right. I mean, some of these families and these 
children knew they were going to be torn away from their 
parents, and they are still coming. So if the risk of death, 
you know, on the journey is not enough to stop them, no 
deterrence that we can do is going to be worse than what a lot 
of them are facing in their home country.
    Ms. DeLauro. Thank you.
    Congressman Cole.
    Mr. Cole. Thanks very much, Madam Chairman, and I want to 
thank all of you for your testimony, too.
    Judge Arthur, since, you know, you litigated a lot of these 
cases, does somebody automatically have the right to come to 
the United States for economic advancement?
    Judge Arthur. No. And actually, the question was raised 
before whether illegal entry into the United States is a crime. 
Illegal entry into the United States actually is a crime under 
Section 275(a) of the Immigration and Nationality Act. It is a 
misdemeanor punishable for up to 6 months. So, no, you don't.
    Mr. Cole. Okay. And would you automatically have the right 
to come to the country for family reunification purposes?
    Judge Arthur. If you get a lawful visa, and we do have a 
very generous lawful visa program. More than a million people 
enter the United States as immediate relatives every year. You 
can take advantage of that and come to the United States.
    Also with respect to the Central American Minors Program, 
which I think was raised before, I believe that President Trump 
had offered to reinstate the Central American Minors Program in 
exchange for funding for barriers along the border. But in 
fact, I believe this committee rejected that request.
    Mr. Cole. And I am not casting aspersions on anybody here, 
but if I wanted to come to the United States, I would probably 
try to figure out what are the ways that legally they are going 
to accept me, as opposed to if I have a motive that is 
different, I don't think I am going to volunteer that motive 
and say I am really here.
    So this idea that these statistics actually reflect what 
the motive is, I think is a pretty flimsy idea. In your 
experience, you mentioned you litigated 1,000 of these cases. 
Are people always honest with why they say they are coming to 
the United States, or do they try and tailor testimony toward 
things that they think will give them the legal right of entry?
    Judge Arthur. Again, the plural of anecdote is not data, 
but I can tell you right now, Mr. Cole, that in every case that 
I ever decided, I would make a credibility determination. In 
many, if not the majority of those cases, that was an adverse 
credibility determination. I have no recollection of any of 
those adverse credibility determinations being overturned by 
another court.
    Mr. Cole. Okay. Let me ask this, and I will address this 
more widely to the group. You know, this isn't a new problem, 
and we did deal with this surge before. And as has been 
suggested, the demographics of the population have changed, and 
that has made it difficult to have the appropriate facilities.
    You know, the last administration confronted this, and then 
in full disclosure, I worked with Secretary Burwell to try and 
make sure she had the resources to deal with this. But did they 
leave anything in the way of permanent facilities, permanent 
infrastructure, or did they pretty much, as we have seen in the 
past, create--and I had one of these in my district--create a 
center for a period of time and then, when the flow came down, 
because people had either been placed and we were not--just let 
it all collapse back down again?
    So we are in the position of sort of constantly reinventing 
the wheel. Has that--has that been our experience as a country?
    Ms. Brane. It is hard for me to know exactly. I mean, I 
will say that ORR has gradually--they have certainly tried to 
attempt--tried--tried to increase the number of facilities, and 
they do have more facilities in place now than they used to. 
But they did open and close some of these large influx 
facilities. There were several that were open in 2012----
    Mr. Cole. Again, and I am not throwing rocks at the last 
administration. I think this actually gets back to a point that 
Judge Arthur made. The demographics of this population have 
changed, and that is straining the physical capacity. It is 
straining the personnel that you would need. You know, one of 
our great problems in mental health is we just don't have 
enough people, period.
    I mean, the idea that if we were--that we would have these 
kinds of people available in sufficient numbers here, 
particularly on an on/off kind of basis. And you know, I think 
it was a telling point when you said at the beginning of the 
Trump administration the flow came down. Just largely because 
you thought you couldn't get in probably, I would assume.
    And then once it became evident, no, the structures are 
still in place that make it I wouldn't say attractive to run 
this risk because I don't think it is attractive for anybody to 
run the kind of risk of a 2,000-mile journey. I mean, people 
don't undertake that sort of thing lightly any more than, you 
know, 300 years ago they undertook lightly traveling across an 
ocean and coming to the United States. That is a big life 
gamble for somebody, and you have to feel like there is some 
big upside at the other end because you are running a risk.
    So, you know, given that, I mean, it seems to me what are 
the sorts of things we can do--because we know it is risky--
that would discourage that? It seems to me, Madam Chairman, 
that is beyond our jurisdiction, and I am certainly not 
critical of that. But a lot of this gets back to stabilization 
inside these countries, which I know my friend Ms. Granger 
worked on, and frankly, which we tried to address recently in 
the spending package where we put a lot more money again into 
these three particular countries.
    Ms. DeLauro. The Central American triangle.
    Mr. Cole. Yes.
    Judge Arthur. Mr. Cole, one thing that I would like to 
correct. Before I think when you were asking me, I said that 
2016 was the high year for UACs. It was actually 2014, 68,631. 
We are on track for about 60,000 this year. But as this graph 
will show you, we are not actually in prime travel season yet. 
So I can't guarantee you that we are not going to see many more 
people come to the United States.
    Mr. Cole. Yes. I will close just with a quick comment, just 
because I remember again having this discussion with Secretary 
Burwell. And literally, each month them wondering how many 
people were coming in. They don't have a very reliable way to 
predict that.
    And so it is extremely difficult for any administration to 
plan, have the people in place, and the resources.
    Thank you for your indulgence, Madam Chairman.
    Ms. DeLauro. Thank you.
    Ms. Roybal-Allard.
    Ms. Roybal-Allard. Just very quickly, Ms. Podkul, what 
challenge do you and your colleagues face when trying to unify 
a separated child, and what would you recommend to make 
tracking of children and their families more accurate and 
efficient?
    Ms. Podkul. Specifically for the families who have been 
separated by CBP?
    Ms. Roybal-Allard. Yes. Because there have been some 
reports that we have lost track of where the children are and 
where the parents are.
    Ms. Podkul. Right. And you know, the Government is 
reporting that they have made changes to improve the tracking 
of the separations. I can tell you just a few weeks ago, my 
colleague met a child who had been separated from his father, 
and that was not indicated in any of the paperwork that the 
Government gave us, and the attorney was not notified. The only 
way we found out was by talking to the child.
    So I think what we need to do and suggestions that you have 
offered before in the past of having child welfare 
professionals in CBP facilities helping decide which children, 
you know, if a child ever needs to be separated, make sure that 
it is a child welfare who is making that decision, and that 
tracking starts in that moment for the reasons why.
    So both the child and their attorney can understand, but 
also the parent. Because sometimes, you know, the decision was 
made in error, and the parent should have the right to 
challenge that so they can reunify with their child as quickly 
as possible.
    Ms. Roybal-Allard. So would you recommend along the lines 
of a shareable, a family unit tracking number?
    Ms. Podkul. Absolutely. There should be a family unit 
tracking number that follows both the child and the parent. And 
I would suggest that that happens not only just when a child is 
separated from their parent, but from any family member that 
they might be traveling with, right?
    So you could have a child who is being cared for by a 
grandparent their entire life. And if they are being separated 
at the border because they don't fall into the definition of 
family, we need to know, and the child's attorney is going to 
need to know that. It is often the adult who is going to have 
the information about the child's case, have contact phone 
numbers, have documents that are going to be necessary.
    And so it is really important for that child to always be 
able to find and have contact with any family member that they 
have been separated from at the border.
    Ms. Roybal-Allard. I guess it would also be helpful, it is 
my understanding there is no standardized protocols or systems 
between the different agencies that come in contact with these 
children?
    Ms. Podkul. Exactly. Exactly, yes, thank you.
    Ms. Brane. If I can just add finally that they also really 
need to look at the final piece of that on potential 
reunification after investigating what the reasons for the 
separation were, right? There was a story that came out about a 
woman who--a mother who was separated from her infant child 
because they thought a criminal conviction had come up on her 
case. It turned out that that was a mistake. She had no 
criminal conviction, and nothing was ever done to rectify that 
situation.
    If you really are concerned about the welfare of the 
children, you should be following up on, you know, how to 
reunify them ultimately or resolve the situation.
    Ms. Roybal-Allard. I believe there have been several 
reports about ORR grantees reporting errors and referrals from 
CBP and ORR, including incorrect gender, age discrepancies. So 
that also adds to the issue of not being able to identify them.
    Ms. DeLauro. Will the gentlelady yield for 30 seconds?
    Ms. Roybal-Allard. Oh, of course.
    Ms. DeLauro. Are we still separating children and rendering 
them----
    Ms. Podkul. Yes.
    Ms. DeLauro. We are still separating children, rendering 
them unaccompanied children, and adding to the system. So even 
though there has been a court order that says no, it is still 
happening in contravention of the court order?
    Ms. Podkul. Yes. Not only is it still happening, but most 
cases we don't know why it is happening.
    Ms. Roybal-Allard. That was going to be my question. What 
reasons is DHS giving?
    Ms. Podkul. Sometimes we will get vague--there will be 
vague indications in the file about why. They may say there is 
a criminal history, but we don't know what that means. Does 
that mean that was a forged check and that parent poses no 
danger to the child? Is it a reason because they have a concern 
about the veracity of the relationship between the child and 
parent? That is very important information.
    So whenever a separation happens, we need to know why, and 
all the information has to go to all parties.
    Ms. DeLauro. Is it mostly on immigration things, violation 
of immigration?
    Ms. Podkul. We don't know.
    Ms. DeLauro. You don't know. Last on this piece, before--we 
now know that there was separation happening in 2017. Again, 
rendering--I want to focus on the jurisdiction of this 
committee, which is unaccompanied children. However, there has 
been no accounting. There are thousands of children that the 
IG--this is not me--that we listened to, thousands of children 
that were--came into custody, if you will. Some were 
discharged. But we have no idea who was accompanied and who was 
separated.
    And we may--well, we are going to get a full accounting of 
that effort. So, thank you.
    Mr. Harris.
    Mr. Harris. Thank you very much, Madam Chair.
    Mr. Mulligan, I guess you are an attorney. I am just 
curious, you said, ``what President Trump does with 
contracts.'' Do you know something we don't know about 
contracts?
    Mr. Mulligan. I think that is a hearing downstairs, 
Congressman.
    Mr. Harris. Or just what you read in the fake news? I don't 
understand. I mean, you are an attorney.
    Mr. Mulligan. Right.
    Mr. Harris. I would think you would speak more carefully 
than that. Unless you have personal knowledge of contracts. Do 
you have personal knowledge of contracts the President has had 
that you think may have been violated?
    Mr. Mulligan. Just what is reported in the news.
    Mr. Harris. Okay. That is what I thought, okay.
    Judge Arthur, we got a real problem in Maryland, it is 
called MS-13. As you know, we are the second most active State 
for MS-13 only behind California, whose population is, my God, 
I don't know, 10 times Maryland, whatever it is. A lot more.
    When you have an unaccompanied child come across, and I 
mean the ones who cross the border as UACs, not the ones who 
become, you know, through the fact that something happens that 
they are UAC, but the ones who cross, you know, I don't--I 
probably wouldn't be good at guessing age at a carnival. But I 
have seen some pictures of people who come across claiming they 
are like 15, 16, may not really be--I imagine some come without 
any papers, no proof.
    I mean, look, if I were going to cross the border illegally 
as an MS-13 member, I sure wouldn't bring my ID card. So that 
brings up two things. One is how difficult is it? Because I 
really don't want MS-13 members coming more in Maryland. We 
have plenty. You know, maybe some other States will take them. 
God bless them. I don't want any more in Maryland.
    It has got to be hard to tell who they are, and I would 
like you to address how difficult it is to determine who is 
actually a criminal, who is not, who is coming here for 
nefarious purposes, who is not, and who is not a subject of 
human trafficking. Because that is another thing I am worried 
about.
    And I just want you to address very briefly, you know, the 
allegation that somehow we are shackling people when they turn 
18 with no--with no basis because I am not sure that anybody 
does that. But what is the basis for someone turning 18 and, in 
fact, becoming subject to a different set of laws that do 
require detainment?
    Judge Arthur. Let me start at the end. The TVPRA and 
Homeland Security Act both actually talk about minors under the 
age of 18. And for that reason, you actually enter into the 
adult system when you turn 18. And so, you know, a different 
set of laws applies to you, simply.
    Mr. Harris. Excuse me. And that is not just true with 
illegal--with immigration.
    Judge Arthur. Right.
    Mr. Harris. I mean, when you turn 18, there are things you 
are charged differently with?
    Judge Arthur. Absolutely. And----
    Mr. Harris. All right. So we are not separating out 
immigrants saying we only do this to immigrants. We do this to 
anybody who turns 18, right?
    Judge Arthur. My son turned 18 not that long ago. I don't 
have access to his medical records any longer.
    Mr. Harris. We fight that battle all the time, but go on--
as a parent. Go on.
    Judge Arthur. Yes, with respect to determining the age of a 
person, it is actually very difficult. TVPRA does provide some 
guidelines, some guidance to identifying the age. But the fact 
is somebody shows up without documents, we don't know who they 
are unless we can figure out who they--unless we have some 
record, and we probably don't.
    With respect to determining the purpose for which they 
come, we really don't have access to their criminal records 
back in their home countries. We don't know what their 
affiliations are. I will note that it was the Obama 
administration that designated MS-13 as a significant 
transnational criminal organization, and they noted the fact 
that one of the things that they do is they raise money in the 
United States, and they send it back to El Salvador.
    So we have talked today about the crime that takes place in 
El Salvador. I know that Ms. Clark I think it was talked about 
how dangerous--Mr. Pocan talked about how dangerous it was. The 
funding for that crime actually comes from--some of it comes 
from here in the United States. We had a horrible incident in 
Kensington, and we are so gerrymandered, I don't know whether 
you represent Kensington or not. But involving a young girl who 
had been sex trafficked to the United States who was beaten 
with a baseball bat 23 times by MS-13 members because she 
failed to perform adequately.
    They didn't hit her in the face because they didn't want to 
damage the merchandise that they had, but it was a horrible 
case. Not reported.
    With respect to MS-13, it is all anecdotal, and in fact, I 
would note that the White House put out--nope, Homeland 
Security, unaccompanied alien children and their family units 
are flooding the border through the catch and release 
loopholes. But they talked about UACs providing fertile 
recruiting ground for violent gangs.
    A 2017 review of UACs in the custody of HHS found 39 of 
138, or 28 percent, were involved in gangs, with the vast 
majority of those involved voluntarily. And again, we know that 
these gangs recruit unaccompanied alien children in our home 
State of Maryland. We know that they go--that they do it in the 
high schools there.
    But again, there is no bar code that somebody has on them 
that you can scan that is going to tell you what their intent 
to come to the United States is.
    Mr. Harris. Well, my time is up. Just a comment on human 
trafficking, how hard is it for us to detect when human 
trafficking is occurring?
    Judge Arthur. Human trafficking is very difficult, and let 
me just define the difference between the term. Trafficked 
people are involuntarily moved. Smuggled are voluntarily moved.
    But again, identifying human trafficking, and I would see 
it in my own court, I would see these women who had been picked 
up, and I would say did anybody tell--did anybody force you to 
come to the United States? And they wouldn't break. They would 
not tell me. And I said, look, I could help you if you tell me, 
and they wouldn't tell me.
    Mr. Harris. Thank you very much.
    Ms. DeLauro. Coming to the end of the hearing, and I wanted 
to say to my colleague, the ranking member, I would love to 
have you make any final comments or ask any additional 
questions that you might have.
    Mr. Cole. I have no additional questions, Madam Chair. I 
want to thank all of our witnesses. Frankly, both your written 
and your personal testimony was compelling and extremely 
helpful, and I appreciate it. Because I think this is such a 
many-sided problem, and I think it has changed in ways that 
probably we didn't fully grasp at the beginning of this back in 
2014 and 2015, both demographically and what that does in terms 
of the facilities we need, the personnel we need, frankly, the 
policies that we need. And you have helped all of us come to a 
better understanding of that.
    Madam Chair, I want to thank you, too, obviously again for 
the IG briefing that we had 2 weeks ago and for assembling this 
panel and focusing interest on this. Sadly, I think we are 
going to have this problem for a long, long time, and you are 
helping us begin to understand the dimensions of it, grapple 
with it, and see what the appropriate ways to proceed are.
    And that is a real contribution, but again, my friend the 
chair is the one that made that possible. We wouldn't be here 
if she hadn't held the hearing, and so I am again grateful to 
my friend for that, grateful for your time and your 
professionalism and your expertise.
    And with that, Madam Chair, I yield back.
    Ms. DeLauro. Thank you so much, and thank you very much. We 
worked together these last several years and will continue to 
do so because in so many instances, we see the difficulties 
that are there. And the goal for yourself and for myself is how 
do we address the issue? How do we try to solve what we can 
solve?
    Again, I want to just say thank you to you for what is 
powerful testimony. As Congressman Cole pointed out, both your 
written testimony and your presentations here this morning. 
There are many questions still to be answered. I come away with 
and I just want to repeat over and over again, we on this 
subcommittee cannot afford to get sidetracked with issues that 
people want to bring up which may obfuscate the issue at hand, 
which is what ORR's mission is.
    It is a human services agency. That is what its mission is. 
It is not an immigrant enforcement agency. It is not an 
extension of ICE, and that is why ORR needs to focus directly 
on that mission. No one in the past has tried to change that 
mission in the way over the past 2 years that this 
administration has tried to change that.
    I can't make them up. There is a memorandum of agreement on 
data flowing. There is the hold-up of fingerprinting and which 
they had to stop because they were so overwhelmed. And we had 
the largest release of 4,000 detained children to safe havens. 
That is what we are about here.
    So that we need ORR to care for children, place them in a 
safe home with a family. Unfortunately, as I said, that has not 
happened, and the administration is trying to divert that 
mission. I have said on many occasions, and I will repeat it, 
from day one when I got involved in this issue, that I believe 
what we have looked at over the last 2 years is Government-
sponsored child abuse. And we can't have that on our watch in 
this subcommittee. That is not where we are.
    Family separation, memorandum of understanding, influx 
facilities like Tornillo and Homestead, disregarding Flores or 
trying to upend Flores, children spending months in Federal 
custody, and we are spending, which comes under our 
jurisdiction, millions and millions of dollars being spent 
without any accountability.
    We have tried. We both have tried to get accountability. We 
just keep hearing the more resources that you need, and we are 
not afraid to provide resources. But as I said in my opening 
statement, we are not going to throw good money after bad for a 
continued--a failed policy that this administration has engaged 
in. And it is about keeping children in detention. It is a 
policy failure. This is a manufactured crisis.
    We are committed, I am committed, as I said at the outset, 
to continue to do oversight of this effort. The more you probe 
into it, the more avenues there are to be able to look at. We 
will call witnesses from HHS. We will call others to address 
this because we need to get to the answers because, you know, 
it can't continue like it is, and we have to fix it.
    We have to stop what is going on now, and we have to fix 
it, and there are models all over the country. Most recently, I 
heard of children who age out, that there is a model for 
dealing with them. I want to know how many are there? Where are 
they? In what facilities are they? What is the difference with 
today I am 17, middle of the night, at midnight, I am 18. I am 
picked up and taken somewhere else--What is the story about 
that?--with less services.
    There are many avenues to probe. We will continue to do 
that.
    I want to thank my ranking member for his cooperation, and 
I just want to say again thank you. Thank you for the great 
work that you are doing on behalf of the children who come to 
us seeking help.
    Thank you very much, and I want to just bring the hearing 
to a close.
    Thank you very much.

                                          Wednesday, March 6, 2019.

         PROTECTING STUDENT BORROWERS: LOAN SERVICING OVERSIGHT

                               WITNESSES

BRYON GORDON, ASSISTANT INSPECTOR GENERAL FOR AUDIT, DEPARTMENT OF 
    EDUCATION OFFICE OF INSPECTOR GENERAL
JOANNA DARCUS, MASSACHUSETTS LEGAL ASSISTANCE CORPORATION RACIAL 
    JUSTICE FELLOW, NATIONAL CONSUMER LAW CENTER
SHENNAN KAVANAGH, DEPUTY CHIEF OF CONSUMER PROTECTION DIVISION, OFFICE 
    OF MASSACHUSETTS ATTORNEY GENERAL MAURA HEALY
PRESTON COOPER, RESEARCH ANALYST IN HIGHER EDUCATION POLICY, AMERICAN 
    ENTERPRISE INSTITUTE
COLLEEN CAMPBELL, DIRECTOR, POSTSECONDARY EDUCATION, CENTER FOR 
    AMERICAN PROGRESS
    Ms.  DeLauro. The subcommittee will come to order.
    Good morning. Let me welcome everyone to the Labor, HHS, 
and Education Appropriations Subcommittee, the oversight 
hearing on student loan servicing.
    Our ranking member, Congressman Cole, is doing double duty. 
He is at the Budget Committee, and he will be here shortly.
    But we can go forward because we have both sides 
represented, and then you can move forward with the hearing. So 
it is not out of balance.
    I want to say a thank you to our distinguished witnesses. 
We have two excellent panels this morning. The first panel will 
feature Bryon Gordon, who is Assistant Inspector General for 
Audit in the Office of the Inspector General at the U.S. 
Department of Education.
    The second panel will feature Joanna Darcus, Massachusetts 
Legal Assistance Corporation Racial Justice Fellow at the 
National Consumer Law Center; Shennan Kavanagh, Deputy Chief of 
the Consumer Protection Division, Office of the Massachusetts 
Attorney General Maura Healy's office; Colleen Campbell, 
Director of Postsecondary Education at the Center for American 
Progress; and Preston Cooper, higher education research analyst 
at American Enterprise Institute.
    So I thank each of you for offering your testimony this 
morning. And we will do, obviously, one panel at a time and 
then call folks up for the second panel.
    It will surprise no one to say that there is a student debt 
crisis in our country. Forty-four-point-seven million people 
owe $1,500,000,000,000 in Federal student loans, more than 
credit card debt or car loans. But less well known is this. We 
are facing a student loan servicing crisis.
    Servicers are a critical link between borrowers and 
lenders. These intermediary companies manage accounts. They 
process monthly payments, and they help borrowers who are 
suffering financial hardship find the right repayment plan. In 
short, they are paid by the Department of Education to serve 
our students, but we are increasingly seeing evidence that they 
do not.
    A new report by the Inspector General found that these loan 
servicers are failing, even potentially cheating borrowers, and 
the Department of Education is asleep at the wheel. According 
to the Inspector General's report, the servicers fail to tell 
borrowers about all of their repayment options. They 
miscalculate how much the students should be paying through 
income-based repayment.
    Two servicers, Navient and the Pennsylvania Higher 
Education Assistance Agency, also known as PHEAA, put borrowers 
into forbearance without first informing them of other less-
costly options, which can possibly put students on a path into 
default, ruining their credit ratings, and exposing their 
income to being garnished.
    Julie Roberts is a 52-year-old woman fighting Stage 4 
breast cancer. She owes $80,000 in student loans and asked for 
a cancer deferment, which the Congress mandated by law through 
the Labor, HHS bill last year. However, her loan servicer told 
her no.
    The servicer said the bill had not passed. It had passed. 
And that she did not qualify. She did. And it was only after 
she went to the press did the servicer comply with the law.
    So this is a serious problem, and as the IG indicated, it 
is not an isolated incident. The Inspector General found that 
between 2015 and 2017, most, 61 percent of the recorded 
interactions were out of compliance with the law. As the 
subcommittee that provides funding for the Department of 
Education and student loan servicers, we have a duty to address 
this issue.
    Why? In fiscal year 2019, we provided $1,700,000,000 for 
student aid--for the student aid administration. Of that 
amount, almost $1,000,000,000 went to servicing contracts, 
$700,000,000 went to salaries. And that budget has increased by 
over $500,000,000 in 5 years while other education priorities 
have been flat or even eliminated.
    So it is imperative that we get to the bottom of these 
issues. Of particular concern to me is what the IG deemed to be 
inconsistent oversight at the Department of Education. 
According to the Inspector General's report, and I quote, ``FSA 
management rarely used available contract accountability 
provisions to hold servicers accountable for instances of 
noncompliance.''
    And secondarily, ``By not holding servicers accountable for 
instances of noncompliance with Federal loan servicing 
requirements, FSA, the Federal Student Aid, did not provider 
servicers with an incentive to take action to mitigate the risk 
of continued servicer noncompliance that could harm students.''
    So as a result, ``Taxpayers might not have been protected 
from improper payments.''
    The Department of Education let servicers off the hook. The 
worst offenders continue to get loan portfolio. In fact, the 
Department's performance metrics for these companies does not 
take compliance with the law into account. They don't have to 
comply with the law. You could be breaking it and continue to 
get contracts.
    I will also note that right now borrowers do not have a 
choice with regard to their loan servicing company. They have a 
choice of a college, of their college on the front end, but 
they do not have options for loan servicers when they leave 
school. That takes away their leverage and the incentive for 
servicers to try and keep their business.
    Now the Department of Education has claimed that they are 
fixing these problems. However, there is a lack of 
transparency, so we cannot simply take their word for it. We 
have an oversight responsibility.
    Secondarily, the problem goes even further than what the 
Inspector General has uncovered. That is because Secretary 
DeVos is preventing States from stepping in to help. States 
have enacted student loan bills of rights. My home State of 
Connecticut was the first State to do so.
    But Secretary DeVos is claiming that the Higher Education 
Act preempts States from enforcing those consumer protections 
for students. In a March 2018 statement of interest in the 
Federal Register, the Secretary said in a quote, ``The 
servicing of direct loans is an area involving uniquely Federal 
interests that must be governed exclusively by Federal law.'' 
In other words, not only do States have no business trying to 
protect individuals within their boundaries, they are 
prohibited from doing so by Federal law.
    Let me just say that is false. Nothing in the Higher 
Education Act even suggests that Congress intended to curb 
State law on this issue. Nothing in Federal law gives the 
Secretary of Education the authority to broadly supersede State 
law in this area. And I will note it is written into the loan 
servicer contracts that they uphold State law.
    I do not believe I need to preach the merits of contract 
law or federalism to my colleagues. The courts have dismissed 
Secretary DeVos' interpretation--California, Massachusetts, 
Washington, Illinois, and Pennsylvania. And the Secretary's 
actions have drawn bipartisan rebukes from the National 
Governors Association, State bank regulators, Republican and 
Democratic Members of Congress, and a large bipartisan 
coalition of attorneys general, including Colorado, Illinois, 
Kansas, Kentucky, Montana, Tennessee, Texas, and many more.
    It is our duty as the subcommittee which funds the 
Department of Education to ensure that we are supporting 
Americans in their quest for higher education and solid footing 
in the middle class. Secondarily, we must ensure that programs 
that we have in place to do so are serving public, not 
corporate interests.
    I am looking forward to hearing from our witnesses on the 
extent of the problem, how we can make the loan servicing 
system and the Department's oversight and policies work for our 
students.
    I now would like to turn it over to my good friend from 
Oklahoma, the ranking member of the subcommittee, Mr. Cole, for 
any opening remarks that he cares to make.
    Mr.  Cole. Thank you very much, Madam Chair.
    And let me begin by apologizing to you and the committee 
for being late.
    Ms.  DeLauro. You don't have to apologize.
    Mr.  Cole. I was testifying at the Budget Committee. So I 
raced here as fast as I could.
    Ms.  DeLauro. A noble cause.
    Mr.  Cole. A noble cause. And an often hopeless endeavor. 
[Laughter.]
    Mr.  Cole. We are at least trying.
    Ms.  DeLauro. Amen. Amen.
    Mr.  Cole. But again, I want to thank you, Madam Chair.
    I think this is the first time this subcommittee has held a 
hearing on the topic before us today, and I want to commend the 
gentlelady for her interest in oversight on the loan servicing 
program. I think it is a real contribution, and I am glad this 
committee is going to take a hard look.
    The subcommittee provides nearly $1,000,000,000 a year to 
the Department of Education to pay for servicing of Federal 
student loans. The policy behind the program is outside our 
jurisdiction, but I do agree we need to ensure accountability 
and proper program performance using appropriated funds.
    Federal student loans are complicated and confusing for 
many borrowers. They rely on the Department of Education and 
their loan servicers to help them navigate the system. I 
understand the Department is currently attempting to modernize 
and upgrade the way it communicates with borrowers through the 
NextGen initiative. And frankly, I want to commend the 
Department for tackling a problem you clearly didn't create, 
but you inherited. And I think it is important we continue to 
make progress.
    I am hopeful that efforts like this can increase borrower 
satisfaction and choice, as well as make efficient use of 
taxpayer dollars. I look forward to hearing the testimony, as I 
enjoyed reading the testimony, quite frankly, and learning 
about ways we can make the loan servicing system work better 
for both borrowers and taxpayers.
    And with that, Madam Chair, I yield back the balance of my 
time.
    Ms.  DeLauro. Thank you very much.
    Let me just set some ground rules and a little housekeeping 
here for the moment. We will be calling on Members based on 
seniority of the Members that were present when the hearing was 
called to order. We will alternate between the majority and 
minority.
    Each Member is asked to keep their questions to within the 
5 minutes per round. We will conduct one round of questions for 
the first panel and then turn to the second panel, and I am 
advised to tell witnesses to please turn on the microphone.
    So, again, let me thank our distinguished panelists for 
being here. I will introduce the witness for our first panel 
and then wait and do the introductions for the additional 
witnesses before we begin panel two.
    And first, we have Mr. Bryon Gordon, who is Assistant 
Inspector General for Audit in the Department of Education's 
Office of the Inspector General. He has more than 15 years' 
experience in auditing Federal education programs and 
previously served for 23 years at the Government Accountability 
Office. Mr. Gordon led the recent audit on student loan 
servicing that we are here to discuss today.
    Mr. Gordon, please begin your testimony. Thank you.
    Mr.  Gordon. Chairwoman DeLauro, Ranking Member Cole, 
members of the subcommittee, thank you for inviting me here 
today to discuss the U.S. Department of Education Office of 
Inspector General's recent audit of the Federal Student Aid 
office's oversight of student loan servicing. The objective of 
our audit was to determine whether FSA had established policies 
and procedures to mitigate the risk of servicers not servicing 
federally held student loans in accordance with Federal 
requirements.
    To help manage the over $1,000,000,000,000 Department-owned 
student loan portfolio, FSA contracted with nine companies 
called servicers as of September 30, 2017. The servicers 
collect payments on loans, advise borrowers on resources and 
benefits to manage their student loans, and respond to customer 
service inquiries. When performing this work, these nine 
servicers must comply with all requirements of servicing 
federally held student loans.
    At the time of our audit, FSA had several processes in 
place to oversee the work of the servicers. We examined those 
activities, as well as FSA's policies and procedures.
    We found that FSA's oversight policies, procedures, and 
activities did not collectively provide reasonable assurance 
that the risk of servicer noncompliance with Federal 
requirements for servicing student loans was being mitigated or 
reduced. Specifically, we found that although it regularly 
identified instances of servicer noncompliance, FSA did not 
track all instances of noncompliance. In addition, FSA 
management did not analyze the information it did have to track 
and identify trends and recurring instances of noncompliance at 
each servicer and across all servicers.
    We found that FSA identified servicer noncompliance in 210, 
or about 61 percent, of the 343 monitoring reports that we 
analyzed. These monitoring reports disclosed recurring 
instances of noncompliance primarily in two areas--consumer 
protection, where representatives were not sufficiently 
informing borrowers of the available repayment options, and 
income-driven repayment, where servicers were incorrectly 
calculating payment amounts.
    Additionally, we found that FSA management rarely used 
available contract accountability provisions to hold servicers 
accountable for instances of noncompliance and did not 
incorporate a performance metric relevant to servicer 
compliance into its methodology for assigning loans to 
servicers.
    For example, FSA identified just four instances totaling 
about $181,000 over a 5-year period where it required servicers 
to return funds for failure to comply with Federal 
requirements. We also found that FSA employees did not always 
follow policy when completing their evaluations of the quality 
of servicer representatives' interactions with borrowers and 
that FSA did not provide reports of failed calls to servicers 
during a 10-month period from June 2016 through March 2017.
    Because FSA's oversight policies, processes, and activities 
do not collectively provide reasonable assurance that the risk 
of servicer noncompliance was being mitigated, FSA did not have 
reasonable assurance that servicers were complying with Federal 
loan servicing requirements when handling borrowers' inquiries. 
Borrowers might not have been protected from poor services, and 
taxpayers may not have been protected from improper payments.
    Because it was not holding loan servicers accountable for 
instances of noncompliance, FSA did not provide servicers with 
an incentive to take action to mitigate the risk of continued 
servicer noncompliance that could harm students. We made six 
recommendations to address the weaknesses that we identified. 
FSA disagreed with parts of our findings but agreed with all of 
our recommendations and stated that it was already implementing 
corrective actions.
    I would like to also mention that we reissued the report 
yesterday with a few minor corrections, none of which affects 
the findings or the conclusions of the report.
    After issuing our report, additional information was 
brought to our attention regarding an FSA review of Navient 
that we discussed in our report and the reason that Oklahoma's 
Student Loan Authority was required to repay funds to FSA. In 
response, I ordered a full review of the supporting 
documentation for the entire report, which resulted in the 
identification of one other minor correction.
    In closing, the OIG is committed to working with FSA, the 
Department, this subcommittee, and the Congress to help improve 
Federal student aid programs and operations so that they meet 
the needs of America's students and families and ensure that 
the vital tax dollars that fund these programs are protected 
from waste, fraud, and abuse.
    I would be happy to answer any of your questions. Thank 
you.
    [The information follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    Ms.  DeLauro. Thank you very much, Mr. Gordon.
    We will start with the questioning. Mr. Gordon, Federal 
Student Aid maintains a database where you track servicer 
noncompliance. Audit reports said the database may have been 
incomplete, as FSA chose to leave out evidence of noncompliance 
as long as the servicer promised to remedy the situation, the 
problem.
    Do you think that FSA's approach to essentially take the 
servicer's word for it is a sound approach to protecting 
students and taxpayer dollars, and did FSA go back and check to 
make sure the servicer followed through and implemented the 
remedy to the noncompliance problem?
    Mr.  Gordon. So as we state in our report, FSA was not 
tracking all instances of noncompliance. During their reviews, 
if the servicer corrected the noncompliance, FSA would not 
track it. FSA would only track the instances that were not 
addressed during the review.
    Ms.  DeLauro. So that, in fact, it was--we don't know--they 
didn't lay out the full scope of the problem?
    Mr.  Gordon. Right.
    Ms.  DeLauro. Okay. What is the impact of FSA not 
thoroughly tracking all compliance--noncompliance issues?
    Mr.  Gordon. So this is a key finding of our report where 
we feel that FSA should be tracking all instances of 
noncompliance, analyzing that information, and using that to 
identify trends in noncompliance either of particular servicers 
or across all servicers. By not collecting all that information 
and analyzing that, they did not have the information they 
needed to hold the servicers accountable.
    Ms.  DeLauro. So, in fact, that puts the borrower at risk 
and costs the taxpayers for servicers who were potentially not 
following compliance efforts?
    Mr.  Gordon. Correct. FSA would work to address the 
individual instances of noncompliance in its reviews, but by 
not identifying trends and correcting the underlying causes and 
working to address those, then potentially other borrowers 
would be affected----
    Ms.  DeLauro. Be affected.
    Mr.  Gordon [continuing]. If those problems weren't 
corrected.
    Ms.  DeLauro. Another question. In your testimony on the 
audit, you highlight examples of FSA's noncompliance with 
Federal law and how the noncompliance was readily apparent in 
your review of call monitoring reports. As these reports only 
review a sample of calls between borrowers and servicers, is it 
possible that there were other examples of noncompliance that 
were not captured by FSA? And in addition, are the recorded 
phone calls that FSA reviews provided by the servicers 
themselves?
    Mr.  Gordon. Yes, the calls are provided by the servicers 
to FSA. In terms of correcting additional problems, as I 
mentioned, FSA typically focused on the individual instances of 
noncompliance that they found in the reviews. They rarely went 
beyond those to see if there were additional instances of 
noncompliance beyond those particular calls that they 
monitored.
    Ms.  DeLauro. So, in fact, the servicers pass on the calls 
to FSA. So they make--they decide what to pass on. Is that 
somehow a conflict of interest here?
    Mr.  Gordon. We do not specifically address that as part of 
our report. FSA requests a sample and would review a sample of 
calls.
    Ms.  DeLauro. But in fact, you know, I do the call, and 
then I pass on the information. There is no additional 
oversight with regard to that call and that we have no other 
examples of noncompliance that may not have been captured by 
what happened. And in terms of performance, as I understand 
it,--they don't have to deal with requirements of the law in 
terms of what they are obligated to do.
    Let me just ask another question. I have got about a 
minute. Did you want to say something?
    Mr.  Gordon. No, no.
    Ms.  DeLauro. FSA management rarely used available contract 
accountability provisions to hold servicers accountable for 
instances of noncompliance. FSA has required servicers to 
return just $1,700,000 to the Federal Government for 
noncompliance.
    This subcommittee most recently--we provided $1,700,000,000 
in both fiscal years 2018 and 2019, $1,000,000,000 carved out, 
as has been pointed out. That means, $1,700,000 penalties 
servicers had to pay only--that accounts for less than 12 
percent of the money that Congress provided.
    What more can FSA have done to hold servicers accountable 
for noncompliance? What tools are at their disposal that they 
are not using?
    Mr.  Gordon. As we pointed out in our report, there are two 
primary tools. One is they do not have to pay servicers if they 
are noncompliant in providing the services. So they could 
request those funds back when they determine that there is 
noncompliance. The other tool that they do not utilize is they 
do not factor in compliance into their allocation formula for 
allocating loans among the servicers. So they do have two tools 
at their disposal that they could use.
    Ms.  DeLauro. Have they denied payment of any of the 
servicers?
    Mr.  Gordon. As our report points out, over a 5-year 
period, FSA was only able to identify 4 instances where they 
required servicers to return funds for just $181,000 over that 
5-year period.
    Ms.  DeLauro. Thank you. My time is up.
    Congressman Cole.
    Mr.  Cole. Thank you very much, Madam Chairman.
    Mr. Gordon, could you give us a quick history lesson? When 
did the system that we have now come into being and whereby we 
manage this incredibly large portfolio?
    Ms.  DeLauro. 1998?
    Mr.  Gordon. Yes, FSA became a performance-based 
organization in 1998.
    Ms.  DeLauro. Does he have his mike on?
    Mr.  Gordon. I am pushing the button. It is not going on.
    Mr.  Cole. Could you just pull the other mike over?
    [Pause.]
    Mr.  Gordon. My apologies. So the current system where FSA 
relies on servicers, on Title IV Additional Servicers, that 
started, the initial contracts were let for those in 2009, 
where FSA primarily uses a performance-based approach to 
managing those servicer contracts. At the initial time, there 
were four TIVASs. After then, some not-for-profits were added, 
and the not-for-profits are--as of the time of our report, 
there were five not-for-profits for a total of nine servicers.
    Mr.  Cole. Since this system has been in operation since 
2009, is your audit the first time we have really gone and 
looked at it? And again, I want to commend the gentlelady for 
holding this hearing.
    Mr.  Gordon. No, we have looked at oversight, FSA's 
oversight of its contractors on multiple occasions. That 
continues to be an area that we highlight as a management 
challenge for FSA and have made recommendations. GAO has also 
done the same. Numerous reports have identified issues with 
FSA's oversight.
    Mr.  Cole. And how much success have you had in your 
recommendations being accepted and adopted by FSA?
    Mr.  Gordon. So we have a good track record with FSA 
accepting and adopting our recommendations. Yet we continue to 
find instances or evidence where there are problems with 
oversight on both contractors and program participants.
    Mr.  Cole. Again, we have been told there is a new program 
being put in place program, this--I always want to say 
``NextGen,'' but MyGen program. Have you had a chance to look 
at that and see whether or not it is making any material 
difference in some of the concerns you have expressed in the 
audit?
    Mr.  Gordon. We have not looked at that specifically. They 
are still early on in the planning for that. They have made 
indications--in the response to our report, they indicated that 
they felt that that would enable them, put them in a better 
position to address some of the issues that our report 
identifies.
    Mr.  Cole. Can you tell us when you would expect to have 
another look to see whether or not this has actually made a 
difference?
    Mr.  Gordon. So we will follow up on the recommendations 
that we made and work with FSA as they propose specific 
corrective actions, and then, ultimately, they will be 
responsible for implementing those corrective actions.
    Mr.  Cole. Okay. In your written testimony, you mentioned 
that the Federal aid programs are complex and inherently risky 
because of the numerous entities involved in administering 
them. Can you elaborate on that? Describe specific complexities 
and share with us how many different types of entities are 
actually involved?
    Mr.  Gordon. So the student loan programs that FSA 
administers, they rely heavily upon the servicers that we are 
talking about today. They still also have an outstanding 
portfolio of guaranteed student loans that were left over from 
the old FFEL program. They are responsible for overseeing the 
6,000 institutions that participate in the Title IV programs 
and administering all the laws and requirements under the Title 
IV programs.
    Mr.  Cole. Okay. And finally--and this is probably an 
unfair question--but you look at a lot of different agencies. I 
am just trying to sort of in the spectrum of things that you 
look at, where would you rank FSA? I mean, are they worse than 
most public entities in terms of administering, better, 
average?
    Mr.  Gordon. I am not really in the position. I am just 
with the Department of Education OIG. So we primarily focus on 
the Department and FSA in our audit work.
    Mr.  Cole. Well, that was a tough question. So I certainly 
understand that.
    Thank you, Madam Chairman. I yield back the balance of my 
time.
    Ms.  DeLauro. Mr. Pocan.
    Mr.  Pocan. Thank you, Madam Chairman.
    And thank you very much for being here today. I appreciate 
it.
    I had a question. In the report when you are reviewing 
servicer noncompliance, mostly oversight was around monitoring 
phone calls, and presumably, that is the way the servicers are 
choosing to reach out to folks. With your oversight 
responsibilities, would it be easier if borrowers were 
permitted to interact with the servicers over email and they 
had a written record to review?
    Specifically, you know, given some of the legal cases and 
things we have had to deal with, wouldn't that give a record 
for people trying to be able to address some of these issues? 
Could you just address that?
    Mr.  Gordon. I believe they can interact by email with the 
servicers also.
    Mr.  Pocan. But it looks like you exclusively refer to 
phone calls. Did you also review emails?
    Mr.  Gordon. We did not. We reviewed FSA's tools that they 
use to monitor the servicers. The call monitoring is one of the 
key ways that they monitor how servicers are interacting with 
borrowers.
    Mr.  Pocan. Okay. So they don't--do you know if they 
actually do a review of the emails as you did your----
    Mr.  Gordon. So, so we discuss several different kinds of 
reviews in our report. They also do onsite reviews of the 
servicers where they review borrower records, the interactions 
with the borrowers. We also cite findings from those reviews in 
our report.
    Mr.  Pocan. And do you know, I mean, roughly a percent of 
what is done via phone versus email by the servicers?
    Mr.  Gordon. I do not know that.
    Mr.  Pocan. Okay. This would be an interesting area to know 
because, you know, it is a lot harder over a phone call to be 
able to do that kind of monitoring versus something that you 
have a paper record, and the actual consumer would have a paper 
record would certainly be helpful.
    So you highlighted some pretty interesting examples of some 
of the abuses, and there has been some talk in some of the 
media articles about what happened. Could you highlight just a 
couple to give an example of what kind of abuse has gone on and 
what we are hoping to address?
    Mr.  Gordon. So in our report, we have highlighted several 
different types of noncompliance that FSA found during its 
reviews. In particular, one of the most frequent areas that we 
highlight was the fact that servicers were not providing 
information on all the available options when they were working 
with borrowers on making adjustments to their payment plans, 
which is a key requirement of the program.
    And by providing that kind of information, that would allow 
borrowers to make informed decisions and understand what their 
options and the consequences of the option that they choose are 
relative to the other options available to them.
    Mr.  Pocan. Were you able to tell if that was done by 
omission or by intent?
    Mr.  Gordon. So, no, we do not look at that. We looked at 
and relied on the reviews that FSA did.
    Mr.  Pocan. Did the FSA do reviews to see if it was by 
omission or intent?
    Mr.  Gordon. FSA's reviews generally focused on the actual 
noncompliance and correcting the noncompliance. Again, one of 
our key recommendations is that we think by analyzing and 
reviewing all the evidence across servicers, FSA would be 
better positioned to get at the potential causes behind why 
that noncompliance is occurring, whether it is on purpose or 
whether it is just by lack of clarity on what is required.
    Mr.  Pocan. And I am sorry if I am not being clear, but 
were you able to tell by doing that review that they actually 
do that, or did they just see if there was noncompliance, or 
did they see how it occurred?
    Mr.  Gordon. That was one of the key recommendations of our 
report is that they should do that, yes.
    Mr.  Pocan. They don't--gotcha. And then there is something 
in the--there is an article in Forbes about the Department of 
Education's loan default unit is in disarray. Specifically, it 
addressed the Department's default resolution group and the 
debt management and collection system. Did you look 
specifically at those two, and if so, did you make 
recommendations to the agency to address those?
    Mr.  Gordon. No, we did not look at those issues. What I 
will say is we are currently about to begin our annual work 
planning process, and that is an issue that we could take under 
consideration as we look to develop new audit work for the 
future.
    Mr.  Pocan. Yes, that would be, I think, great. Just from--
based on the work you have done, sometimes it is nice to find 
the other areas, and there certainly seems to be a couple areas 
that would be worth looking at.
    I yield back, Madam Chairman.
    Ms.  DeLauro. Thank you.
    Mr. Harris.
    Mr.  Harris. Thank you very much.
    Let me just ask a question. Before 2010, how big was the 
portfolio that FSA dealt with?
    Mr.  Gordon. So in----
    Mr.  Harris. It is now over $1,000,000,000,000.
    Mr.  Gordon. Yes, it is over $1,000,000,000,000.
    Mr.  Harris. What was it then?
    Mr.  Gordon. I believe it was--I believe it has about 
tripled since that time.
    Mr.  Harris. Tripled, that is a lot. I mean, as you said, 
it is one of the largest financial institutions in the country.
    Mr.  Gordon. Yes.
    Mr.  Harris. And it grew that way in only 8 years. So 
unlike the other financial institutions that handle 
$1,000,000,000,000 worth of things have been around 50, 60, so 
they had a lot of time to kind of figure out how this thing. 
And the law has changed since then, right? I mean, we changed 
it. The regulations changed.
    So I guess the approach you have is I understand the IG 
does this audit. And you know, you do an audit of any 
Government agency, you are going to find some places where they 
don't--where things don't comply. But my understanding is that 
the FSA kind of agreed with the six recommendations and said 
they were going to do it. And that is 5\1/2\ months ago. Is 
there any data that they haven't been doing it in the past 5\1/
2\ months?
    Mr.  Gordon. No, we have not reviewed anything specific to 
the actions that they discussed in the report.
    Mr.  Harris. Okay. So we did the investigation. We found 
some areas, and by the way, it is not that the current 
administration hasn't taken any action. My understanding is 
they have taken action. Even in the report, they have taken 
some actions to get the money back from these servicers that 
aren't doing the job. I get it, and we, you know, hire some 
other servicers to do the job better, or these servicers will 
figure it out.
    But, so is there a problem ongoing? I mean, what is your 
perception? And you might say, look, I don't know. We studied 
it over 5 months ago was our report. What is your perception 
now?
    Mr.  Gordon. So I think it is a good thing that FSA agreed 
with our recommendations and reported back that they will take 
action. After we issue a report, we will work with the 
Department to look specifically at what those actions are, and 
we will review those actions. And then once we are okay with 
that, then it will be up to them to implement those actions.
    Mr.  Harris. Sure.
    Mr.  Gordon. So, yes, I do think that is a good thing that 
they were responsive to the recommendations and have agreed and 
reported back to us that they have already taken action on 
those.
    Mr.  Harris. That is kind of what they are supposed to do, 
right?
    Mr.  Gordon. Correct.
    Mr.  Harris. When was the previous audit this extensive, 
when was it undertaken of FSA? Ever?
    Mr.  Gordon. So we are always looking at various aspects of 
FSA.
    Mr.  Harris. Do you understand my question?
    Mr.  Gordon. Yes.
    Mr.  Harris. This extensive an audit of FSA, has it 
occurred since 2010? No, right?
    Mr.  Gordon. I don't think so. I would have to get back to 
you on that.
    Mr.  Harris. Okay, probably not. So let me see. You have a 
new program. You triple the size into a $1,000,000,000,000 
mechanism. Hopefully, maybe next time we will talk about the 
increasing cost of college because that is really what is the 
underlying problem.
    You found some problems. The agency said they are going to 
fix it. Why aren't we waiting until your next audit to 
criticize the agency for noncompliance? I mean, the bottom 
line, this is the way the Government is supposed to work, 
right?
    Mr.  Gordon. Yes.
    Mr.  Harris. Okay. I just thought I was missing something.
    Thank you very much. I yield back.
    Ms.  DeLauro. Ms. Bustos.
    Mrs.  Bustos. Thank you, Madam Chairman.
    And also I want to thank our chair, Congresswoman DeLauro, 
for being a truth seeker in everything you do, and I don't 
think it is our job up here to protect the Secretary of 
Education.
    So I just got on the phone before I came here with one of 
my sons. My husband and I have three children, all college 
educated at different levels. One is a graduate of community 
college, one a private college, and one a public university. 
And one of my sons--and I am not going to say who because he 
wouldn't be happy if I called him out by name--still has a six-
figure debt after graduating in 2010. He started out in a job 
where he made $30,000 a year. So you think about how that 
delays your life.
    So to the other line of questioning. At the end of every 
single one of these violations that you said the two biggest, 
consumer protection was one of the biggest violations. Number 2 
was the incorrect--you didn't use the word ``deciphering,'' but 
I will say incorrect deciphering of payment amounts.
    And so at the end of every single one of those violations 
is a human being, is one of our kids or grandkids who went to 
college and now are having to delay their lives. Maybe they 
can't invest in a home. Maybe they put off getting married, all 
of that.
    So this question is kind of a big one, but right now, let 
us look at the freshmen who will be graduating, let us say, in 
4 years. In the next 4 years, what is it going to take to clean 
up this mess? What do you need from us, and what is the game 
plan to clean up this mess so our children aren't continuing to 
be ripped off by the system?
    Mr.  Gordon. Thank you for the question, and I apologize, 
my mike has gone off again.
    Mrs.  Bustos. I don't think that is your fault.
    Mr.  Gordon. So I think where this committee and Congress 
can help with this, I think the recommendations that we make in 
this report are really central to better positioning FSA to 
address the underlying issues of noncompliance. If they were to 
do a better job of analyzing the noncompliance and taking 
actions ultimately to reduce noncompliance, then that should 
decrease the likelihood that your son or daughter would 
experience problems in the future.
    So anything that this committee can do to support the 
recommendations, either by asking FSA to report on their 
progress or on the outcomes of what they do in response to our 
report, I think would be helpful to reinforce that with them.
    Mrs.  Bustos. Well, it is kind of difficult, it seems to 
me, when we have got Secretary DeVos, who has come forward 
saying that Federal law trumps State efforts when it comes to 
oversight of these companies.
    So I come from Illinois, and we are one of the States that 
is actually trying to fix this. And I think that is part of the 
problem when we have basically a Secretary who is overseeing 
all of education who doesn't seem to want to work with us in 
making this better for our children.
    Just another follow-up question. In your testimony, you 
talked about failed calls, and can you explain what is a 
``failed call?'' If you can describe what that means, how that 
looks to the person on the other end of the line.
    Mr.  Gordon. So FSA would review the calls. They would take 
into consideration about 25 percent of what they look at is the 
actual greeting and the information that they provide the 
servicer on--or provide the borrower on the call. And then the 
remaining 75 percent of the review would be related to what the 
servicer works through with that borrower on that call. They 
would basically score whether they accurately provided the 
service to the borrower, and any score below 85 percent would 
be deemed a failed call.
    So failed calls could be just based on the greeting itself, 
or it could be--also include compliance issues that FSA found 
during its review of the call.
    Mrs.  Bustos. Okay. Thank you very much for being here with 
us today. Thank you for your efforts to make things right.
    And with that, I yield back the balance of my time.
    Ms.  DeLauro. I thank the gentlelady.
    And response to Congressman Harris' query and just as a 
point, the Federal Family Education Loan Program, that is FFEL, 
that was prior to the Direct Loan Program, was riddled with 
widespread fraud, waste, and abuse. In fact, the GAO and 
Education OIG highlighted those issues in a 2003 semiannual 
report.
    You should also know that in July 2018, the Government 
Accountability Office released a report, entitled ``Federal 
Student Loans: Further Action Is Needed to Implement 
Recommendations on the Oversight of Loan Servicers.'' The 
report reviewed the Department of Ed's efforts to implement 
previous recommendations that it had made improving that.
    The performance audit was conducted in 2000--April 2018 to 
July 2018. And in that report, GAO stated the Department of 
Education had only implemented two of the six recommendations 
GAO made to the Department improving its oversight of student 
loan servicers in both 2015 and 2016, which means that FSA had 
over 2 years to implement GAO's recommendation, but in fact, it 
chose not to.
    Mr. Moolenaar.
    Mr.  Moolenaar. Thank you, Madam Chair.
    Thank you for your testimony today and for your overview of 
what you learned in this process.
    I wanted to understand how was the objective of the audit 
determined, and what prompted that back in what year was it 
that it started?
    Ms.  DeLauro. 1998.
    Mr.  Gordon. This audit?
    Mr.  Moolenaar. Was it 2015?
    Mr.  Gordon. Yes.
    Mr.  Moolenaar. Okay. So 2015, in January of 2015. And what 
prompted the audit, and what determined the objective of the 
audit?
    Mr.  Gordon. So as I have mentioned, oversight by FSA has 
been a management challenge area for us. That is always an area 
of focus. The actual objective itself was derived to take a 
broad look at FSA's overall system of controls over 
noncompliance, what they were doing to ensure that servicers 
were complying with the requirements.
    Mr.  Moolenaar. So, in 2015, you determined there was a 
management challenge at FSA or that----
    Mr.  Gordon. It has been a management challenge for years, 
going back a little over a decade, yes.
    Mr.  Moolenaar. Okay. So who at the time was the Secretary 
of Education in 2015?
    Mr.  Gordon. That would be the prior administration.
    Mr.  Moolenaar. Do you remember who that was?
    Mr.  Gordon. There was some change. I would have to double 
check, yes.
    Mr.  Moolenaar. So there was some transitioning going on in 
the prior administration, and at that time, you felt it was 
worthy of this investigation because there were problems that 
were being identified?
    Mr.  Gordon. Yes. These problems span multiple 
administrations. As we point out in our management challenge 
report, these are large, complex programs. FSA has a lot of 
responsibility, oversight, and this is an area that we continue 
to focus on in our audit work.
    Mr.  Moolenaar. Okay. So then with the transfer and into a 
new administration, you presented the findings of your report, 
and then the new administration, I understand there were some 
disagreements on maybe whether the policies were in place or 
not. Is that correct?
    Mr.  Gordon. They disagreed with the overall conclusion of 
the report.
    Mr.  Moolenaar. Okay.
    Mr.  Gordon. The main finding that they did not have 
adequate controls to ensure that servicers were complying, they 
disagreed with that. However, they did agree with all the 
recommendations and did report back to us the actions that they 
either had taken or were planning to take.
    Mr.  Moolenaar. Okay. So I guess that gets to the point 
that Dr. Harris was raising, too, is so this was brought to the 
attention of the Secretary or the Director of the FSA. They 
agreed with the recommendations and now are in the process of 
implementing those. Is that your understanding?
    Mr.  Gordon. Correct, correct. Yes, we will work with them 
on their actual corrective actions. They will present to us 
formal corrective actions in response to our recommendations. 
And once we are okay with that, then it is up to them to 
actually implement and address the issues that we found.
    Mr.  Moolenaar. Okay. And will you come back to the 
committee and report on that at some point?
    Mr.  Gordon. I would be happy to.
    Mr. Moolenaar. Okay. I am assuming that the chair would 
permit that? I would be interested in hearing that.
    Ms.  DeLauro. I would be absolutely willing to do that. 
There was also, I guess, some disagreement with some of the 
recommendations, but that you are taking into consideration. 
They did disagree with some of your recommendations?
    Mr.  Gordon. They disagreed with the overall conclusion of 
the report.
    Ms.  DeLauro. Conclusions, okay.
    Mr.  Gordon. The recommendations themselves, they did agree 
on.
    Ms.  DeLauro. Okay. Fine, thank you for that clarification.
    Mr.  Moolenaar. Were there areas where your conclusion was 
that there needed to be a policy in place, they may have 
disagreed and said that there was a policy in place? Is that 
the kind of----
    Mr.  Gordon. Our conclusion was that they did not have 
procedures in place to provide reasonable assurance to ensure 
that there was not noncompliance by the servicers.
    Mr.  Moolenaar. Okay.
    Mr.  Gordon. They felt that all the oversight mechanisms 
that they had in place did provide them with that. But we felt 
it was really important, not just the oversight that they were 
doing, but making use of the information on noncompliance, 
analyzing that, and using that to reduce noncompliance in the 
future. That was really the disagreement that we had with them.
    Mr.  Moolenaar. Okay. And then just so I understand, when 
there is noncompliance, is there consequences for 
noncompliance, and is that part of the policy you are referring 
to that----
    Mr.  Gordon. So under the contract that FSA has with the 
servicers, they can take action against the servicers if there 
is noncompliance. They do not have to pay the servicers for 
servicing the loans that are noncompliant.
    Mr.  Moolenaar. And has there been action taken on any--
with respect to any servicer?
    Mr.  Gordon. So as we highlight in our report, there were 
only 4 instances in the 5 years prior to the end of our audit. 
What they reported back to us is that they had assessed about 
$2,000,000 in penalties subsequent to our audit.
    Mr.  Moolenaar. Okay. Thank you, Madam Chair.
    Ms.  DeLauro. Thank you.
    Ms. Lee.
    Ms.  Lee. Thank you very much, Madam Chair, and thank you 
for giving us a chance to drill down on this really outrageous 
action that these servicers are taking. And the report, of 
course, not surprising, it is shocking. But this lack of 
transparency and accountability is really unacceptable.
    And what is worse, when you look at the fact that borrowers 
of color disproportionately take on more debt and owe more on 
their Federal student loans. I am looking at, what, 77 percent 
of African-American students, nearly 50 percent of African-
American students the borrowers defaulted and 75 percent of 
those who dropped out of the for-profit colleges.
    Now your report, I believe, covered a sample of the abuses 
only that the servicers commit. So I am wondering if we looked 
at the rest of the data from the student loan borrowers, would 
there be more examples of the Department's lack of oversight 
and servicer error or not? Or do you use these samples to kind 
of estimate what types of errors are there?
    And then, secondly, let me just ask you about, and you can 
answer all in one response, who are these servicers? How do 
they get these contracts? You said in your testimony there are 
4 servicers responsible for 93 percent of the 
$1,000,000,000,000. Do you have any minority-owned contractors 
who are doing this?
    I mean, what is going on with this business, and how are 
they allowed to do this if it is a contractual arrangement? And 
who are they?
    Mr.  Gordon. So in terms of your first question on the 
sampling, we reviewed the reviews that FSA did, both call 
monitoring reviews and other reviews that they did of the 
servicers. During those reviews, FSA would rely on sampling to 
assess compliance. We did not go beyond that.
    FSA, as we say in our report, generally did not go beyond 
the noncompliance that they found in those samples, which could 
be as few as 30 students during--30 borrowers during those 
reviews.
    In terms of the servicers----
    Ms.  Lee. Wait a minute.
    Mr.  Gordon. Sure.
    Ms.  Lee. Are there any statistical formulas that could 
give us a better picture of what the real deal is?
    Mr.  Gordon. So we did not look at that specifically as 
part of our review. FSA does rely on a sampling approach to 
test compliance as they do the reviews. We were focused more on 
what they did once they identified noncompliance and how they 
addressed that and, again, how they used the information that 
they had on noncompliance.
    Ms.  Lee. Well, do you believe you have enough data to make 
these conclusions and recommendations off of their sample?
    Mr.  Gordon. In our report, yes. Yes. Yes, we believe 
based--the conclusions that we draw in our report, we believe 
we have enough information to do that.
    As far as the servicers themselves, we provide that 
information in the report. The four main TIVAS servicers, which 
I was referring to earlier, they were brought in----
    Ms.  Lee. Who is that again?
    Mr.  Gordon. The Title IV Additional Servicers.
    Ms.  Lee. Okay.
    Mr.  Gordon. There is four of them--Nelnet, Navient, PHEAA, 
and Great Lakes. They are the ones that account for over 90 
percent of the servicer fees, and then there are five 
additional not-for-profit servicers that also participate in 
the program. The number of not-for-profit servicers has varied 
over the years. Current, as of the end of our audit, there was 
an additional five.
    Ms.  Lee. Are any minority owned? Are any--and then, 
secondly, are they penalized for these errors?
    Mr.  Gordon. Generally, no, they are not penalized.
    Ms.  Lee. Well, why not? This is taxpayer money. I mean, 
come on. I had a business for 11 years, and if I didn't comply 
with my requirements, I would get penalized.
    Mr.  Gordon. And that was a key recommendation of our 
report is that FSA does have the authority to take action in 
instances of noncompliance and that they should make more use 
of the authority that they have to hold the servicers 
accountable.
    Ms.  Lee. Yes, but that is prospectively. What about 
retrospectively? Are they going to be penalized, fined, kicked 
out of the program? Why are they still there?
    Mr.  Gordon. We did not get into that.
    Ms.  Lee. Well, could you get into it for us, please? I 
mean, this is outrageous. And they shouldn't be there. And then 
I want to know how many are minority owned, too.
    Mr.  Gordon. I don't believe----
    Ms.  Lee. With so many minority students being affected by 
this lack of accountability and transparency and rip-offs, I 
mean, come on. I would think some minority vendors could maybe 
help these other--help FSA understand.
    Mr.  Gordon. I am not aware if any are minority owned. I 
could get back to you on that. Just----
    Ms.  Lee. Would you get back to us and find out why there 
are no minority-owned servicers, given the fact that African-
American and Latino students are 75, 80 percent of the 
borrowers?
    Mr.  Gordon. Yes.
    Ms.  Lee. Okay. Thank you.
    Ms.  DeLauro. Ms. Frankel.
    Ms.  Frankel. Thank you, Madam Chair.
    And thank you for your testimony.
    I am new to the committee. So I just have really some very 
basic questions.
    Can you, first of all, explain how are these service 
providers, how are they selected, and what is their main 
purpose?
    Mr.  Gordon. So the main purpose of the servicers is to 
basically service the loans for the borrowers. So they provide 
information, collect payments from the borrowers, advise the 
borrowers on alternative payment options, help them through 
periods where they have difficulty making payments by, again, 
discussing the options that they have available.
    So they are basically--they are the face that deals with 
all the borrowers, all the student loan borrowers.
    Ms.  Frankel. And how are they selected?
    Mr.  Gordon. So the initial four contractors, the TIVASs 
were awarded in 2009. The not-for-profits, when they were 
brought into the program, that was mandated under law. When 
that mandate was removed, FSA still continued to include some 
of the not-for-profit as part of the program.
    Ms.  Frankel. Were they permanently selected, or is there a 
contract?
    Mr.  Gordon. There is a contract. The initial contract in 
2009 was a 5-year contract, and they were re-awarded in 2014.
    Ms.  Frankel. So it will be up this year?
    Mr.  Gordon. It was a competition. I believe, yes, the 
contract--the contract should be up this year.
    Ms.  Frankel. So is there going to be, do you know, any 
consideration as to compliance whether they will be reselected?
    Mr.  Gordon. The FSA is currently going through, as was 
discussed earlier, a major new initiative, the Next Generation, 
where they are planning to basically revamp how they provide 
servicers and how they work with the loan servicers.
    Ms.  Frankel. Can you give specific examples of how 
noncompliance actually affects the borrower?
    Mr.  Gordon. So in the examples that we talk about in our 
report where a servicer does not provide a full set of 
information when a borrower comes in and seeks an alternative 
repayment, that borrower may select a payment plan that may not 
be in their best interest. They may not understand the 
consequences of that plan or the alternatives that would be 
available.
    The other, in terms of the income-driven repayment options, 
if those payments are miscalculated, the borrower could either 
be over or under assessed payments.
    Ms.  Frankel. Are the service providers given specific 
information on how to answer questions, or is it left to their 
own devices?
    Mr.  Gordon. The provision in the contract requires the 
servicers to comply with Federal requirements. In some 
instances, FSA gives very specific directions. In other 
instances, they may not. That is one of the areas of feedback 
that we have received from servicers related to our report is 
they may not have received specific information on what they 
need to do.
    Ms.  Frankel. Okay.
    Ms.  DeLauro. Will the gentlelady yield for one second?
    Ms.  Frankel. Yes.
    Ms.  DeLauro. Because to follow your line of questioning, I 
think in terms of noncompliance and the effect on the borrower, 
I think you need to let Congresswoman Frankel know about the 
issue of forbearance and moving borrowers into forbearance and 
what that means. And that, in fact, that is the basis of a suit 
against one of the servicers, which is Navient.
    Mr.  Gordon. Sure. If they are improperly moved into 
forbearance or make that decision based on being provided 
incomplete information, they would continue to accrue interest 
and ultimately end up with a larger loan debt as a result of 
the period that they spend in forbearance. So, yes, it can have 
a direct financial consequence on the borrower.
    Ms.  Frankel. Are there any incentives for the providers to 
be in compliance, number one? And number two, is there any 
competition? Do borrowers have any options who they can work 
with?
    Mr. Gordon. So the borrowers are assigned to a specific 
servicer. So, currently, no on that. As far as competition 
among the servicers, the loans are allocated based on a formula 
that is primarily driven by the extent to which they keep 
borrowers in a current payment status.
    Ms. Frankel. And are some doing better than others?
    Mr. Gordon. Yes.
    Ms. Frankel. Yes, okay. And are there any incentives for 
compliance?
    Mr. Gordon. So that is actually the key part of our report 
is that this loan allocation formula, because it does not 
include compliance, does not really provide incentive to 
increase compliance on the part of servicers.
    Ms. Frankel. Thank you. I yield back.
    Ms. DeLauro. Thank you.
    Mr. Graves, it is my understanding that you have no 
questions. So what we will do is to complete this panel but say 
a very big thank you to you, Mr. Gordon, for the work that you 
do, for the impartiality of the work that you do and the 
independence. Because, in fact, the work of the Inspector 
General across departments and the Federal agencies provide us 
with important information.
    And as you pointed out that your recommendations, which 
were laid out, and we would, you know, want to see those and 
obviously see whether or not they are being--there are changes, 
corrective actions being made. But our job is to take a look at 
the data, the material that you put forth and then take it from 
there.
    So we are very, very grateful for your testimony this 
morning. Thank you so much.
    Mr. Gordon. And thank you.
    Ms. DeLauro. Now the second panel to move forward, and we 
are going to--we are sorry about the microphones, Mr. Gordon. 
But they are going to take just a very few minutes to please 
come on up, but they are going to fix the microphones so we 
won't run into this again.
    Thank you.
    [Pause.]
    Ms. DeLauro. Thank you. I will do brief introductions for 
the witnesses who are on this second panel.
    We have first Ms. Joanna Darcus, who is the Massachusetts 
Legal Assistance Corporation Racial Justice Fellow at the 
National Consumer Law Center. Joanna represents low-income 
student borrowers of color using advocacy and litigation to 
address predatory education and lending practices.
    Next we have Ms. Shennan Kavanagh, Deputy Director of the 
Consumer Protection Division at the Massachusetts Attorney 
General's office, where she oversees a variety of consumer 
protection matters relating to student loans, auto finance, 
mortgages, and debt collection. She is also the head of the AG 
office's enforcement initiative on student loan servicing.
    Then we will hear from Preston Cooper, research analyst in 
higher education policy at American Enterprise Institute, who 
focuses on the economics of higher education with a particular 
emphasis on higher education policy at the Federal level.
    And last, we will hear from Ms. Colleen Campbell, Director 
of Postsecondary Education at the Center for American Progress. 
Her work focuses on providing accessible, affordable 
postsecondary options for underrepresented communities and 
adult learning.
    Please everyone note that your full testimony will be read 
into the record, and we will deal with 5-minute presentations.
    Ms. Darcus.
    Ms. Darcus. Chairwoman DeLauro, Ranking Member Cole, and 
members of the committee, the National Consumer Law Center 
thanks you for this opportunity to testify before you today.
    For the past several years, I provided free legal help to 
student loan borrowers, first as a civil legal aid attorney in 
Philadelphia and now from Boston with the National Consumer Law 
Center as a member of our Student Loan Borrower Assistance 
Project. I offer this testimony on behalf of our low-income 
clients.
    It is based on our experience representing them, as well as 
our work providing technical assistance and training to other 
advocates and attorneys who are also assisting student loan 
clients nationwide. Often, their clients' experiences mirror 
those of my clients. Simply put, when servicers fail to provide 
effective service, borrowers suffer.
    When the Department of Education's Office of Federal 
Student Aid fails to identify and correct servicing errors or 
fails to hold servicers accountable, more borrowers suffer. 
Currently, borrowers are the only ones being held accountable 
when something goes wrong.
    Servicers have been systematically failing to keep 
borrowers current. People routinely fall behind because of lost 
or improperly processed paperwork. Borrowers struggle to make 
unaffordable payments because servicers routinely fail to 
inform them about income-driven repayment, and borrowers miss 
out on program benefits like public service loan forgiveness as 
a result.
    Servicers compete for the task of shepherding borrowers 
through repayment. They seek out this responsibility and assert 
that they are capable. We pay student loan servicing companies 
handsomely to advise borrowers of their options and help them 
understand the features of their student loans. We desperately 
need that investment to pay off for borrowers and for other 
taxpayers.
    My low-income clients, the distinct majority of whom are 
people of color, took out student loans because it was their 
best option to fund an education that promised to put them on a 
path to financial security. Borrowing was supposed to make 
higher education not just accessible, but affordable. Yet many 
of my clients worry about how they will repay their loans and 
how long it will take.
    They are doing the math and wondering when education will 
equal opportunity for them. Yet servicers' errors, delays, and 
misinformation tack on additional costs and time in repayment 
for many of them. Because there is no statute of limitations on 
the collection of student loans, fear and anxiety often mount 
along with interest and fees.
    The vast majority of my clients have not only experienced 
delinquency but have fallen into default. Occasionally, I will 
work with a borrower who is still current or who is delinquent. 
As we review their National Student Loan Data System report or 
I decode it for my clients, I help them understand what it 
means and often find that there have been serial forbearances 
and other red flags.
    For instance, last month I met with a 2017 graduate, a 
college graduate, first in her family to go to school, who is 
pursuing a public service career but on a graduated repayment 
plan. Those two things will never work out for her. That plan 
will not get her where she wants to go, which is forgiveness.
    There is more we can do before default, but that doesn't 
mean that borrowers who haven't experienced default haven't 
also been harmed. But unfortunately, for my clients, they need 
an attorney to help them access the features and benefits of 
the program. But no one should need an attorney to help them 
manage their student loans.
    The demand for student loan legal assistance far outstrips 
the supply right now, and in addition to the services offered 
by legitimate companies, student loan attorneys, nonprofit 
financial organizations, a vast debt relief industry has 
cropped up, taking advantage of these borrowers in distress.
    Servicing failure and Federal Student Aid's failure to 
address those issues contributed to the explosive growth of 
this market. Corrective action and system change is imperative. 
Anything less would continue to do a disservice to the student 
loan borrowers who should be able to rely on the servicers they 
pay for, both as student loan borrowers and as taxpayers.
    Since it is tax season, the story I shared about a tax 
offset, a single father raising twins who lost $7,000, 
including the earned income tax credit, is far from an anomaly. 
We need to make these stories a thing of the past. Borrowers 
can't wait for change. Just like Ms. H, the retiree, who needed 
her Social Security to pay her mortgage so she could save her 
house.
    Thank you for your attention to these issues and the 
opportunity to testify today. Borrowers need your attention, 
and they need change now.
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    Ms. DeLauro. Thank you.
    I might note, and my colleague Congresswoman Lee noted 
this, that student loans can't be discharged in bankruptcy as 
well. So they face additional pressure there.
    Ms. Kavanagh.
    Ms. Kavanagh. Chair DeLauro, Ranking Member Cole, and 
members of the subcommittee, thank you for inviting me to 
testify today on the issue of protecting student borrowers by 
oversight of loan servicers. On behalf of Attorney General 
Maura Healy, I appreciate the opportunity to speak on this 
issue and to share our work advocating for student borrowers in 
Massachusetts through enforcement actions, investigations, and 
direct borrower assistance.
    I am here today to reinforce the serious concerns expressed 
by the Department of Education's Inspector General and to urge 
this committee to hold the Department accountable to the 
students and families we all serve.
    Loan servicers are a key player in the student loan system. 
They perform the day-to-day management of loan accounts and are 
borrowers' primary point of contact for information about their 
loans. Notably, despite the critical role that loan servicers 
play in borrowers' financial lives usually over the course of 
decades, borrowers do not get to choose which company services 
their loans. This reality impedes borrowers' ability to 
effectively advocate for themselves in the face of servicer 
misconduct and provides a disincentive for servicers to hold 
themselves to high standards of borrower service.
    There is widespread misconduct in the student loan 
servicing industry undermining borrowers' ability to repay 
their debts and to pursue careers of their choice. Every day, 
our office hears directly from student borrowers seeking help 
from us when their loan servicers have failed them.
    A single instance of servicing noncompliance with State or 
Federal law can have a ripple effect for borrowers, permanently 
getting them off track with successful loan repayment. Everyone 
has an interest in ensuring this does not happen--the students, 
their families, their schools, and the taxpayers.
    This is a national problem with a significant local impact. 
When students cannot afford to repay their student loans, they 
cannot make long-term investments in their local communities, 
such as buying homes. When graduates who wish to pursue public 
service careers as police officers, nurses, teachers, or social 
workers, are improperly denied access to Federal programs 
enacted to enable them to manage their student loan debt, 
communities lose highly skilled and educated public servants.
    It is, therefore, imperative that the Federal Government 
perform strict oversight of its loan servicers. The Department 
of Education must enforce the obligations to which servicers 
agreed and hold them accountable when they violate State laws 
and Federal laws and regulations that govern the programs in 
which borrowers' loans are made. This problem will continue 
indefinitely if left unchecked.
    State agencies like attorney general's offices are playing 
a crucial role in filling the gap and protecting borrowers when 
their servicers fail to comply with the law. Attorney General 
Healy is a leader in this effort and has devoted a significant 
amount of resources to advocacy and enforcement initiatives. 
Through our work, we have uncovered many instances of systemic 
noncompliance with State and Federal law by loan servicers and 
have obtained significant relief for borrowers.
    For example, our office has obtained refunds for thousands 
of borrowers nationally who were overcharged by their servicer. 
Notably, the servicer refused to refund the overcharges for 
over a year, despite knowing that it had improperly billed the 
borrowers.
    We secured a $2,400,000 payment from one servicer for a 
variety of violations of State and Federal law, including 
failing to properly grant eligible military members an interest 
rate cap to which they are entitled under the Service Members 
Civil Relief Act; overcharging late fees to borrowers on 
Federal income-driven repayment plans; misreporting the status 
of borrowers' loan accounts to the credit reporting bureaus; 
and failing to timely process borrowers' applications for 
income-driven repayment plans.
    In addition to our enforcement work, our office created a 
designated Student Loan Assistance Unit to assist individual 
borrowers by bridging the communication gap with their 
servicers. In 2018 alone, the Student Loan Assistance Unit 
fielded over 3,000 telephone calls to its hotline and generated 
over $1,000,000 in savings and recoveries for student loan 
borrowers in Massachusetts.
    The volume of borrowers the Student Loan Assistance Unit 
assists and the breadth of the issues the unit handles exhibits 
the significant need for local resources to help borrowers. 
These are just some examples of the work the Massachusetts 
Attorney General Maura Healy is doing to protect student 
borrowers. They illustrate the need for loan servicer oversight 
at both the State and Federal levels.
    Thank you very much.
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    Ms. DeLauro. Thank you.
    Mr. Cooper.
    Mr. Cooper. Good morning, Chairwoman DeLauro, Ranking 
Member Cole, and members of the subcommittee. Thank you for the 
opportunity to testify today on servicing the Federal student 
loan portfolio.
    My name is Preston Cooper, and I am a research analyst in 
higher education policy at the American Enterprise Institute, a 
nonprofit, nonpartisan research organization based here in 
Washington, DC. My comments today are my own and do not reflect 
the views of AEI, which does not take institutional positions 
on issues.
    Federal student loans are one of the most complex consumer 
financial products that exist in the United States. The loan 
program has several different repayment plans, ranging from the 
10-year standard plan with level payments to extended plans, to 
income-based repayment plans. There are also multiple and 
overlapping loan forgiveness programs, each with different 
requirements and timelines, as well as numerous opportunities 
for borrowers to avoid paying their loans. It is no wonder that 
student loan borrowers, staring down all this complexity, are 
confused.
    To manage its $1,200,000,000,000 student loan portfolio, 
the Department of Education contracts nine servicers, which 
have received plenty of blame for the loan program's problems. 
But while there is always room for servicers and the Department 
of Education to improve, the best way to help borrowers 
navigate our complex student loan program is to simplify the 
system.
    I will discuss two aspects of Federal student loans where 
complexity has led to suboptimal loan outcomes and borrower 
frustration, forbearance and public service loan forgiveness. A 
recent Consumer Financial Protection Bureau lawsuit alleges 
that loan servicer Navient improperly steered its borrowers 
into a loan status called forbearance.
    Forbearance allows borrowers to pause payments on their 
loans for any reason for up to 3 consecutive years. Interest 
accrues during that time, with the typical borrower who stays 
in forbearance for 3 years racking up $4,500 in additional 
interest costs.
    Without question, the use of forbearance is excessive. 
Sixty-eight percent of borrowers who entered repayment in 2013 
used a forbearance at least once, up from just 39 percent from 
the 2009 cohort, despite an improving economy. This is well 
above what we would expect if borrowers were only using 
forbearance to get through temporary hardships as intended. 
Many put the blame for this on servicers, but the more 
important question is why the Federal Government allows student 
loan borrowers to stop making payments for up to 3 consecutive 
years with no questions asked in the first place.
    The complexity of the Federal student loan program has also 
led to considerable confusion among borrowers regarding what 
they need to do to earn public service loan forgiveness, or 
PSLF. As of September 2018, over 41,000 unique borrowers had 
submitted an application for PSLF, despite Federal data showing 
that fewer than 1,800 were even close to making the required 
number of qualifying payments.
    While some claim that servicers or the Departments are 
blocking borrowers from PSLF, these statistics show that tens 
of thousands of borrowers believe they qualify for forgiveness 
when they actually do not. This is because there is a long list 
of stipulations regarding what counts as a qualifying payment, 
which borrowers do not always fully understand. Borrowers must 
have the right kind of loans, must be in the right repayment 
plan, and cannot be in deferment or forbearance when they make 
their payments, among other things.
    A simpler student loan program would improve borrowers' 
experiences and reduce the chance that borrower or servicer 
error leads to a suboptimal outcome. For example, one potential 
simplifying reform would limit discretionary forbearances to 3 
consecutive months, down from the current limit of 3 years. 
Even if the servicer does improperly steer a borrower into 
forbearance, the consequences of that mistake will be minimal 
if the maximum forbearance is only 3 months.
    Since its beginning in 1958, the Federal role in student 
loans has grown ever more expansive and complex. Decades of 
accumulating reforms have led to a sprawling program, which is 
very difficult for either the Federal Government or servicers 
to administer effectively. The path to a better loan program is 
simplification.
    That concludes my testimony, and I look forward to 
answering your questions.
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    Ms. DeLauro. Thank you, Mr. Cooper.
    Ms. Campbell.
    Ms. Campbell. Thank you for having me here today.
    I want to begin on a positive note. Starting in the Obama 
administration and continuing over the last 5 years, FSA has 
been pursuing a complete re-imagining of the servicing system. 
It is now called the Next Generation Financial Services 
Environment, or NextGen, and it modernizes FSA's 
infrastructure, allows for better performance monitoring, and 
most importantly, promises borrowers a single website through 
which they can manage their loans. It is a sure win for 
borrowers.
    But it has been stuck in limbo, thanks to never-ending 
protests and lawsuits brought by servicers and debt collectors 
who want to protect their bottom lines and the status quo. 
While we wait, borrowers are also stuck with a complex system 
that consistently lets them down. It is time to reform the 
repayment system, and Congress can take steps now to fix the 
mess that we are in.
    First, Congress can provide FSA with additional oversight. 
Too often, FSA prioritizes efficiency over outcomes. Efficiency 
means funneling borrowers into less labor-intensive benefits. 
It means cutting corners on compliance monitoring because more 
findings mean more work. It means giving up on severely 
delinquent borrowers because compensation is too low.
    This is not what borrowers deserve. FSA has shown that it 
is unable to balance its priorities, and Congress must make 
clear that borrowers come first.
    To ensure FSA refocuses on its true mission, Congress can 
mandate that the Consumer Financial Protection Bureau reclaim 
its past supervisory and enforcement roles. These duties were 
stripped from the CFPB by Secretary of Education Betsy DeVos, 
who severed the memorandum of understanding that gave the 
Bureau this authority. The CFPB wouldn't merely be a cop on the 
beat but would be a resource and partner for FSA, alleviating 
some of the cost and burden of contractor oversight.
    Second, this committee can restructure how a servicer's 
performance is measured. Currently, servicers are ranked in 
comparison to one another, then allocated a share of new 
accounts based on their rank. Instead, servicers should be 
expected to meet a high standardized baseline of performance so 
that all borrowers can expect the same quality of service.
    And servicers should be measured on more than borrower 
outcomes. Performance metrics should include other objective 
metrics, such as rates of enrolling delinquent borrowers into 
an income-driven repayment plan, providing appropriate and 
accurate counseling, correctly calculating repayment and 
interest amounts, and processing benefits and paperwork in a 
correct and timely manner.
    Federal law should also prohibit specialty servicing, a 
practice in which FSA allocates all accounts of a single type 
to one servicer. For example, FedLoan Servicing or PHEAA 
receives the account of every borrower who indicates interest 
in the Public Service Loan Forgiveness Program, even though 
PHEAA has performed worse than every other servicer in FSA's 
most recent evaluation.
    Specialty servicing ensures that poor performers continue 
to receive accounts and discourages other servicers from 
directing borrowers toward benefits that will cause them to 
lose an account and, therefore, revenue.
    Finally, Congress can provide FSA with flexibility around 
default. As my written testimony details, I recommend that 
Congress puts an end to student loan default. I realize that 
default is defined in the Higher Education Act and is, 
therefore, beyond the jurisdiction of this committee. But you 
do have the opportunity to take the first steps in turning the 
system around. There is not currently a hard line between 
servicing and collections. Though HEA defines default at 270 
days of nonpayment, servicers are not required to transfer 
those accounts to debt collectors until 360 days of 
delinquency.
    Congress could open up some authority for servicers during 
that 90-day period, such as allowing them to automatically 
enroll borrowers into an income-driven, excuse me, repayment 
plan. This could help prevent the lowest income borrowers from 
facing default.
    Automatic IDR enrollment would require additional data 
sharing between the Departments of Treasury and Education. 
Thankfully, the authority to share these data already exists. 
It was clarified during the Obama administration and has 
remained a priority for the current administration, even 
showing up in last year's executive office budget.
    Improving FSA oversight, amending servicers' performance 
metrics, and building flexibility into late-stage delinquency 
would be a terrific start to moving the repayment system in the 
right direction. Though NextGen should help improve things for 
borrowers, it is by no means a silver bullet. The new system 
will take years to get off the ground. It has already been 5 
years since we embarked on this process.
    We cannot afford to wait any longer. Borrowers are being 
harmed right now, and it is up to Congress, and in particular 
this committee, to provide FSA with the necessary direction and 
resources to get things off the ground.
    I look forward to discussing these proposals and your 
questions during the Q&A.
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    Ms. DeLauro. Thank you all very, very much for your 
testimony.
    Let me begin the questioning, and let me begin with you, 
Ms. Campbell. You know FSA is a performance-based organization 
tasked with achieving certain goals and efficiencies for 
students and taxpayers. It was established as a PBO in 1998. It 
was the first one, as I understand it, and it granted FSA great 
flexibility in the administration of student aid programs.
    In light of the testimony heard today by Mr. Gordon about 
the failures of FSA in managing and overseeing student loan 
services, do you believe that FSA is fulfilling its statutory 
mandates as a PBO? And there is a section, Section 141, in the 
Higher Education Act, which lays out the performance-based 
organization for the delivery of Federal student financial 
purposes, why it was established, what its purposes are, and it 
lists a number of those purposes, (a) through (g).
    I won't go through all of them, but my question is, are 
they fulfilling the statutory mandate of a PBO? Are they 
adhering to principles, which ones maybe they are and which 
ones are not?
    Ms. Campbell. Sure. So in the HEA, it lists a number of 
priorities, as you mentioned, and the first one is borrower and 
student satisfaction with the aid programs. However, it also 
discusses managing costs of the programs. Now when costs are 
balanced with students' well-being and priorities, those are 
often at odds, and especially in an agency and especially in 
the times that we are in where kind of Federal agencies are 
expected to be cutting costs and running as efficiently as 
possible, what often happens is that FSA acts in the interest 
of saving money and kind of efficient--most efficiently 
operating rather than putting the needs of borrowers first.
    So when the PBO was initially put into place, I think that 
it did a lot to improve Federal student aid, but I think that 
it is time that we re-evaluate how FSA has complied with that 
edict in the first place.
    Ms. DeLauro. Let me also ask you, the Congress provided 
$9,000,000,000 in student aid administration from 2014 to 2019. 
Other programs were zeroed out, flat funded, while students 
defaulted on loans. The FSA saw an increase of over 
$500,000,000. In 2019 alone, Congress gave $1,700,000,000 to 
FSA.
    You testified here about the mismanagement and the abuses 
of the servicers. If we know that servicers are doing a poor 
job in helping our students, this was something that Ms. Lee 
was talking about, why do they continue to receive lucrative 
contracts?
    Ms. Campbell. I think one of the really important aspects 
of this is transparency. There is very little transparency into 
how FSA puts together its contracts, the policies it makes kind 
of behind the scenes. And often, these policies are made in 
conjunction with servicers and debt collectors themselves.
    Because of the way that FSA is structured with the 
performance-based organization system, what ends up happening 
is that a lot of--FSA is given a lot of authority to do things 
on its own. It can put out contract procurements in order to 
kind of get into these situations with servicers in the first 
place.
    When that ends up happening, you are leaving the public out 
of the decision-making process, and you know, you frequently 
hear from folks that we need more data on student loan 
borrowing and on kind of what is going into these contracts and 
into compliance, and that is absolutely right. I think if the 
public had more say in these processes and if there was more 
data available so that we could better evaluate these programs, 
then we would be able to consistently shed light on what is 
going on at FSA rather than kind of relying on audits and kind 
of oversight activities in order for these things to come out 
and then try to fix them retroactively.
    Ms.  DeLauro. Will money alone fix the process?
    Ms.  Campbell. I think that money alone will not fix the 
process.
    Ms.  DeLauro. I am going to yield back my time. I know the 
ranking member has to be somewhere.
    Mr.  Cole. Thank you very much. I appreciate that, Madam 
Chair.
    Let me begin just--and this is a little off topic, but I am 
just curious about your opinion. We have appropriately focused 
on the FSA and on servicers and the Department of Education. 
What about, you know, how many, in your opinion, of these loans 
should have never been made in the first place? That is, 
students up front didn't get the appropriate advice that either 
this career path won't take you where you can repay this, or 
this is the wrong thing?
    And it seems to me a lot of--they are not getting very much 
help in making initial decisions from the colleges and 
universities or trade schools or what have you. Is that a fair 
assumption to make? And if you have a solution, I would love to 
hear that, too. Yes, please.
    Ms.  Darcus. It is certainly the case that many students 
would be better served by grant aid instead of loans. Because 
this program is designed to make college affordable, we really 
have to look at what affordable means and whether folks will 
ultimately have the ability to repay loans.
    So when we are thinking about our investments in higher 
education and future generations of workers of all kinds and 
citizens, we should really think about prioritizing grant aid 
so that we don't wind up saddling folks with debt that they 
can't afford to repay.
    The other thing we need to do and another area where there 
is an intense need for oversight is of the schools that are 
program participants with the Department of Education. We have 
seen predatory for-profit schools who are essentially fueling--
siphoning taxpayer dollars through students to their investors 
while students are suffering without being able to complete 
their credentials because of poor education or high costs. And 
also without the kind of credential then that would enable them 
to get employed in a way that would free them to repay their 
loans while still feeding their families.
    Mr.  Cole. Same question to everybody. So----
    Ms.  Kavanagh. Yes, I agree with what Ms. Darcus has said. 
Oversight of the education industry in general to make sure 
that when students are making decisions about higher education, 
they are getting the opportunities to go to schools that are 
going to provide them with the opportunities to get the degrees 
they need in order to be able to repay their loans.
    My office has been very active in enforcement initiatives 
over for-profit schools, the predatory for-profit schools who 
defrauded students or who closed, and is also continuing to be 
very active with students in obtaining group discharges of 
their loans when they have the ability to do so and individual 
discharges on a daily basis.
    Mr.  Cooper. So the Department of Education estimates that 
in fiscal year 2018, 25 percent of the loans made to 
undergraduates will end up in default at some point. And the 
strongest predictor of default or one of the strongest is 
whether the student actually finishes college and actually gets 
a degree or credential.
    And it makes sense that if you go to college either you get 
ripped off or you can't finish, you say why should I pay this 
if I didn't get anything out of it? So I would definitely say 
while this is a problem that is not easy to solve, it can start 
with stronger accountability for colleges to make sure that 
they are not taking in students who are not prepared for 
college and will drop out and then default on their loans.
    Mr.  Cole. Thank you.
    Ms. Campbell.
    Ms.  Campbell. And to the point that Mr. Cooper made 
earlier about simplification in the system, I think that 
regardless of if a student finishes college or not, they should 
have the opportunity to repay their debt, that the system 
shouldn't be so complex that it is difficult to figure out how 
to repay.
    I also think that we can't really be thinking about this in 
terms of students not feeling like they shouldn't have to repay 
their loans if they didn't finish college. I think that when 
they are not receiving the benefits of a credential, those 
earnings kind of benefits, it can make it really difficult to 
live and to pay for other expenses, and a student loan will 
often come last kind of on their list of priorities.
    I will absolutely say that allowing students to go to 
school debt free is a huge priority, and that it would prevent 
a lot of the outcomes that we see, particularly for borrowers 
of color and low-income students who are disproportionately 
affected by default.
    Mr.  Cole. Well, I thank all of you for your comments. I am 
going to have to leave, but just to wrap up my time here, you 
know, what concerns me the most is it is almost as if nobody is 
thinking about what is best for the students. And that includes 
the colleges, profit and nonprofit alike.
    There is a big difference between your chances of repaying 
the cost being a 16th century French major and a petroleum 
engineer. I mean, one I would go into debt for. The other one, 
I would like to do, but I probably wouldn't go into debt for. 
And students need to know that kind of thing up front. I don't 
think the colleges do a very good job, nor do I think--I mean, 
all of your testimony has been very persuasive about the 
problems we are having with the servicers.
    And particularly this idea that a number of you mentioned 
that students get an opportunity to choose what college they 
want to go to or what they want to do, but they have no choice 
in the provider. And we have no way of interjecting some 
competition there where the student might have an opportunity 
to go with somebody that is going to service them better.
    So, again, I commend you, Madam Chairman, for holding the 
hearing. It has been a very good one, and I thank all of our 
witnesses.
    Ms.  DeLauro. Thank you very much, and I thank you. I know 
you have to be off to manage a bill.
    So, and I want to say a thank you to Congresswoman Frankel 
for hanging in there. Congresswoman Frankel.
    Ms.  Frankel. That is what I am here for. Thank you.
    First of all, I want to thank you. You all answered my 
original questions, Mr. Gordon. So thanks for that.
    There is another basic question, though. How do these 
service providers make their money?
    Ms.  Campbell. So they are compensated based on the 
borrower's status in repayment. So they are paid the most for a 
borrower who is in a current repayment status and the least for 
a borrower who is in kind of a late-stage delinquency. The 
amount that they are paid per month for a current borrower is 
$2.85.
    Ms.  Frankel. And how many borrowers do each of them have?
    Ms.  Campbell. So I have those numbers here. The servicers, 
the largest services have in excess of 6 million accounts. So 
that is, for example, Navient, and then the not-for-profits end 
up being much, much smaller.
    Ms.  Frankel. Okay. So I think someone is here from 
Massachusetts, right? Okay. Now I think I read or somebody said 
that there is a new rule that doesn't allow the State to be 
involved with this. What is the status of that?
    Ms.  Kavanagh. There isn't any rule or new rule that 
preempts State consumer protection laws. There has been an 
effort over the last several years to argue in various 
litigations in various courtrooms that the States don't have 
authority under their consumer protection statutes to hold 
servicers accountable for various violations of State law.
    So far, those efforts, the servicers have lost on those 
legal arguments in the various cases that are out there like 
the ones against Navient and our office's case against PHEAA.
    Ms.  Frankel. Okay. I am going to ask two questions, and 
you can all take a shot at it. The first question, the next 
question I have is apparently women--I don't know if this is 
true, but it is written here. So maybe it is. That women hold 
two-thirds of the outstanding student loan debt in the United 
States. I would like you to comment on that, if you have a--
know why.
    And secondly, I think some of you have not--could you give 
me your recommendations on what kinds of things we can do to 
make this whole situation better that we have been talking 
about?
    Ms.  Campbell. Sure. So women tend to hold more student 
loan debt because women enroll in college at higher rates. Your 
staff did a good job at pulling those numbers for you. And you 
know, what we end up seeing is that----
    Ms.  Frankel. That is right because more women are in 
college.
    Ms.  Campbell. Exactly. Exactly.
    Ms.  Frankel. Okay. All right.
    Ms.  Campbell. And so because women enroll at higher rates, 
they tend to, you know, enroll in school and borrow more. Women 
are also disproportionately those who are students enrolling in 
college who have children, and so those students are also ones 
that borrow a lot. In fact, about 25 percent of undergraduate 
defaulters have a child when they enroll in college. So this is 
really a problem that is affecting families, not just people.
    In terms of recommendations for the entire system, I think 
that one of the most important things that this committee can 
do is to require a consistent set of servicing standards across 
the board. I also think that this committee can require that 
the Office of Federal Student Aid implement some of these 
actions before the NextGen system is rolled out.
    That process has been going on for years now and will 
continue to be delayed, I am sure, if servicers and debt 
collectors have any say in it. And so I think that we can't 
wait for these changes, that they have to happen now and that 
you can compel the Department of Education to do them right at 
this moment.
    Ms. Frankel. We will just go down the line.
    Mr. Cooper. So one of the, I think, most important things 
that Congress can do is we currently have 7.2 million borrowers 
in default, and barring a radical transformation of our loan 
system, I think that a number like that is going to remain the 
case for the foreseeable future.
    So I would say what can the Department of Education do to 
help those borrowers get out of default, and how can they make 
the process for getting out of default clear, make sure that 
the fees are not punitive and that the fees are transparent, 
and make sure that borrowers, once that they are in this hole, 
they could climb out of it.
    Ms. Kavanagh. We agree with the recommendations that the 
Inspector General's office made in its audit report. And in 
particular the one where to require servicers to track issues 
of noncompliance and also to do--when they discover an issue of 
noncompliance, to do a deep dive and see if that is systemic 
and affects a large group of borrowers versus just being a one-
off situation.
    We have learned in our enforcement work, oftentimes we will 
get a complaint from an individual borrower, and we have the 
tools to dig down deep and find out whether that has happened 
to more people. And oftentimes, we do find out that it is a 
systemic issue. So without that pressure on servicers to take 
everything is something to take serious and do a deep dive, 
then there is going to be a lot of noncompliance and consumer 
protection issues that affect large groups of people that 
either go unnoticed or unremediated.
    And in addition, holding servicers accountable by 
penalizing them in using whatever the tools the Inspector 
General's office has with respect to making them pay back money 
or not giving them loans, but in addition, from the State's 
perspective, enforcing our right to get civil penalties against 
servicers when there is widespread and intentional and knowing 
misconduct.
    And also from the State's perspective, not having the 
servicers have the ability to challenge our authority or the 
support from the Department to consistently challenge our 
authority to enforce our State consumer protection laws, which 
are historically our laws to enforce and are not preempted by 
the Higher Education Act.
    And lastly, not being prevented from obtaining information 
from loan servicers. There has been a lot of problems with loan 
servicers hiding behind the Department of Education and not 
sharing information that we would be entitled to get either 
through our subpoena power or civil discovery or otherwise in a 
collaborative relationship that we could use to assist 
borrowers and identify problems and get them corrected quickly.
    Ms. Frankel. Madam Chairman, I just had one more minute.
    Ms. DeLauro. Okay. Go ahead.
    Ms. Frankel. Before our next witness, I want to just ask 
you a question. Because you are recommending more of a deep 
dive by the service providers in terms of helping--getting 
compliance from the borrowers, if the service providers are 
only getting, what did you say, $2----
    Ms. Campbell. It is $2.85 a month for----
    Ms. Frankel. A month. So what is really the incentive to do 
a deep dive if you are only getting $2.85? I mean, they might 
as well just say, no, I will go on to the next one.
    Ms. Kavanagh. Well, the incentive would be to keep their 
contract in order to be able to continue, you know, making 
money doing this business. Because the alternative would be to 
lose their contract. But you know, whether or not the servicers 
are making an enormous amount of profit or enough profit to 
keep everybody in business isn't an excuse for them to fall 
down and fail to do their job.
    Ms. Frankel. No, I am not giving an excuse. I am just 
saying maybe the system is not right because the incentive 
doesn't sound too good. That is only because there is not, I 
guess, compliance. There is not enforcement.
    So either you have to have a system, I think, where there 
is maybe a better way to incentivize compliance before you have 
to actually penalize. I don't know. I am just throwing that out 
there, but what is your next--what is your suggestions?
    Ms. Darcus. I share your desire to ensure that it is not 
just borrowers who face penalties. That it is imperative that 
this committee continue to do the work of ensuring that the 
taxpayer dollars are spent well, whether that is by our 
investment in servicers who are responsible for helping 
borrowers succeed in repayment or the money that we are 
spending on private collection agencies that Federal Student 
Aid also oversees, or on other kinds of investments, like end 
for-profit schools.
    And one of the things that you have heard is that default 
is a critical problem for borrowers, and we have got to prevent 
it from happening. If servicers can't do the job, then we also 
need to look at redefining default, removing acceleration, 
ensuring that people can still live full lives, and by full 
lives, I mean keep the roof over their head, get to work, and 
take care of keeping the utilities on.
    And I will just note that this is the first year in which 
borrowers are facing offsets of their Social Security 
retirement and Social Security disability benefits because they 
are in default, are left with fewer dollars than recipients of 
Supplemental Security Income. These borrowers live on $750 a 
month now. SSI recipients get $771. We need to do something 
about the consequences of default, and I hope that you all will 
work with your colleagues to reauthorize the Higher Education 
Act in a way that ensures that borrowers who are not well 
served by our system, while our system is still being revamped, 
are not unfairly penalized.
    Ms. Frankel. I just have one more follow-up, which is I 
think one of you, well, more than one of you said that one of 
the biggest problems is defaults. Then I guess they get 
ignored. Is there anything in the system where there is another 
entity that looks at the defaults and goes in and tries to 
help?
    Ms. Campbell. When loan borrowers default, they are taken 
from the servicer by the Department of Education and assigned 
to a private collection agency.
    Ms. Frankel. That is it?
    Ms. Campbell. And that is it. So, essentially, the goal of 
those private collection agencies is to collect dollars. And 
typically, the way that they do that is through wage 
garnishment, tax garnishment, Social Security, things like 
that. We pay almost the same amount for debt collectors as we 
do for them to basically manage 7 million borrowers--it is 
about $1,000,000,000 a year to manage 7 million borrowers--as 
we do for loan servicers, which manage 34 million borrowers.
    So, clearly, there is a little bit of a cost discrepancy 
there. Debt collectors receive about $1,700 per borrower that 
they get out of defaults through one method. That is compared 
to, you know, that $2.85 a month that servicers receive for 
keeping a borrower current. And so there is definitely a 
disconnect between collections and servicing, and I think that 
that is something that would be very important for Congress to 
look at.
    Ms. Frankel. So, Madam Chair, maybe there is a--maybe there 
is a--maybe there is something, there is a gap is missing. You 
have servicing, and then you have debt collection. But it 
doesn't sound like anybody is really trying to help see if 
there is a way to help these folks who are going into default.
    Ms. Darcus. I think that is right. There is a point at 
which you have heard servicers do the math, and they decide 
whether it is worth it to spend resources trying to make--
trying to help delinquent borrowers stay out of default. Even 
though that is their job, they have to--they make that 
financial decision about whether they are going to help that 
borrower.
    And then once that borrower does transition to a private 
collection agency, that is usually when they come into my 
office. Nobody wants calls from debt collectors, and they don't 
know whether to trust that debt collector who started 
contacting them.
    The other thing that happens is the accounts once placed 
with a PCA, they stay at one PCA for a little while, then they 
move on to the next one. They move on to the next one. So you 
might get contacted within a relatively short amount of time by 
multiple entities, and you never know whether they are 
contacting you about the same thing. You don't know it is about 
your student loan. It is very, very confusing, and I do hope 
that you all will take a look at post-default collection 
activity and at the way that we use private collection 
agencies.
    The National Consumer Law Center, we have called for an end 
to the use of private collection agencies because of the 
unfortunate--the unfortunate way in which borrowers are 
increasingly harmed by the debt collection activity they face 
and the inability of the private collection agencies to help 
them resolve their defaults.
    Borrowers also need more chances to get out of default, and 
you all can give them more opportunities to do that through 
reauthorization of the Higher Education Act.
    Ms. DeLauro. Thank you. But addressing one comment to my 
colleague, it is $2.84, but you are multiplying that by 
millions. So they are doing--they are doing well. They are 
doing very, very well. The incentives are----
    Ms. Frankel. But they don't have any incentive to help 
somebody.
    Ms. DeLauro. Well, and they are not--they do not get 
overseen by anyone. They are pretty much independent based on 
the way that they have been determined as a PBO. They are 
there. I also might just add that it would be useful in terms 
of what financial instruments people are being told to take on 
that the CFPB be brought back into the picture here in order to 
be able to oversee that and take a look at whether or not 
people are being--they are being steered in the wrong direction 
and how they can be steered in the right direction.
    Let me just ask Ms. Kavanagh, let me--there are several 
attorneys general now who are suing the student loan servicers 
over violations of State consumer protection law. Why do 
States, you know, have an interest in protecting borrowers from 
servicers? What work is your office doing, the AG's office done 
to deal with, you know, the harms that are the result of poor 
servicing?
    Ms.  Kavanagh. So the States have a unique interest in 
ensuring that their student residents are able to repay their 
debt and to take advantage of Federal programs available to 
them in order to pursue careers, if they so choose, in public 
service. It is a great benefit to the general welfare of the 
States to have residents that are participating in their local 
communities and that are able to manage their debt, buy homes, 
and raise families.
    So we saw in Massachusetts, and I think based on the 
activity in other States as well, a big hole in between 
students being able to successfully repay their debts and 
access Federal programs and the actual ability to do so because 
the student loan servicers were not performing their jobs and 
giving borrowers information, either accurate information or 
any information at all about the plans that are available to 
them.
    So we got active, and we have our consumer protection 
statute, which is the one of the strongest statutes in the 
country, and the tools at our office's disposal to investigate 
and to enforce our consumer protection laws for the benefit of 
students. And we opened up a Student Loan Assistance Unit, and 
when we did that, we heard from thousands and thousands of 
borrowers. We have been fielding calls and questions and 
complaints from borrowers, and we have worked with student loan 
servicers. And when we are unable to get results or we see 
problems that are systemic, then we have used the tools to go 
forward and enforce our laws against them and hold them 
accountable for it.
    Ms.  DeLauro. It would appear that more and more States 
attorneys general are reflecting the kind of work that you are 
doing, and it is also my understanding that Secretary DeVos has 
been thwarted in a number of courts on the reinterpretation of 
what the statute says or the false interpretation of what the 
statute says.
    I wanted to make a comment. I have a couple more questions 
for people, and then--we will wrap it up. But now on the Public 
Service Loan Forgiveness Program, which has been mentioned,--it 
would appear that there are 423 applications who have been 
approved by servicers, and there are 206 borrowers who had 
their loans discharged. So that our efforts in this area to--we 
provided $700,000,000. That $350,000,000 in 2018 and 2019 to 
help borrowers put in the wrong repayment plan, but who paid no 
less than they would have under the correct plan.
    In other words, we are not utilizing the funds that we 
have. And I don't know if it is slow walking. I think it is an 
area to find slow walking, people who are eligible for public 
service loan forgiveness, which is something that I think think 
that we ought to try to explore as well.
    I have a question from Congresswoman Lee, if I might? And 
let me just--and this is for anyone on the panel. A 2016 report 
from United Negro College Fund found students at historically 
black colleges and universities, HBCUs, borrowed loans at 
greater amounts and encountered more obstacles in repaying 
loans despite HBCUs having lower tuition costs.
    Students of color are forced to take on more debt due to 
lack of household resources, lack of adequate grant aid, and 
lack of adequate State investment in higher education. What 
suggestions would you provide to help borrowers better finance 
their education and repay their loans? What more can we do to 
help this group?
    So anyone who wants to----
    Ms.  Darcus. I will start. I will mention again that grant 
aid is a really vital way to make higher education affordable 
for low-income groups and people of color who do have fewer 
resources to draw on due to historic discrimination and its 
legacy that persist to this day.
    I will also add that institutions that have historically 
served people of color, like HBCUs, have suffered the same 
disadvantage. They are underfunded chronically, and also they 
have smaller endowments that leave them with fewer 
institutional resources to help defray the cost of the 
education, the investment that their students then have to 
make.
    Those are systemic problems. They are the legacy of racism 
and discrimination in this country. If you are serving folks 
who don't have a lot of money, then they don't have a lot of 
money to give you at the end of the day to make higher 
education more affordable for the next generation.
    So I know that HBCUs are calling for more fair funding, 
more Federal investment in HBCUs so that those institutions 
have the resources that they can pour back into students so 
that students aren't on the hook for debt when they are going 
to schools that serve them best.
    And I will also add this is another place where holding 
for-profit schools accountable is really important because 
enrollment is a challenge at every school. And there are 
schools that have historically served students of color, and 
they have done it well. Those are HBCUs and others. There are 
for-profit schools who claim to serve students of color, but 
the statistics don't bear that out.
    Students of color who attend for-profit schools 
disproportionately experience defaults and also are less likely 
to complete their education. So many students of color would be 
better served by going to a school like an HBCU. So we have got 
to make sure that those predatory schools like predatory for-
profits are not getting access to Title IV funds anymore and 
that we give more money to the HBCUs.
    Ms.  DeLauro. Well, you will be happy to know that next 
week on the 12th, we are doing an oversight hearing on the 
predatory for-profit schools.
    So anyone else on this question that Ms. Lee--go ahead.
    Ms.  Campbell. Yes. Just briefly, we have responded to the 
Senate's request for some information on how to assist 
borrowers of color. So this is something that I know that they 
are looking at addressing in the Higher Education Act. But I 
also think that it is important to note here that what little 
information that we do have about the outcomes of borrowers of 
color has only been--come to light recently, and that is 
because of some work that is done by the National Center for 
Education Statistics in publishing sample surveys. The 
Department of Education doesn't currently collect any 
information related to the race of borrowers, and so the 
Department of Education is really unable to assess the outcomes 
of the portfolio in this sense, and so, you know, I think that 
it is worth considering if there is a way for the Department of 
Education to collect this information and to evaluate how 
borrowers of color may be differentially affected by programs. 
And that way, outreach can be better targeted for those 
communities.
    Ms.  DeLauro. I have a quick question for you, Ms. Darcus. 
You talk about Federal Student Aid's response to service area 
abuse or deception hurts borrowers. You talk about how they 
deserve to be made whole. In your experience, are your clients 
ever made whole?
    Ms.  Darcus. The short answer is no. They are made better, 
though when errors are found, it is very important that they be 
corrected. That takes a whole lot of time and energy, but the 
Department can't retroactively adjust balances and give credit 
for months of--toward forgiveness that borrowers lost out on, 
although they claim that is very difficult.
    So the angst, the anxiety, and the juggling of budgets and 
expenses and the management of time, that can't be given back 
to my clients. So we need to make sure that they don't 
experience delinquency, default, and servicing errors along 
their way to repay their loans.
    Ms.  DeLauro. I am going to--I want to say really thank you 
from all of us for the testimony, there is clarity, there is a 
description of the difficulties and the complexity, and I hope 
that we can continue to be in touch with you about as this 
committee to take some opportunity for redressing some of these 
issues and what the Inspector General spoke about. So if you 
don't mind, we will be back in touch with your remedies. I 
can't guarantee we can do it all, but I can guarantee you that 
you can help to set us on a road to addressing what is a very, 
very serious problem.
    And I also want to be clear in closing that everyone has 
described this system as complex. It is very complex, and the 
servicing system has had its difficulty from the outset. This 
is not about pointing fingers. But there was, I might add, 
after several years, there was a formidable plan to correct 
this in the waning days of the last administration. And that 
was the Mitchell--the Ted Mitchell memo, which I have read, and 
I will want to reread because it seems that there was the 
understanding that there were serious consequences that had to 
be addressed.
    And it also appears that at the behest of the loan 
servicers that what Secretary DeVos did or she thought she had 
to do was to scrap the Mitchell memo, jettison it and its 
recommendations. Just recently, what the Department has done is 
they have awarded a $577,000,000 contract to Accenture for its 
NextGen--it is a digital portal to streamline student loan 
interactions.
    And you know, people want to take a hard look at that. 
There may be some good things. But I also may--and this is--I 
have had experience with Accenture in the past. It is known for 
its use of tax shelters, for its outsourcing practices, and a 
long list of failures with Federal contracts. But even then, 
the servicers are in court with the NextGen solution that the 
Department has. This is astounding.
    And in the meantime--so the Secretary felt that she had to 
accept what they said about the Mitchell memo. They have now 
proposed this NextGen. The servicers don't like NextGen, and 
they are suing the Department for this effort. And in the 
meantime, in the meantime, it is the borrowers who are on the 
hook. They suffer countless violations of consumer protections.
    And you know what I found, and my colleague Ms. Frankel 
will find this outrageous as well, as the self-assessment of 
the servicers, the COOs, the Chief Operating Officers, they get 
bonuses. They reward themselves on a self-assessment basis that 
they are doing a good job and they should then be rewarded 
financially through the agency's own internal assessment.
    So I think what you have demonstrated, what the Inspector 
General has demonstrated, that this is an issue that needs 
continued and vigorous oversight. We owe it to students. We owe 
it to the taxpayers. It falls under our jurisdiction, and we 
are going to continue that. And we are going to follow up with 
the Inspector General both on whether or not there are 
corrective actions at the FSA, in addition to which the new 
directions that they are going on and their investigatory work 
on what may be some violations.
    So, with that, I want to say thank you to you very, very 
much for your testimony, and also I want to thank my colleague 
Ms. Frankel for hanging in there all this time.
    Thank you. [Laughter.]
    Ms.  DeLauro. Thank you all very, very much, and we will 
call this hearing to a close.
    Thank you.
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                                           Thursday, March 7, 2019.

         ADDRESSING THE PUBLIC HEALTH EMERGENCY OF GUN VIOLENCE

                               WITNESSES

ANDREW MORRAL, PH.D., SENIOR BEHAVIORAL SCIENTIST, RAND CORPORATION
DANIEL WEBSTER, SC.D., DIRECTOR, JOHNS HOPKINS CENTER FOR GUN POLICY 
    AND RESEARCH
RONALD STEWART, M.D., FACS, DIRECTOR OF TRAUMA PROGRAMS, AMERICAN 
    COLLEGE OF SURGEONS COMMITTEE ON TRAUMA
JOHN LOTT, PH.D., PRESIDENT, CRIME PREVENTION RESEARCH CENTER
    Ms. DeLauro. The subcommittee will come to order. Good 
morning. Glad to be joined by my colleagues and our ranking 
Member, Congressman Cole, and by our chair of the 
Appropriations Committee, Congresswoman Nita Lowey.
    So I want to welcome everyone to the Labor, HHS, Education 
Appropriations Subcommittee and this is a hearing this morning 
to address the public health emergency of gun violence.
    Let me say a thank you to our distinguished panelists for 
being here: Dr. Andrew Morral of the RAND Corporation, Dr. 
Daniel Webster of Johns Hopkins, Dr. Ronald Stewart of the 
American College of Surgeons, and Dr. John Lott of the Crime 
Prevention Research Center.
    I will introduce each of them before their remarks.
    Gun violence is a public health emergency. Since 1968, more 
Americans have died by gun violence than in every American war 
combined. In 2017 alone, guns killed nearly 40,000 Americans.
    That same year, opioid overdoses killed 47,000 Americans. 
We have dedicated immense public dollars, especially in this 
subcommittee, to addressing and examining one and not the 
other.
    It is time that we support public research of gun violence 
as well. We did, until the Dickey Amendment in the 1990s. It 
did not ban the Centers for Disease Control and Prevention from 
researching.
    However, it had a chilling result, severely discouraging 
it. Congressman Jay Dickey, with whom I served, came to regret 
his actions in this regard. Later in his life he worked closely 
with Dr. Mark Rosenberg, the former director of the CDC Center 
for Injury Prevention and Control, with whom he clashed in the 
1990s.
    They subsequently worked together to address gun violence. 
Congressman Dickey passed away in 2017. But as his ex-wife, 
Betty Dickey, and his friend, Dr. Rosenberg, said in their 
statement to this subcommittee today, and I quote, ``Jay Dickey 
evolved his thinking as a former Congressman, member of this 
subcommittee, and sponsor of the Dickey Amendment, to ardently 
believe that research can make a difference.'' And also, and I 
quote, ``If Jay were alive he would want to appear as a witness 
at this hearing to tell you in his own words that Congress 
should appropriate funding for this important research that has 
the potential to save lives and to reduce disability.''
    And I ask unanimous consent to insert their full statement 
into the record.
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    Ms. DeLauro. Jay Dickey came to believe that research can 
make a difference. Certainly this Congress must as well. We 
know that the Centers for Disease Control and Prevention can do 
this research.
    As HHS secretary, Alex Azar said last year, and I quote, 
``My understanding is that the rider does not in any way impede 
our ability to conduct our research mission. We are in the 
science business and the evidence-generating business and so I 
will have our agency certainly working in this field as they do 
across the broad spectrum of disease control and prevention.''
    CDC Director Robert Redfield agrees. Last year, he said, 
quote, ``We don't have any restrictions to do the research. We 
just need a funding mechanism. We are poised to research in 
this area if Congress chooses to give us additional funding.''
    There is so much more that we need to know, and as our 
witnesses will attest, the 20-year gap in CDC research has left 
a vast void in our understanding of how to prevent gun 
violence.
    CDC is the nation's public health agency and, therefore, it 
must be involved. For example, we need to increase research 
intervention to reduce suicide by firearms. Suicide by firearms 
account for nearly 24,000 deaths in 2017 and firearms suicide 
rates have risen steadily since 2006.
    We need to be looking into this, and comprehensively, 
especially with regards to our veterans. They are twice as 
likely to die by suicide as the general public and two-thirds 
of those veterans who died used a gun.
    Earlier this week, President Trump announced an executive 
order--a roadmap to empower veterans and end a national tragedy 
of suicide. It establishes a task force that includes Veterans 
Administration, Defense, Health and Human Services, and 
Homeland Security.
    Let me just read what Secretary of the Veterans 
Administration Robert Wilkie said: ``We will bring the best 
medicine, the best social science, in addition to going to the 
Congress and asking for grants and money to give our states and 
localities so that they can help us in this fight.''
    A senior administration official said that the order will 
also task agencies with developing a national research strategy 
in coordination with public and private stakeholders in order 
to have a more complete picture of the challenges facing 
veterans once they exit the service.
    This committee has jurisdiction over the CDC. The CDC must 
be involved. And also, we have jurisdiction over the research 
dollars and where the research dollars go. We need to better 
understand the correlation between domestic violence and gun 
violence.
    The initial evidence is alarming and it happens to relate 
to incidents of stalking as well. As one of our witnesses notes 
in his written testimony, more than half of intimate partners 
homicides involve the use of firearms.
    We need to help those Americans who choose to own guns to 
do so in a way that helps them keep their family safe. Research 
has indicated that safe storage is effective in reducing the 
number of children harmed by guns. We could be examining other 
common sense measures to do so.
    Those are just a few examples but there are so many areas 
we need to be examining and we need public dollars to do so.
    Let me quote from one of our witnesses, Andrew Morral, who 
said about this, and I quote, ``Many critical questions require 
national data collection over many years. A concerted research 
program of basic and descriptive research on gun use and 
violence and applied--and policy research. Resources for a 
research program of this magnitude would almost certainly 
require a long-term commitment of support by the federal 
government.''
    Pre the Dickey Amendment we had only $2,600,000 for CDC 
research. Given the magnitude of this public health emergency, 
the federal research agenda must be bigger and it cannot just 
rely on private money.
    We need the CDC to be looking into this and the National 
Institutes of Health. The NIH had a three-year initiative from 
2014 to 2016 looking into the epidemic of gun violence. They 
funded 14 projects.
    But they chose not to extend it. We will direct the NIH to 
restore that initiative because, again, we need public 
research. To make strides with regards to Alzheimer's or 
cancer, what we do is to dedicate public dollars to research.
    We do it for opioid addiction. There are a lot of different 
entities that are looking into opioids. We certainly are, with 
millions of dollars. Public dollars, we understand, in this 
area are critical. We can all agree to that.
    Sepsis kills about as many people as gun violence, 
according to a review in the peer-reviewed journal of the 
American Medical Association of CDC mortality statistics. Yes, 
despite similar rates of mortality, sepsis received 150 times 
the research funding that gun violence has.
    Also in the Journal of American Medicine, compared with 
other leading causes of death, gun violence was associated with 
less funding and fewer publications than predicted, based on 
mortality rates.
    Hernia, peptic ulcer, anemia, viral hepatitis, asphyxia, 
Parkinson's disease all have a lower mortality rate but 
received significantly more funding. In relation to mortality 
rates, gun violence research was the least researched cause of 
death and the second least funded cause of death after falls.
    Drowning, asphyxia, nephritis, aspiration, penetrating 
wounds, heart disease, fires, hernia, and malnutrition are all 
more researched than gun violence.
    We need to be providing public dollars for gun violence 
research because, as Richard Berk, a professor of criminology 
at the University of Pennsylvania, put it, and I quote, there 
is, quote, ``no upside to ignorance.''
    So to close, let me say this is about the burden and the 
benefits--the burden of gun violence in our communities and its 
public health implications and we need to acknowledge the 
benefits of the research that we can be gathering to mitigate 
it. This is a public health emergency and it demands research.
    Now let me turn it over to my good friend from Oklahoma, 
the ranking member, Mr. Cole, for any opening remarks that he 
chooses to make.
    Mr. Cole. Thank you very much, Madam Chairman.
    Today, we have got a distinguished witness panel to discuss 
the topic of gun-related deaths. I want to begin by thanking 
all of you. I have read your works last night and extremely 
valuable papers and I look forward to your testimony here 
today.
    I want to begin for myself by recognizing that for many 
people the right of gun ownership is fundamental, rooted in the 
United States Constitution. I support that view. Our Founders 
knew that true freedom from despotism requires ordinary 
citizens to have the means to defend themselves.
    Of all the rights found in the U.S. Constitution, only 
one--the right to bear arms--is included to ensure that all 
other rights are upheld.
    However, I fully recognize that the use of this right comes 
with great responsibility. Like all Americans, I am 
disheartened when I see the loss experienced by a family 
because of a gun-related death but not assign exclusive blame 
to the gun, let alone to millions of law-abiding gun owners.
    We have in recent years seen where some of the true 
culprits lie--a mental health system woefully inadequate to 
meet the needs of the population, a loss of a sense of 
community and family in too many American homes, a sense of 
animosity towards people with opposing views, and an 
unwillingness by some to accept the reality of diversity in 
terms of race, ethnicity, and gender identification.
    A variety of factors leads a person seeing--leads to a 
person seeing the commission of a horrific crime as a viable 
means of addressing his or her situation. More funding for the 
Centers of Disease Control and Prevention will not by itself 
solve our systemic problems.
    Our response must be broader and more inclusive and it must 
be a response that unites rather than divides the American 
people. Looking for quick fixes or simple solutions will not 
solve a problem of gun violence.
    But it will exacerbate our political difference and poison 
the important public discussion that needs to occur across 
partisan lines and cultural divides.
    During my tenure as chairman of this committee and working, 
frankly, with my good friend, the current chairman, my then-
ranking member, we were able to substantially increase funding 
for the NIH, the CDC, and a host of related entities that have 
made it--made it clear--excuse me, and we made it clear that 
nothing prevents these entities from pursuing research related 
to gun violence.
    And, again, as my good friend, the chairman--the chair 
pointed out, Secretary Azar has made that same thing crystal 
clear in his capacity as Secretary of Health and Human 
Services.
    But we also looked at a variety of other ways to deal with 
the problem we enacted a near 50 percent increase in the mental 
health block grant program. This funding goes to states and 
territories and lets them fund a range of services for their 
communities, especially support services for those suffering 
from serious mental illnesses.
    Starting in fiscal year 2018, we supported funding for 
certified community behavioral health clinics. These clinics 
serve individuals suffering from serious mental health and help 
these individuals get the help they need to improve the quality 
of their lives.
    As chairman, I also supported significant funding 
investments in substance use disorder prevention treatment and 
recovery. Too often we find people using addictive and 
dangerous substances as a way to cope with an untreated mental 
illness.
    I believe funding in these areas is essential to addressing 
the issue of gun violence. I do not expect everyone to share my 
views on responsible gun ownership and I am proud to serve in a 
body that represents all Americans and many viewpoints.
    We need to proceed in ways that generate broad 
congressional support for scientific research and we need to be 
careful stewards of our limited resources.
    The money we spend needs to make a difference as opposed to 
making a political point. I believe this bill has a number of 
programs that have proven potential--to improve the lives of 
everyday Americans and these programs come with broad 
bipartisan support.
    I have always said let us spend money on places we all 
agree have the most value and see how much is left. Using that 
approach, we have never had any money left on the table.
    I know our chair cares deeply about these issues and I look 
forward to working with her in fiscal year 2020, Labor H 
appropriations bills to find common ground.
    I would like to thank all our witnesses again for coming 
and I yield back the balance of my time.
    Ms. DeLauro. Thank you very much.
    It is now a pleasure for me to introduce the chair of the 
full Appropriations Committee, Congresswoman Nita Lowey, who 
has a very, very long and committed history to wanting to 
increase and provide funding for research--public health 
research in the face of a public health crisis. We are talking 
about funding research.
    Congresswoman Lowey.
    The Chairwoman. Thank you very much, Madam Chair. It is 
certainly a pleasure for me to be here today and I really want 
to thank my good friends, Chairman--Chairwoman DeLauro and 
Ranking Member Cole for hosting this very important hearing.
    And before I begin, I want to thank all those wonderful 
people in the audience who are here who took time out of their 
private lives and students, some moms, some dads who are 
traveling the country. We see groups of people everywhere who 
are tired of seeing death from guns and they are saying, let us 
do something about it.
    So thank you all for being with us today. By my count, this 
is the first time gun injury prevention will take a leading 
role in a hearing before this subcommittee since 1996, Madam 
Chair, when I sat at this dais with former Representative Jay 
Dickey and when Dr. Mark Rosenberg, then the director of the 
Center for Injury Prevention and Control, was part of a panel 
testifying on CDC appropriations.
    So I want to thank you, and I want to thank all those who 
are testifying before us today. This is so important.
    I didn't know, frankly--I didn't know then what I have, 
sadly, learned since--that that hearing was part of a 
coordinated effort to dismantle federal research in gun 
violence prevention.
    Soon thereafter, Republicans eliminated funding for the 
very research that Dr. Rosenberg had been conducting. Since 
then, the federal government has sat on the sidelines, 
relinquishing our role in protecting the public health while 
hundreds of thousands of Americans have lost their lives.
    In December, the CDC released data showing that 2017 had 
the highest number of gun deaths--nearly 40,000 in almost four 
decades. Forty thousand. Adjusted for age fluctuations, gun 
deaths have jumped by nearly 20 percent in the past two 
decades.
    So, my friends, it is our duty--it is our responsibility to 
investigate why. As a nation, we invested in research that 
inspired seatbelts and airbags and, as a result, thousands of 
lives have been saved.
    As Members of Congress, particularly those tasked with 
funding public health research, it is well past time that we 
fund research to identify what leads to these gun deaths and, 
more importantly, how to prevent them.
    It is clear that the United States faces a public health 
emergency, one that is breaking apart families, eroding the 
safety of communities, threatening our shared future. Only by 
conducting scientific research on gun injury prevention can we 
better understand the causes of this crisis and develop and 
implement a public health response to reduce injuries and 
death.
    Yet, without dedicated funding from Congress, the CDC, 
which should lead these efforts, cannot move forward with this 
vital work.
    So, again, to our panelists, thank you very much for 
joining us. For our chair, thank you so much for putting this 
hearing together. I look forward to discussing the tools and 
resources needed to improve our understanding of the causes, 
impacts, and scope of gun violence.
    Together, we can enhance our capabilities, improve public 
health, and save lives. Thank you.
    Ms. DeLauro. Thank you very much, Madam Chair.
    It now gives me great pleasure to introduce our 
distinguished panelists and, again, thank them for being here.
    Dr. Morral is a senior behavioral scientist at the RAND 
Corporation and leader of gun policy in America--a RAND 
initiative to understand the effects of gun policies. Dr. 
Morral has published dozens of peer-reviewed reports in leading 
scientific and policy journals and has served as a science 
advisor to the Department of Homeland Security.
    Dr. Daniel Webster is a professor of American health at the 
Johns Hopkins Bloomberg School of Public Health where he 
directs the Center for Gun Policy and Research. Dr. Webster has 
published over 120 peer-reviewed articles in scientific 
journals on topics including gun policy, violence prevention, 
youth violence, intimate partner violence, and suicide.
    Dr. Ronald Stewart is the medical director of trauma 
programs at the American College of Surgeons. For the past 20 
years, Dr. Stewart has served on the American College of 
Surgeons Committee on Trauma, serving as the chair of the 
Committee on Trauma from 2014 to 2018 and over the past three 
decades Dr. Stewart has led the development of an integrated 
civilian military trauma system that serves all of south Texas.
    And John Lott, the founder and the president of the Crime 
Prevention Research Center. Dr. Lott has held research or 
teaching positions at several academic institutions and was the 
chief economist at the United States Sentencing Commission 
during the 1988-1989--during 1988 and 1989. Dr. Lott is a 
frequent op-ed writer and a contributor to Fox News.
    If I can take a personal privilege for a moment, I want to 
recognize Dr. Stewart. I believe your family is here and your 
son, Jackson, is here. I don't know where--where are you 
Jackson? There you are. Okay. It is really great to see you, 
and let me offer our congratulations to you. Jackson has just 
graduated from the Basic School at Quantico, which is where 
Marine Corps officers complete six months of training.
    And so this is really a wonderful achievement and thanks so 
much for being here, and my understanding is that you are on 
your way to flight school at Pensacola. So, again, and to the 
entire family who is here as well so and thank you for letting 
us borrow your father for this hearing.
    Okay. Dr. Morral, go ahead.
    Mr. Morral. Thank you, Chairwoman DeLauro, Ranking Member 
Cole, and distinguished members of this subcommittee for the 
opportunity to speak with you today.
    My testimony is based on a series of peer-reviewed reports 
published by RAND as part of its internally-funded Gun Policy 
in America Project, a multi-year effort to better understand 
what is known about gun policy in order to improve public 
discussion and support the development of fair and effective 
gun laws.
    My remarks are also informed by having over the last month 
reviewed almost 250 gun policy research proposals from social 
scientists across the country as part of my responsibilities as 
director of the National Collaborative on Gun Policy--Gun 
Violence Research, a private philanthropy staffed by RAND.
    Today, I want to make three points. First, we know too 
little about gun violence and its prevention. One of the 
clearest findings from our Gun Policy in America Project was 
just how little research has been done to understand the 
effects of gun policies.
    We searched the research literature to try to find evidence 
that met rigorous methodological criteria for more than a 
hundred types of gun policy effects. We concluded that, at 
best, there was relatively good evidence for just one policy we 
investigated and that was child access prevention laws appear 
to reduce childhood injuries and deaths.
    We also found more limited evidence that background checks 
may reduce firearm suicides and homicides, that prohibiting gun 
ownership by individuals with certain mental health histories 
may reduce violent crime, and that ``stand your ground'' laws 
may increase homicide rates.
    Importantly, though, all these findings are based on just a 
handful of studies, nothing like the quality and depth of 
evidence that had accumulated on the link between smoking and 
cancer, for instance, by the time states started prohibiting 
indoor smoking.
    My second point is that we need more high-quality research 
on gun policy and gun violence prevention, including on suicide 
prevention, intimate partner homicide, defensive gun use, 
illegal gun markets, prosecution of gun crime, and other 
topics.
    A lack of investment in gun policy research means we do not 
have compelling answers to very basic questions like do gun-
free zones deter gun violence or do they invite them--do they 
invite. How do child access prevention laws affect gun owners' 
ability to defend themselves and their homes?
    These are the kinds of questions for which there is strong 
disagreement between policy analysts on opposing sides of the 
debate. Importantly, these are disagreements about facts--facts 
that are knowable in principle but that require careful study.
    When there has been such longstanding disagreement about 
facts that go to the heart of what constitutes an effective or 
even a fair gun law, we should be investing in careful and 
objective research to discover the truth.
    With minimal federal investments, a small number of 
investigators have continued to make progress on important 
research questions with support usually from their 
universities, rare philanthropic or state grants, and 
occasional short-term funding opportunities like the NIH 
program that the chairwoman mentioned during the last 
administration.
    But large-scale progress may require national data 
collection over many years, a concerted research program of 
basic and descriptive research applied in policy analysis 
research.
    A research program of this magnitude would almost certainly 
require a long-term commitment by the federal government.
    Finally, I will conclude by discussing three steps Congress 
and the federal government could take to help improve gun 
policy research.
    First, Congress should consider funding a dedicated 
research portfolio to support gun policy research. In 2016, 
opiate overdose deaths exceeded firearm deaths for the first 
time.
    In 2018, recognizing the urgency of the public health 
crisis, Congress appropriate $3,300,000,000 in response, 
including $500,000,000 for research. An appropriation for gun 
policy research even a fraction this size could lead to 
dramatic improvements in our understanding of gun policy and 
violence prevention.
    My second recommendation is to reintroduce and expand 
firearm ownership and use questions to the CDC's Behavioral 
Risk Factor Surveillance System. Doing so could provide low-
cost--a low-cost approach to developing vastly superior data on 
state differences and trends in firearms access compared with 
the approximations that researchers currently have to use.
    Third, the CDC could make an important contribution to gun 
policy research by improving the reliability of its existing 
injury surveillance system and expanding its data collection to 
allow for state-level estimates of firearms injuries.
    Thank you for this opportunity to testify and I look 
forward to your questions.
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    Ms. DeLauro. Thank you very much, Mr. Morral.
    I was to tell you that your written testimony will be 
included in the record and you were recognized for 5 minutes. 
But you came in under 5 minutes. So I thank you very, very much 
for that.
    I am also supposed to tell everyone, the witnesses, to 
please turn your mic on here so when you speak.
    So, with that, our second witness is Dr. Webster. You are 
recognized for 5 minutes for your opening statement.
    Mr. Webster. Thank you, Chairwoman, and Ranking Member Cole 
and members of the committee.
    I appreciate the opportunity to speak at this hearing about 
the importance of need for federal funding to research gun 
violence, one of our nation's most important public health and 
safety challenges.
    I want to note for the record that while I am affiliated 
with Johns Hopkins, my remarks today are my own and do not 
necessarily reflect that of Johns Hopkins University.
    Suicides by firearms account for nearly 24,000 deaths in 
2017 and firearm suicide rates have risen steadily since 2006. 
In 2017, 75 percent of homicides in the United States were 
committed by firearms. That is a greater share of homicides 
committed with firearms since at least 1981 and, I believe, 
going much further back from that.
    Because homicide rates are highest among young Americans, 
firearm homicide represents a leading cause of premature 
mortality in our nation. It is estimated that 133,895 
individuals were treated for nonfatal gunshot wounds in 2017 
and more than 456,000 nonfatal firearm crimes reported in the 
National Crime Victimization Survey.
    Yet, the impact of firearm crimes--firearm violence on 
public health cannot be fully captured by data on deaths or 
physical woundings. Countless individuals throughout our nation 
including many young children have been mentally scarred by 
their own victimization with a firearm or witnessing others who 
have been shot.
    I have been studying gun violence as a public health 
problem for about 30 years and conducted research on virtually 
every form of gun violence. I evaluated a broad range of 
strategies to reduce gun violence.
    I have led several studies of policy and programmatic 
interventions designed to prevent gun violence, some of which 
were funded by the CDC through grants through the Johns Hopkins 
Center for the Prevention of Youth Violence.
    Each of these studies were after the Dickey Amendment. But 
while I studied gun violence and efforts to prevent it with CDC 
funding, these studies did not really examine if or how access 
to firearms played a role in violence nor how firearms were 
acquired by individuals who used them to harm themselves or 
others.
    Although firearms were used in 90 percent of homicides of 
young victims ages 15 to 24 years and most suicides and 
intimate partner homicides involve firearms, CDC funding of 
research on youth violence, intimate partner violence and 
suicide has not focused on critical questions relevant to 
access to firearms for more than two decades.
    It is clear the CDC's reluctance to support research 
examining the role of firearms in violence and strategies that 
focus on firearm access has been driven by actions taken and 
not taken by Congress, to the cut to the CDC's budget in the 
mid-1990s by the amount that it allocated to firearms violence.
    I hope you and your congressional colleagues will set a new 
course by investing much-needed federal funding for research to 
inform efforts to prevent gun violence.
    Debates over what policies to enact to reduce gun violence 
center around questions that rigorous science can help settle. 
These include how do those who commit violent crimes obtain 
their firearms; do various firearm laws affect ability of 
individuals who might be prone to violence to obtain or use 
them; do policies or programs directed at firearm access affect 
suicidal behavior or the outcomes; do certain policies 
negatively impact the safety of law-abiding citizens by keeping 
them from accessing firearms to defend themselves.
    I served as editor for two special issues of public health 
journals that were devoted to firearm violence including 
epidemiological reviews. There is a lot to draw from available 
research to guide current prevention efforts.
    For example, there is good evidence that the impact of 
state firearm policies on intimate partner homicides depend on 
the breadth of firearm prohibitions for violent individuals and 
that handgun purchaser licensing or permit to purchase laws 
reduce homicides and suicides.
    But most studies designed to estimate the effects of these 
firearm policies have important weaknesses, as was alluded to a 
moment ago. I believe that those weaknesses are often due to 
the modest levels of funding that limit the amount and type of 
data that are collected and analyzed.
    To build evidence that supports causal inferences between 
firearm policies and violence, researchers would ideally want 
to know whether perpetrators of firearm violence were 
prohibited from possessing the firearms they used and, as much 
as possible, they would want to know whether the paths that 
firearms take to the perpetrators were disrupted. But both of 
these types of data are either difficult or impossible to 
obtain. Collecting data on criminal history of perpetrators is 
a very labor intensive process that takes financial resources.
    With rare exceptions, researchers do not have access to 
granular level crime gun trace data from the ATF that indicate 
whether each criminal gun possessor was the legal purchaser of 
the firearm involved in crime, whether the purchaser of the gun 
was--that was later used in crime purchased other guns that had 
been used in crime or how crime guns that are diverted for 
criminal use shortly after retail sale are distributed across 
retail gun sellers within an area.
    Prior to congressional actions taken in 2003--okay. I want 
to note, just to conclude, that the TR restrictions in 2003 
have limited access to this data. When I was available to--able 
to get data from Milwaukee Police Department we were able to 
discern that a problematic gun dealer in Milwaukee, the rate of 
guns coming from that gun shop into the criminal use went up by 
200 percent after those data were no longer available.
    So, in addition to--and----
    Ms. DeLauro. You have to conclude.
    Mr. Webster. I am sorry.
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    Ms. DeLauro. I have to turn the mic on.
    Dr. Stewart, I ask you to make your 5-minute opening.
    Dr. Stewart. Chairwoman DeLauro, Ranking Member Cole, 
members of the subcommittee, thank you for inviting the ACS to 
participate.
    I am a trauma surgeon from San Antonio, Texas. I am also a 
slow-talking west Texan so I will do my best to stay on time. I 
am a trauma surgeon and serve as the medical director for the 
Committee on Trauma for the American College of Surgeons.
    For 96 years, the Committee on Trauma has worked to 
comprehensively improve the care of injured patients in areas 
such as EMS, trauma centers, and disaster response system and 
this has resulted in dramatic improvements in care.
    While we work on all these issues related to treatment, we 
also--it is important to focus on prevention. For the past--for 
the past five years, we have focused a large effort on 
implementing a public health approach to reducing firearm 
violence in order to improve the health of our patients and the 
resilience of our country.
    In light of the pervasiveness of firearm violence and 
increasing frequency of mass casualty shootings, we believe a 
comprehensive solution is necessary. We did not come to this 
opinion based on our personal beliefs or political 
affiliations.
    We came to this recommendation following decades of study 
and five years of collective effort and inclusive dialogue 
regarding firearm injury.
    Over the past five years we have used three guiding 
principles: one, address the problem as a public health and 
medical problem, not a political problem; two, implement 
evidence-based violence prevention programs through our 
network--implement evidence-based violence prevention programs 
through our network of over 500 trauma centers; principle 
number three, foster and provide a forum for a collegial civil 
dialogue centered on reducing unnecessary firearm injury, 
death, and suffering. This is the right thing to do for our 
patient and for our colleagues.
    I am going to describe each of these in a bit more detail. 
At its most basic level, what does a public health and medical 
approach mean? It means a commitment to the service of humanity 
in basing our actions on objective scientific truth as best we 
can determine it.
    At its core, this approach requires research. We need 
research to get it right. We need research to make firearm 
ownership safer while preserving or even enhancing personal 
liberty.
    We need research to understand the root causes of violence 
and how best to intervene to prevent the cycle of violence and 
how to break the cycle of violence once it is established.
    So following principle two, what do we mean by implementing 
evidence-based violence prevention programs? Is it possible to 
prevent or cure violence?
    Well, yes, it is. This may seem a stretch for some but it 
is definitely not harder than managing a complex viral 
epidemic. It is possible to prevent and cure violence, but to 
get this right requires the full commitment--the full 
commitment--of all medicine along with partnerships of the 
governmental research agencies. One of the most important of 
these is the CDC.
    Following the third principle of making ourselves a forum 
for a civil collegial professional dialogue center, what is the 
right thing to do for patients in our communities has led us to 
realize that achieving the goals of the first two principles 
are not as difficult as we thought in the beginning.
    I am grateful to be able to meet with you and I am grateful 
for what you do--all of what you do. All of what you do.
    Before I tell you about the hardest thing about my job, I 
want to acknowledge that your job is also difficult because 
your bosses, we, the voters, send you mixed messages.
    But I have learned the message is not as mixed as many may 
guess. Personally, following the third principle, I have 
probably talked to more people in medicine on both sides of 
this debate than anyone.
    I presented our approach in west Texas and in New England. 
I have presented our approach in Chicago and Little Rock, 
Arkansas, and I have gone out of my way to solicit all points 
of view.
    We have surveyed ourselves. We have surveyed other medical 
organizations. We have held town halls and I can tell you that 
research directed at how to reduce firearm violence is strongly 
supported by a large majority and is one of the least 
controversial topics.
    Through many discussion I have learned that all people 
across the political spectrum agree on one thing: reducing or 
eliminating needless death and suffering. All agree on that.
    We are asking you to make eliminating needless death and 
suffering a major priority and we are asking you to do it 
together, to do it together. We are asking you to do this in a 
bipartisan way.
    So, in summary, firearm violence is a major public health 
problem in the U.S. It is a public health emergency and it 
requires research, not just allowing research in an emergency. 
In a critical situation in my team if there is such a thing it 
requires me to both--to direct someone what to do, not just to 
say I allow you to do it.
    The American College of Surgery represents surgeons who 
care for patients who suffer, who die, and who are survivors of 
firearm injuries. The hardest thing I have to do is try to 
explain to a mother of a child the very embodiment of that 
family, the very embodiment of that family who was completely 
normal at breakfast is now dead. It is awful. It is painful and 
it is the worst. It makes me physically ill. We can do better 
and we can work together.
    We understand there is no simple solution to these problems 
and the issues are complex. But we also know if we use the 
power of medical science, technology, inclusion, and 
partnership, these complex problems are completely manageable 
and, yes, even curable.
    We are totally committed to working with you. Thank you 
very much.
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    Ms. DeLauro. Dr. Lott.
    Mr. Lott. Thank you very much, Chairwoman DeLauro and 
Ranking Member Cole and the other members of the committee.
    There is already massive resources that the federal 
government is giving to these types of issues. If you look on 
the four years from 2015 to 2018, over $42,000,000 was given in 
grants to go and study firearms research type issues.
    Over from--and there is many other resources. Tens of 
millions of dollars from Michael Bloomberg. You have George 
Soros and others have put together the Fund for a Safer Future 
with--starting off with $16,000,000.
    You have places like RAND, which are talking about having 
up to $50,000,000. You have many other areas. Plus, it kind of 
ignores how money comes from other areas. Professors--one of 
their main jobs is to go and do research.
    If you look over the period of time, only about 3 percent 
of medical journal articles were funded by federal grants. Only 
15 percent got funding from any type of outside grant. The 
other 85 percent were done as part of your job--their jobs as 
academics.
    There is a couple claims out there that I think are quite 
misleading. One is that research was decimated after the Dickey 
Amendment. That is simply not true.
    That claim comes from a report put out by Michael 
Bloomberg's--one of his gun control groups where they claimed 
that in the years afterwards there was a 60 percent drop in 
research.
    What they actually measured was firearms research in 
medical journals as a percent of all medical journal research. 
Research on firearms actually increased. What happened was that 
there was a massive explosion in medical research in other 
areas.
    Whole new areas of medicine were started. Whole new 
journals were started that didn't exist previously. So its 
share fell but the absolute number of papers actually went up 
over that period of time.
    You know, another claim that we have heard frequently from 
the Journal of the American Medical Association is that if you 
look at federal resources being put into research on firearms, 
it pales in comparisons to mortality when you compare it to 
other things.
    There are multiple problems with that. One is it ignores 
all this other funding. It ignores that for many areas of 
medical research the primary way that research is done is 
through federal funding, for cancer and other things. Those are 
very costly things to go and do. That is not necessary for most 
firearms-related research.
    And not only that, but you have--the other way they measure 
it is papers published in medical journals. The problem is that 
is only a tiny fraction of the research on firearms.
    That completely ignores economists who have written on it. 
It completely ignores the entire area of criminology and all 
the journals that are there. I mean, you have dozens of 
criminality journals. Well, those aren't counted in those 
numbers. It ignores work done by law professors.
    And so those types of claims that we are under investing in 
firearms research only gets those numbers by completely missing 
massive areas of research that just--are conveniently not 
counted in those types of numbers.
    The other problem that you have is simply the quality of 
public health research and, unfortunately, it is very poorly 
done. One of the most famous studies in public health is done 
by a person named Arthur Kellermann where he has famously 
talked about the risks of having guns in the home.
    The problem is that, one, there was a simple data problem. 
He simply assumed that if a gun death was--owned in the home 
and somebody died from a gun death it was that gun. In fact, 
about 86 percent of the deaths were from a weapon brought in 
from the outside, not the gun in the home. Fixing that one 
error reversed the results.
    The second problem that you have is just, and this goes 
throughout public health research, is they use a technique that 
is useful for studying drug efficacy and apply it to social 
phenomena and it just doesn't apply because you can't control 
randomness in trials like you can in a drug trial.
    And so, for example, you know, you go--I guess I have a 
discussion in my written research. You can look at that. But, 
you know, you look at so many other areas of public health 
research and they are, like, 30 years behind the time in terms 
of statistics.
    The types of controls that they make are just not up to par 
with other areas of research and so much money is wasted in 
this. I could go and point out--you see grants for $300,000 to 
go and put together a database on mass public shootings.
    Do you know how many databases are already out there on 
mass public shootings? I don't even know how you spend money on 
something like that. Or $600,000 to go and look at state laws 
and correlate that with homicides or suicides.
    I mean, this is trivial. You have an eight-page paper that 
comes out of a $600,000 grant. I mean, it is almost criminal 
the way federal resources are wasted and thrown away. I mean, 
and, you know, that just is only part of the problem that is 
there.
    But I greatly appreciate the time that you have there. This 
is an important problem. Lives are at stake and it is important 
that we don't waste resources--valuable resources--on studies 
that don't add anything to our knowledge.
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    Ms. DeLauro. Thank you very much.
    As in the past, what we will do is to proceed with 5-minute 
rounds. We will alternate back and forth by seniority as 
members were seated at the beginning of the hearing and I just 
ask everyone to be respectful of our witnesses, to try to give 
them enough time to respond to the questions.
    Let me begin, and this is--these are question to Dr. Morral 
and Dr. Stewart. 2013 the Institute of Medicine published a 
list of priority research questions related to firearm 
violence. Several of IOM's proposed research questions related 
to self-inflicted fatal injury, or suicide.
    Dr. Morral, in your testimony you ask a similar question. 
If we could prevent 100 percent firearm suicides, what 
percentage of those people will still die by suicide using 
another lethal means? Zero? Fifty? A hundred? Can you expand on 
this research question, what can we do to better understand how 
to prevent suicide?
    Dr. Stewart, we spoke to a colleague of yours at the 
American College of Surgeons, Dr. John Fildes, who talked about 
successful interventions to reduce homicides in Nevada. He 
noted that many people were surprised at their success. They 
simply assumed that suicide was not preventable.
    Can you talk about some of these interventions, how 
important it is to expand research in this area so we better 
understand how to prevent suicide?
    Dr. Morral.
    Mr. Morral. Thank you, Madam Chairwoman.
    We have done research on this. We have done a survey of 
policy experts and analysts asking them if you could prevent a 
hundred suicides--firearm suicides--how many of those people 
would go on to die by suicide using another lethal means, and 
what we find is that there is a huge divide in belief about 
this factual matter between policy analysts who prefer 
restrictive gun laws and policy analysts who prefer permissive 
gun laws.
    So the permissive group believes that about 90 percent of 
people who are prevented from killing themselves with a firearm 
will go on to kill themselves with another lethal means.
    Experts who favor restrictive gun laws think that number is 
just 20 percent. Ninety percent versus 20 percent. It is a huge 
difference in belief about what is in fact a factual matter 
that could be studied better and it really matters for what you 
think about gun policies that could reduce firearm suicides.
    Ms. DeLauro. So it is something that we need to try to take 
a look at?
    Mr. Morral. We do.
    Ms. DeLauro. Dr. Stewart.
    Dr. Stewart. I totally agree with Mr. Morral. The--so with 
respect to the public health approach to--let us talk suicide--
about suicide, is we should--we should direct our efforts to 
the--to the problems based on magnitude and suicide is the 
leading--the leading cause of deaths--leading cause of death 
from firearms and we should--the public health approach also 
involved engagement of stakeholders.
    And so we--and we have done those things--engaging firearm 
owners as a part of the solution rather than a part of the 
problem, and there is terrific work currently ongoing with 
respect to--with respect to people doing that work.
    It is possible. It is doable. It is very important.
    Ms. DeLauro. Let me just be--if I can put a fine point on 
it. This--what was this--the intervention in Nevada and what 
kinds of interventions begin to work? That is helpful to us in 
terms as we go forward.
    Dr. Stewart. So I think--I think Dr. Fildes is referring to 
Kathy Barber's work with respect to--she calls it friends 
helping friends. Friends don't let friends drive drunk.
    Well, so firearm owners don't let firearm owners harm 
themselves. And so they have partnered with gun retailers and 
to develop programs around suicide prevention. This is a common 
ground thing that could really make a difference in the lives 
of America--of Americans.
    And I know some people do not--do not consider suicide as 
violent as homicide. It is every bit as violent and it leads to 
horrible consequences.
    Ms. DeLauro. I will try to see if I can get another 
question in here. This is--we have research published in the 
American Journal of Public Health. The presence of a gun in 
domestic violence situations increases the risk of homicides 
against women by 500 percent.
    FBI supplemental homicide data--36 percent of murders of 
young women between the ages of 15 and 29 were committed by an 
intimate partner, family member. Of those murders, more than 
half were committed with a gun.
    I may not get all three of you into this and we can pick up 
after. But, Dr. Webster, Dr. Morral, Dr. Stewart, what do we 
know about domestic violence and this effort? What kind of 
research or policies would we need to protect women, and men as 
well, from gun violence from an intimate partner?
    Dr. Webster.
    Mr. Webster. Thank you. I think that is an excellent 
question.
    The majority of intimate partner homicides involve a 
firearm. The study you referred to I was a co-author on. It 
identified--if you look at among women who are in physically 
abusive relationships or recently out of those relationships, 
when you control for basically anything you could imagine and 
measure, availability of a firearm elevated risk fivefold above 
situations when there was no firearm.
    But I think what we are beginning to learn is that some of 
the policies do matter, as I alluded to in my testimony. They 
do appear when they are adequately strong and I think that is 
the critical question.
    Because of a range of policies across our different states 
and in federal government of how broad those restrictions are, 
the evidence we have looked at and published most recently 
suggests that covering as many violent people as possible does 
lead to more prevention of domestic homicides.
    But there is other critical things that are important to 
learn.
    Ms. DeLauro. Thank you, Doctor. I will come back to you on 
that.
    My time has run out and I have gone over. But I think it is 
important for us to know what kinds of research, what kinds of 
policies can work.
    Ranking Member Cole.
    Mr. Cole. Thank you very much, Madam Chair.
    And I want to thank all of you just, again, for your 
testimony and what you presented. I found it very interesting.
    Now, you, obviously, don't always agree. I mean, I happened 
to read back to back, Dr. Lott, your paper and then, Dr. 
Morral, your paper and you guys have very different views on 
the amount of available research.
    And so I want to give you both an opportunity to address 
that. How much research do we have in the private arena out 
there? How readily available is it and how robust is it, going 
forward?
    So I will go first with you, Dr. Morral, and then Dr. Lott.
    Mr. Morral. Thank you, Ranking Chairman--Ranking Member 
Cole.
    We just completed a review of a huge amount of literature 
trying to--trying to look at what--you know, what evidence is 
available. High-quality evidence we were looking for in 
particular, meaning evidence that can really say something 
about the causal effect of the policies we were looking at.
    And the big takeaway from our study was that there is--you 
know, the vast majority of the effects we were looking for 
evidence on we couldn't find research on.
    So I think that that is some evidence that there is more 
work to be done for sure and I think that Dr. Lott's own 
research that he reported, which says that only 3 percent of 
the--of the firearms research he was able to identify had any 
federal funding, you know, you could look at that and say, 
great, we don't have to have federal funding for any research.
    But I think the other side of it is the real--the real 
story there is that the only research that can get done is 
research that doesn't cost anything--you know, doesn't cost 
much.
    Mr. Cole. Dr. Lott.
    Mr. Lott. I have done some of largest studies--I have done 
some of the largest studies that have been done on crime and I 
think my book, ``More Guns, Less Crime'' from the University of 
Chicago Press--I don't know of any other one that has looked at 
city, county, state-level in the many different ways that I 
have looked at even come close.
    But, you know, he talks about the lack of studies. You look 
at his work on--on right to carry laws. They literally ignored 
dozens of peer-reviewed studies that had been published on 
concealed carry laws.
    You know, I suppose if you ignore a lot of the work that is 
there it will make it look like in fact there is not as much 
done. They do that in other areas such as on background checks 
and on other things that are mentioned.
    So, you know, I look at it and there is a tremendous amount 
of work that is being done. You got to count criminology and 
others. I mean, these claims about--that have been made about 
not enough research--looking at the Journal of American Medical 
Association article--you have to count all the other funding 
sources.
    And I, you know, I have never had to go--even though I have 
done the largest studies I have never had to go and ask for 
federal money. You have a lot of data there. You can go and 
hire people on your own through grants through the university 
that you are working at.
    I have been at Stanford, the Wharton Business School, Yale 
University, University of Chicago, and I never had any problem 
getting money to go and do the research that I wanted to do and 
without a dime, not even a penny, of federal money that is 
there.
    The problem that you have with federal money is that it is 
often political in terms of who they give it out to. 
Politicians and the people who make those decisions I just 
don't think can divorce politics from it.
    And beyond that, the money is just tremendously wasted. I 
mean, I look at studies. There is funding for $600,000 that 
just got out to look at mass public shootings.
    Mr. Cole. If I can, I am going to hold you there.
    Mr. Lott. Sure. I am sorry.
    Mr. Cole. No. No. I wish I had more time.
    But I wanted to go back. You made a very interesting point. 
I think it was you, Dr. Webster, and I wanted to ask you to 
elaborate on it.
    You mentioned, if I got it right, and that literally in 
some cases the views of the researchers, clearly, influence 
their research product. That is, people that already sort of 
believed in strong firearms control were more likely to think, 
okay, suicides are--we could really cut this down 90 percent.
    So could you talk about--I mean, that is a real challenge 
for all kinds of research and I say this as a guy that used to 
be a professional historian. I mean, values really do shape the 
research sometimes and it is something you really have to guard 
against.
    So what is your----
    Mr. Webster. So it was actually Dr. Morral who made that 
comment.
    Mr. Cole. Oh, okay.
    Mr. Webster. So I am going to let him respond and----
    Mr. Cole. Thank you. I am sorry. I got confused.
    Mr. Morral. Actually, the research I was referring to is 
not research on how social scientists skew their findings. It 
was really on what do social scientists believe and policy 
analysts believe about things for which there is not good 
research yet, questions like do gun-free zones make us safer or 
less safe. There just is not good causal research on that 
question, but we still asked policy analysts, and I am talking 
about analysts at the NRA and analysts at Every Town for Gun 
Safety, as well as researchers, and what we find is that there 
is a huge divide on what they believe the truth probably is, 
but it has not been studied yet.
    Mr. Cole. Okay. Thank you very much. Thank you for allowing 
me to go a little bit long.
    Ms. DeLauro. Thank you. I wanted to--and I checked with the 
Chair of the full committee. Dr. Morral, Dr. Lott challenged 
some of your research, so I want to give you an opportunity to 
respond, if you would like. If you would like to do that, I 
would like to give you that opportunity.
    And secondly, I would just make a comment that I am 
concerned that if we do not need any Federal funding in this 
area, that maybe we should, in fact, take all Federal funding 
away from the National Institutes of Health and not provide any 
Federal funding. Let folks go out and do it through 
universities or through private philanthropies. But if you 
would care to respond, please do.
    Mr. Morral. Our research had certain inclusion criteria. 
There were certain kinds of studies that we were looking for 
that had to do with the recency of the work and the quality of 
the work. Actually, we included a lot of Dr. Lott's work 
because it met our inclusion criteria. But there were other 
studies that were excluded because they did not meet the 
criteria.
    Ms. DeLauro. Congresswoman Lowey.
    The Chairwoman. I do want to say, Madam Chair, that this 
testimony is so interesting. I almost feel you would like to 
have a debate here into----
    Ms. DeLauro. We can hardly hear you.
    The Chairwoman. Oh. I was just going to say that I think 
this discussion is so very interesting. I would almost like to, 
rather than ask another question, just let Dr. Lott and Dr. 
Morral just keep debating this issue.
    But in any event, there are many of us here that I know 
have questions to ask. So I think I will go back to Dr. Webster 
with my time.
    I would really like to know, because this is an 
extraordinary panel--and I want to thank you, Madam Chair, for 
putting this together. Could you really tell us--and I should 
say as the Chair that I have been working on this issue so long 
that I sat here with Congressman Dickey, and then he withdrew 
his comments; you know that whole episode.
    Could you really, Dr. Webster, give us additional 
information, provide examples of the types of research that 
would give policymakers better data to address the kind of 
terrible death? Why don't we just let you start, and then at 
times someone else can challenge you, because for those of us 
who have been working on this a long time, I would really like 
to get the best advice possible. Thank you.
    Mr. Webster. Thank you. I think that is really a central 
and important question. What I would have this committee 
concentrate on in thinking about this is that we know so little 
about really the central questions relevant to the background 
of individuals who commit violent crime with guns and how they 
obtained their firearms.
    Dr. Lott alluded to, well, you can do all kinds of 
statistical analyses with available data and you do not need a 
dime, and so on and so on. I do not believe that, but I also 
think that really to get to the heart of these questions and to 
move us in the direction where we can make cause and effect 
inferences, you really need better, more complete data on those 
critical questions about backgrounds of individuals, how they 
got their guns.
    And the last thing I will say here in terms of the huge 
data gap is--and I think Dr. Morral mentioned this--we really 
don't have good non-fatal wounding data at a state level. 
Almost all of our analyses available, we can tell you about 
lethal outcomes and their association with different policies 
and interventions. We really don't know much at all about non-
fatal woundings.
    So those are just among the most central and important 
questions that I believe have been under-invested with respect 
to research.
    The Chairwoman. Let me say, in the past--and we have been 
talking about this for a while, some of us--some of my friends 
on the other side allege that CDC is currently able to conduct 
gun violence prevention research. Yet CDC Director Redfield, 
former Director Friedman, and Secretary Azar have said that CDC 
needs dedicated funding from Congress before it can commence 
this life-saving work.
    Maybe, Dr. Morral, can you set the record straight? Is it 
clear that CDC has done very little research into this issue 
area and that direct funding is needed to reengage on the 
initiative? You are going to clarify this for us, I know.
    Mr. Morral. My written testimony suggests that we do need 
dedicated research funding for this, but I note that there are 
those who have suggested that dedicated research funding is not 
inconsistent with retaining the Dickey Amendment. You could 
continue to have the Dickey Amendment as a kind of----
    The Chairwoman. But he said he didn't believe it anymore, 
by the way. He withdrew it. But go ahead. So we can continue 
the Dickey Amendment. Go ahead.
    Mr. Morral. So Mark Rosenberg and Victor Dzau, the head of 
the American Medical Association, have suggested this, that we 
keep the Dickey Amendment as a kind of guardrail on any 
research program, but that we have dedicated research funding, 
an appropriation for firearms violence research so that we can 
do the non-policy advocacy research.
    The Chairwoman. Thank you.
    Did you want to comment on that, Dr. Webster?
    Mr. Webster. Yes, briefly. I do think that, yes, 
technically CDC could choose to use some of its resources to 
better understand firearm violence, and I wish they would. CDC 
has been punished for funding things that might be sensitive 
that are critical to what I was raising of how do people get 
these guns, where do they come from.
    So I think if we really want to see this work done, 
Congress needs to send a very clear message with resources to 
CDC, and I am fairly confident that they will use those 
resources wisely.
    The Chairwoman. Well, I appreciate, Madam Chair, both of 
these responses because I hate to think that science should be 
sensitive. When we appropriate money for science, you really 
try to the best of your ability to get at the facts. So, thank 
you very much.
    Thank you, Madam Chair.
    Ms. DeLauro. Thank you.
    Mr. Harris.
    Mr. Harris. Thank you very much.
    I thank everyone for being here. Clearly, we know this is a 
problem we have to deal with, especially on the suicide level, 
because the Pareto diagram is that suicides are the bulk of the 
handgun violence that occurs.
    Dr. Webster, I assume, because you mentioned suicide, how 
they got their guns is not that much of a question in suicides. 
I imagine that most are legally obtained. Is that right?
    Mr. Webster. Actually, there is not a lot of data on that. 
I would assume you are probably correct.
    Mr. Harris. Okay.
    Mr. Webster. But really, we could use better data. Thank 
you.
    Mr. Harris. And gathering that data would not be--because 
the whole question is we could earmark funds to go for this, 
but that is kind of the purpose of the CDC and the NIH, is to 
look at the broad overview of public health in CDC, and 
science, medical science at the NIH, and decide where funds are 
necessary.
    Now, NIH is obviously funded in gun research, in handgun 
violence research. I mean, millions and millions of dollars. So 
that is a decision at NIH and CDC. I mean, we could kind of 
force them to spend money on it, but that is an unusual 
approach to take, to kind of force one of the institutes to 
actually go down a path, because they are the experts and I 
think they should decide what is spent.
    You are right, Dickey is a guardrail; that is all. If they 
are reticent to do it over at CDC and NIH, I think the omnibus 
bill last year provided clarification to them that, in fact, it 
only is a guardrail.
    Let me talk about some specific testimony here, Dr. Morral, 
because there are three things in your written testimony that I 
have a question about.
    The first one is you say that you believe the lack of 
research is due to a lack of investment in scientific research 
by the Federal Government. But, in fact, we don't restrict the 
NIH from a certain amount of research, do we? I mean, our 
Appropriations bill does not say, well, you are limited to $5 
million or $10 million. They could spend a billion dollars on 
it, couldn't they? With the guardrails of the Dickey Amendment, 
your reading of it and understanding how NIH works.
    Mr. Morral. You are right, I understand that they can 
direct----
    Mr. Harris. That is what I thought. So they could spend a 
billion dollars. They just choose not to.
    You also say on page 4, ``I would never suggest that 
scientific studies need to be conducted before it is possible 
to implement good policy.'' How do you know it is good policy 
without a study? I mean, gun-free zones are a perfect example. 
We have gun-free zones. We don't know if they are right or 
wrong. Do you consider gun-free zones a good policy? Do you 
personally consider gun-free zones a good policy?
    Mr. Morral. We have looked at this, and there is no 
evidence. There is no evidence of whether it is good policy or 
not.
    Mr. Harris. So you don't think it is good policy.
    Mr. Morral. I am not saying it is bad policy. I am saying 
there is no evidence.
    Mr. Harris. So you won't answer me whether you personally 
think it is a good policy. If you were the king, would you 
institute gun-free zones?
    Mr. Morral. I am not a policymaker. I am a social 
scientist, and my research suggests that there is no good 
evidence on this.
    Mr. Harris. Okay. Let me go to page 5. You make a comment 
from the National Academy of Science Report. ``No single 
database captures the number, locations, and types of firearms 
and firearm owners in the United States.'' Do you think we 
should have a single database that captures that information?
    Mr. Morral. Let me just clarify one thing. I am not 
suggesting any kind of gun registry. I am talking about a 
voluntary survey, which is the Behavioral Risk Factor 
Surveillance Survey. This is a random sample----
    Mr. Harris. A voluntary survey that the government 
collects.
    Mr. Morral. Yes.
    Mr. Harris. That you are expected to answer truthfully 
whether or not you have a firearm, maybe how you got it, to the 
government.
    Mr. Morral. You are welcome to not answer it. It is a 
voluntary survey.
    Mr. Harris. But if you don't answer it, then the data is 
not good. You are a scientist. I am a scientist. You know that 
non-responsiveness affects the quality of the data.
    Dr. Webster, I am going to ask you the question. Do you 
think we should have a single database for all this? Do you 
personally think that we should have a single database in the 
country of all firearm owners and types of firearms, number and 
location?
    Mr. Webster. No.
    Mr. Harris. Good. I am glad to hear that, because there are 
people who do think that, and I think that is the crux of the 
problem. There are some researchers who think that should be 
true. I have done research. Many of you have done research. You 
know you guide your research toward the blinders you have on in 
terms of what is done and what is not.
    Now, Dr. Lott, I am just going to, very briefly, ask you, 
do you know--because you make a statement that ``given the 
scope of the problem and the desperate need for solutions that 
do not rely on aggressive policing or wide-scale 
incarceration.'' You do think, though, that aggressive policing 
and incarceration of people who have committed a gun-related 
crime is a good thing, I hope.
    Mr. Lott. I think incarcerating someone who has committed a 
gun crime is a good thing.
    Mr. Harris. Okay. Are you aware of the 2012 Department of 
Justice study that looked at the number of times when someone 
lied on a background check, a felon lied on the 4433 NICS form? 
By the way, there were 1,100 people that year who lied on it. 
Eight were prosecuted and pled guilty. Do you think a good 
start might be to take the other 1,100 felons who actually 
tried to get a gun, lied on the form, committed perjury, 
committed a Federal crime, do you think we ought to start 
prosecuting some of those people?
    Mr. Lott. Absolutely.
    Mr. Harris. Thank you very much.
    I yield back.
    Ms. DeLauro. Ms. Roybal-Allard.
    Ms. Roybal-Allard. Drs. Morral and Stewart, according to 
the National Physicians Alliance, the United States has made 
remarkable progress in other areas of injury prevention, such 
as reducing death and injuries in car accidents. However, over 
the same period, we have not seen parallel implementation of 
safety efforts to reduce the number of deaths from gun 
violence.
    Dr. Lott contends that there is already ample research 
being done on gun violence in general. However, my focus today 
is on prevention, and public health scientists are clear that 
the cost of this research paralysis on one of our country's 
major public health crises has been staggering for American 
communities.
    Can you expand upon what data gaps currently exist in 
firearm-related injury research? And given the important role 
that CDC plays in public health, how could Federal funding 
promote public health approaches to injury prevention?
    Mr. Morral. Thank you, Congresswoman. One of the 
recommendations I make in my written testimony is that we need 
to improve--the CDC could improve its collection of firearms 
injury data nationwide and at the state level. Right now, 
almost all the research we reviewed did not have injuries as an 
outcome because we don't have good injury data. So we are 
limited to studying fatalities. Of course, non-fatal injuries 
are the vast majority of firearms injuries.
    If we could be studying both fatalities and injuries, I 
think we would have much better leverage on some of these 
causal questions about what the effects of different policies 
are.
    Ms. Roybal-Allard. And you are saying that that would be an 
area of research that CDC could provide?
    Mr. Morral. That would be an area of data collection that I 
think CDC would be able to really help expand the 
infrastructure for research.
    Ms. Roybal-Allard. Also, Dr. Morral, as you know, according 
to the CDC, 83 children are injured or killed every day by 
firearms. Addressing the child health impact of firearm-related 
injuries and deaths will need to be a major component of any 
research CDC conducts in this area. We know unintentional 
injuries and fatalities occur when young children find a loaded 
firearm. We also know by research initially begun at CDC that 
witnessing violence can have significant detrimental effects on 
children and their long-term health and development.
    My questions are what research do you think CDC could 
support that would help us better understand how to effectively 
promote safe firearm storage to prevent unintentional firearm 
injuries and deaths for children? And do you think CDC research 
could help us better understand and respond to the trauma and 
developmental impacts that occur when children witness firearm 
violence in their communities?
    Mr. Morral. May I defer this question to Dr. Webster?
    Ms. Roybal-Allard. Yes. Dr. Webster, of course.
    Mr. Webster. So, I think one way that the CDC could advance 
our understanding about childhood-related victimization, 
particularly unsafe access, is to gather robust data about 
where the guns came from, what were the situations and 
conditions; in school shootings, how many of those incidents 
involve individuals, young people who got their guns from their 
own home, or are they getting it in some other way.
    So again, I go back to this is a really central, important 
question that could be added to the CDC's National Violent 
Death Reporting system, systematic collection of the source of 
the gun, where did the gun come from, and this could also be 
supported with some demonstration projects to see the value and 
validity and robustness of the data that could be collected on 
those questions.
    Dr. Stewart. I think with respect to the issue of comparing 
progress made in other injury prevention endeavors, the same 
approach should be applied to firearm injury. That approach 
goes something like this. First of all, if it is a really 
critical problem, you have to name it and you have to direct 
funding to do something about it. There are structural 
problems. In the National Institutes of Health, there is no 
institute for trauma and emergency health care. But you name 
it, and you direct the funding.
    With respect to how to frame that research, I am going to 
speak in very broad terms. I think you could frame that 
research that could be supported by a wide portion of 
Americans, and that would be to focus the efforts on addressing 
the underlying factors that lead to violence, so addressing 
violence, and violence is a bigger problem than just firearms. 
There are 100 people who die from violent intentional injury a 
day in the U.S. There are 75 other people who die from other 
violent intentional injury. So it gets closer to the root of 
the problem.
    And the second thing would be to fund research that would 
make firearm ownership as safe as reasonably possible. That is 
exactly what we do for automobile safety. It is what we do for 
bicycle safety. It is what we do for all those injury 
prevention things. We say let's make the activity as safe as 
reasonably possible, and we do that through that public health 
approach which involves engaging the stakeholders who are 
bicycle riders and who drive a car to help be part of the 
solution.
    Ms. DeLauro. Congressman Moolenaar.
    Mr. Moolenaar. Thank you, Madam Chair.
    I want to follow up a little bit with Dr. Stewart on some 
of the comments you were just making. I thought you made some 
very insightful comments, because I have been listening to the 
debate, and when we talk about a public health emergency, I 
think of things like opioids. I see sort of the medical public 
health aspect. Ebola, when that is overseas, you think about 
that. You see measles going on, you think of anti-microbial 
resistance, you think of infectious diseases. When you think of 
surgery, you think about how do we keep the place clean so that 
people aren't going to get infected. I think of mental health.
    Then we start getting into some of these areas, whether it 
is murder, whether it is suicide, whether it is accidents, and 
it seems to me that you start a bit of a mission creep from 
where the Centers for Disease Control would be.
    So I know what you were just talking about, making a 
connection between injury control--and I think there is a good 
point you make where we ought to think about how people can 
handle things safely and how that can work. I worry a little 
bit because you made the point of naming it. You know, if you 
name these issues, like if someone said they died in a suicide 
from a gun, one person would say gun violence, right? They 
would say gun violence. Now, if it was through hanging, would 
they say rope violence? They would not.
    In the same way, if you said there was someone who died in 
a car accident, you would say that is a car accident. If it was 
an accident involving a gun, that is categorized as gun 
violence. These kinds of things, I think they are important 
when we talk about what kind of research we really need that 
would actually add to the knowledge base, because I think you 
have all made a point where we want to make policy decisions on 
relevant statistics, you want to have access to data. I would 
encourage all four of you to tell the committee what kinds of 
data are needed, and I don't know that that is the CDC's job 
because I think of some of these areas where they are taxed 
already. It may be other parts of the Federal Government that 
need to find these statistics. It may be in the criminal 
justice area; it could be other areas.
    But I think I have learned a lot from the discussion today. 
Dr. Stewart, I just want to say as a trauma person, I am sure 
you have dealt with these kinds of things on a first-hand 
basis, and you shared a little bit, and I think all of us are 
concerned. But I appreciated what your approach was where you 
talked about let's find ways to build common ground because it 
is a very divisive political topic, but I think all of us would 
want to have our Second Amendment rights protected, and I think 
we would want anyone who is using firearms to use them 
responsibly and safely, and anyone who commits crimes and 
breaks laws using firearms should be prosecuted to the fullest 
extent.
    But the question of where we are in policy, what kinds of 
laws help promote that, even to the question of gun-free zones, 
whether they are effective, whether they are not effective, I 
hope we can add light rather than just heat to this discussion.
    So, Dr. Stewart, let me just go back to you because I 
thought you made an interesting comment early on about looking 
for ways to prevent violence, looking for ways that may enhance 
personal liberty but also restrict people who would do 
violence. I don't know if you have any final thoughts on that.
    Dr. Stewart. Yes, sir, I do. Thank you. Thank you very 
much.
    There are several questions. I will try to just answer the 
issue of naming. I do hear you. There are things that do get 
named, though. For example, suicide, it gets named as an opioid 
overdose. So there are certain things that we name, and it 
tends to have to do with the magnitude of it.
    But I think I could frame the way the American College of 
Surgeons has done this work. I can frame it in a way, what I 
call the common narrative, that honestly I don't think requires 
compromise from anyone on this panel, which goes something like 
this: firearm ownership is a constitutionally protected liberty 
in the United States, but we have a significant, large violence 
problem, and we can address that problem by working together to 
make firearm ownership as safe as reasonably possible and 
address the underlying root causes of violence.
    Now, with respect to the issue of an emergency, my family 
is here, and they think of me as a boring person. I don't over-
use--I don't speak in hyperbole often.
    Mr. Moolenaar. They are nodding their heads. [Laughter.]
    Dr. Stewart. Well, that is what they tell me. [Laughter.]
    So, is it an emergency or not? It is true, all those 
conditions that you talked about. When I consider it is an 
emergency is when you are in the trauma center and there are 50 
people, more or less, in a rural church in south Texas at a 
worship service, and 46 of them are shot, and 26 of them die. 
That is an emergency from my standpoint.
    And when you look at the context of it, a great trauma 
system there--I am biased--a great trauma system, and a good 
Samaritan interrupted the attack, okay? So you would say, well, 
how did all that work, Dr. Stewart? Well, my community has a 
few simple aphorisms. We let no one suffer or die in vain. And 
when you honestly look at that, you say we have got to do more. 
We have got to address the upstream factors that lead to 
violence, and we have to get serious about enforcing laws, and 
also about keeping firearms out of the hands of people who 
shouldn't have them. It is an emergency from my standpoint.
    Mr. Moolenaar. Fair point. Thank you very much, Dr. 
Stewart.
    Ms. DeLauro. Thank you.
    Congresswoman Lee.
    Ms. Lee. Thank you very much, Madam Chair. I want to thank 
yourself and the Ranking Member for this very important 
hearing, because in my community, like in many communities, it 
has been a public health emergency for years and years and 
years.
    Let me take a moment to acknowledge, of course, our young 
people who are here, because they are bearing witness and are 
here on behalf of those who have been killed or injured by gun 
violence, and also for using your voice and your presence to 
prevent future senseless acts of gun violence and tragedy. So 
thank you all very much for being here.
    Let me say a couple of things. First of all, gun violence 
disproportionately impacts communities of color, people of 
color.
    A couple of statistics. In 2017, 50 percent of gun-related 
deaths in our country were African American men, even though 
African American men make up about 6 percent of the country's 
population. Four in 10 African Americans have been personally 
affected by gun violence, including my own family. But the 
majority of African Americans do not feel as though their calls 
to end gun violence and formally study the impacts are being 
heard by the public.
    In my own district, for example, I hear from constituents 
every day about the effects of gun violence. Four hundred 
people in my district were killed in the last five years alone. 
There have been three weekends this year where three or more 
people were killed by guns in my district. Unfortunately, we 
don't hear about what is taking place in many communities and 
what we are dealing with on a daily basis.
    Now, I wanted to ask you--and probably, Dr. Stewart, you 
may be the appropriate witness, and I thank all of you for 
being here to respond to this. But I am a psychiatric social 
worker by profession. I understand PTSD. I know the signs of 
PTSD. I go into a variety of communities in my district and 
talk to individuals in the community who have been affected by 
gun violence. The signs of PTSD, not only from individuals but 
from the community, there is a community PTSD crisis.
    I am wondering how we are addressing PTSD with individuals 
and with communities. I mean, I can cite Census tracts where 
everybody has been affected by PTSD because of the gun violence 
that takes place over and over and over again. I know we have 
done a lot of research on PTSD in the military, but I am 
wondering in terms of funding, a dedicated stream of funding, 
Federal funding to better understand the public health epidemic 
of gun violence, how we can factor in and what do you think we 
need to do about PTSD that is rampant in so many communities 
across the country?
    Dr. Stewart. So, I very much appreciate your comments. 
Thank you. I think the reason why I am passionate about this is 
that the data you show is accurate in that we have to do better 
with respect to it. I have no doubt that PTSD is rampant in 
communities, and it is probably, honestly, to some degree 
rampant in trauma providers as well, to be totally honest about 
it.
    So when I talk, when we talk, not just me, when we talk 
about violence prevention, we are talking about we need 
research to understand what we can do that would make a 
difference in those communities in a way that engages those 
communities as well. Whenever I talk about engaging firearm 
owners as part of the solution, engaging communities who are 
under-served, communities of color as a part of the solution 
rather than as a part of the problem.
    There are very hopeful programs with respect to this. There 
is the National Network of Hospital-Based Violence Prevention 
Programs. There is Cure Violence. There are researchers and 
practitioners in places all around the country who are making 
headway.
    But funding for those projects, to understand and to 
achieve the right results, is absolutely critical, and it is 
something that I believe could really make a difference in 
under-served communities.
    Ms. Lee. The long-term trauma impact, Dr. Lott.
    Mr. Lott. I really appreciate your question. To me, too 
much is focused on the guns, per se, and not on what is 
underlying it and causing it.
    Over 50 percent of the murders in the United States occur 
in 2 percent of the counties. If you look in those counties, 10 
blocks in those counties account for most of the murders in 
those areas. It is gang violence. It is basically drug gang 
violence.
    What you have to do is figure out a way of taking away the 
incentives for people to go and join those gangs that are 
there. Just to focus on guns, you are going to be as successful 
in stopping these gangs from getting guns as we have been in 
stopping them from getting drugs, okay? I mean, you look at 
Mexico, they have one gun store in the country since 1972. The 
most powerful guns you can legally buy or own are 22 short-run 
rifles. And yet they have a murder rate that is five times 
higher than what we have because the gangs, the drug gangs 
bring it in.
    What you have to do is think of ways of taking away the 
profits that the drug gangs have, and we can talk about that, 
but that is a completely different conversation than----
    Ms. Lee. Sure. But this is still a public health emergency, 
and what we need to do is figure out how we can do the research 
to document that this is a public health emergency and then 
develop strategies on how to get the guns off the street.
    Mr. Lott. But the point is you are going to be most 
successful in thinking of ways of taking away the profits from 
the gangs, and that will reduce the incentive for bringing in 
the guns to protect their valuable drugs and other things they 
have.
    Ms. Lee. Thank you.
    Ms. DeLauro. Congresswoman Frankel.
    Ms. Frankel. Thank you, Madam Chair, for this hearing.
    Thank you all for your testimony today.
    So, I know we have a lot of policy issues that we debate on 
both sides, and what I would like to ask each of you is if you 
were going to have this opportunity to research, which some of 
you are doing already, what are some of the most prominent 
questions? If you each would tell me five questions you would 
like to see answered.
    Mr. Morral. Okay. Thank you, Congresswoman, for the 
question. Well, we have done some research on where the biggest 
disagreements are between people on opposite sides of this 
debate about factual matters, and I think that is a sweet spot 
for where you could do some good research. What we found is 
that there are three policies--of the ones we looked at, there 
are three policies where there is a large difference in 
agreement about facts.
    One is permit-less carry; one is gun-free zones; and the 
other is stand-your-ground laws. One group of experts think 
these things can make us safer, the others think it makes us 
less safe. I would recommend that we study that more and 
better.
    Ms. Frankel. Just go down the line.
    Mr. Webster. Sure. I think where I would start as a 
priority is focusing on the source of guns used in violent 
crime, and I think there are at least two different dimensions 
to that where we need better research. One has to do with the 
role of problematic licensed gun dealers and how their 
practices affect the underground gun market and relevant 
violence.
    I think more broadly, we really need to collect systematic 
data across the variety of the policy environments we have in 
the United States to better understand the connections between 
firearm policies and underground gun market conditions. I mean, 
anecdotally, you find evidence that, for example, in New York 
City, where gun laws are quite restrictive, the street price 
for a relatively cheap gun might be $700 or so. The same gun 
in, say, Louisville or Atlanta might be $100. But we don't have 
that systematic kind of data to understand these connections 
between what the policies are and--you know, I focus a lot on 
mechanisms of diversion. There are a lot of important questions 
and debates that we could help settle with better data and more 
rigorous research.
    Dr. Stewart. So I think you would probably guess that I 
would say violence prevention research is key. I am going to 
just mention some key points on that.
    I think addressing structural factors--and by structural 
violence what I mean is the way populations get put in harm's 
way. If you think about it, that gets to actually the 
intersection of both homicide and suicide, because when you get 
to the root of those causes, we need data, we need research to 
understand it. But it gets to poverty, inequity, social 
isolation, stigmatization, previous trauma, and what that leads 
to is a sense of hopelessness. It leads to hopelessness, which 
then leads to violence.
    But I don't know how much you have thought about it. That 
is an intersection of both suicide and homicide. It gets to 
some of those things, and it needs to be done in a non-
partisan, correct way, but I think that is an important part of 
this.
    The second thing, though, would be to use the same general 
approach that we have used for automobile safety and for 
bicycle safety, and that is research, really good-quality 
research that involves the firearm-owning community, that 
actually engages them as a part of the solution to develop 
technology. I believe in technology. I believe in science that 
could make products safer. But that involves the full 
participation of firearm owners.
    Mr. Lott. Thank you very much for your question. There are 
two general points I would make. One is I think we need to move 
a little bit away from the focus on firearms and talk about 
what creates the incentives for people to go and use them the 
way they do, and to talk about what can you do to eliminate the 
profits that are involved in gang violence and in drug gangs. 
If you focus on the guns, you are going to be as successful in 
stopping these drug gangs from getting ahold of guns as you 
have been in stopping them from getting ahold of drugs.
    We have spent huge amounts of resources to try to stop 
these drug gangs from getting ahold of drugs. It is not like a 
drug gang can go to the police and say this other gang stole 
our drugs, can you help us get them back? They have to set up 
their own military. If I could click my fingers today and cause 
all illegal drugs to disappear from the United States, and all 
guns, how long would it take for illegal drugs to start coming 
back into the United States? If you are in El Paso, 20 minutes. 
How long would it take for them to bring the weapons in to go 
and protect that valuable property that is there? They would be 
bringing them in exactly at the same time.
    Just look at Mexico, as I was saying. It is no more 
difficult for them to go and bring in the drugs or the guns.
    So to me, the big focus is what creates the incentives for 
them to engage in this violence, which is so heavily 
concentrated in the urban areas, in these small areas within 
our country.
    Ms. Frankel. I yield back.
    Mrs. Watson Coleman. Thank you, Chairwoman. And thank you 
to the Ranking Member for holding this very important hearing 
today.
    With our passage in the House of the two bipartisan bills 
last week that would expand background checks and ensure that 
guns are not transferred until a check is completed, it is now 
more important than ever to empower our public health agencies 
to research the epidemic of gun violence.
    We know that nearly 40,000 Americans die from gun violence 
every year. In 2017, more Americans died from gun violence than 
car crashes. This is a public health crisis. In my district, 
there have been more than 1,000 incidents of gun violence since 
2014.
    Today, I just want to share this photo of young Trey Lane, 
a constituent of mine who was gunned down because he was simply 
trying to shield his friends from a drive-by shooting. His life 
was taken too early by gun violence, before he could realize 
his dreams and aspirations. His mother has taken her grief and 
turned it into organizing and talking to other mothers.
    In the richest country in the world with cutting-edge 
technology and research capabilities, there is no reason why we 
cannot focus our public health pools on addressing gun 
violence.
    So let me get to some of my questions. I am particularly 
concerned with the disproportionate experience of this violence 
in our communities of color, and the research that has taken 
into account the intersectionality of our people of color and 
gun violence.
    Dr. Webster, we know that gun violence has ravaged 
communities of color for decades, but what shocked me was a 
2017 analysis by the CDC of data on child deaths that found 
that black children were 10 times more likely than their white 
peers to die from gun-related homicides. I am a mother and a 
grandmother, so you know what that means to me.
    Based on your research and experience, how can Congress and 
this committee better support studies to address the 
disproportionate amount of gun violence in these communities of 
color?
    Mr. Webster. Thank you. I think that is a great question. 
There are a couple of different directions I guess I would go 
with this. One is when we try to address problems like 
violence, or any other public health emergency, we want 
evidence-based solutions. The truth of the matter is that there 
has been relatively modest investment in actually developing 
innovations to test. We have Cure Violence; it was alluded to 
before. There have been studies looking at cleaning and 
greening, a variety of things that seem to have some beneficial 
effects. But honestly, it is a much bigger, more complex 
problem, and very modest levels of investment in innovations.
    I think what we need to do is--and we do this to some 
degree on the law enforcement side. We develop partnerships 
with researchers and law enforcement officials to 
systematically study the problem, develop innovative 
solutions----
    Mrs. Watson Coleman. So you agree that we need better data 
and better research specifically in this area?
    Mr. Webster. Yes, and I guess what I am getting to is that 
it should be directed towards developing innovative solutions 
that are not wholly dependent upon over-aggressive policing. So 
I think communities and researchers can develop innovations 
with adequate resources.
    Mrs. Watson Coleman. Thank you.
    For those of you who don't know, I am a co-founder of a 
caucus on black women and girls, specifically looking at the 
intersection of race and sex with regard to certain policies. 
Our goal is to give voice to those issues. Research into 
interventions against gun violence is incredibly important 
because women of color are nearly three times as likely to be 
murdered with guns than white women. They are also more likely 
to experience death or harm as a result of an intimate 
relationship.
    Dr. Morral, what is it that we should be doing with the 
Centers for Disease Control and Prevention, the NIH, and the 
National Institute of Justice to address the intersectionality 
of these deaths and these injuries and color and race?
    Mr. Morral. Thank you, excellent question. These are 
problems that are not well researched right now. I think that 
we do need to do a lot of basic descriptive research to 
understand who is being harmed by whom and how the weapon was 
obtained, in addition to the basic descriptive research. Then 
we have to move into research on programs and interventions to 
address that.
    Mrs. Watson Coleman. Thank you. I see that my time has 
expired. I am very interested in this area. I think there has 
been an under-utilization of information, caring, and response, 
and I look forward to having further discussions and to hearing 
from other researchers as well, including those who look like 
me who research my issues. So, thank you.
    I yield back.
    Ms. DeLauro. Congresswoman Clark.
    Ms. Clark. Thank you, Madam Chairwoman, and many thanks to 
the panel for being here today. Again, I want to thank members 
of this audience. I know you are just the tip of the huge 
advocacy iceberg, and we appreciate you being here and all your 
work.
    I can't think of another public health crisis where we have 
said there is no role for Federal research dollars. Can any of 
you? It is a yes or no question, Dr. Lott.
    Mr. Lott. There is a lot of money going in here now.
    Ms. Clark. We are here looking at how we can prevent gun 
violence, how we can prevent deaths from guns, and we know that 
that is a range, from suicides to mass shootings, and we need 
to have the data to look at all of this.
    I have been listening to the questions from the members of 
Congress, and I do think, Mr. Morral, that your analogy to the 
national traffic safety is a good one. Cars don't kill people, 
and I know when I was a state representative and we were 
looking at mandatory seat belt laws, my phone lit up from 
people saying they wanted the freedom to drive their car 
without it.
    We certainly have a large cultural difference in how we 
look at guns. I get it. They are inanimate objects designed to 
kill things, people, animals, but they are inanimate.
    Can you explain that analogy a little bit and tell me how 
you think we could best constitute a similar Federal agency for 
addressing gun violence?
    Mr. Morral. Yes, thank you for the question. The National 
Highway Traffic Safety Administration was set up in 1970, and 
it has since then been collecting this incredible data set on 
all traffic crashes that have happened in the U.S. This has 
been super-valuable for doing research and designing new 
strategies for reducing traffic fatalities in the U.S. As a 
result, today, deaths per vehicle mile traveled are a quarter 
of what they were when the National Highway Traffic Safety 
Administration was set up.
    We have similar tremendous benefit from all the Federal 
investment and research on smoking. Today, smoking and the 
associated disease is much less than it was when these research 
programs began.
    These are success stories that suggest that Federal 
research programs, when they are devoted to doing this kind of 
work over a long term and really focusing on a problem, can 
have great benefits. There is no guarantee--to Dr. Lott's 
point, there is no guarantee that if we were to do the same 
thing with firearms violence that we would have the same 
benefits, but we haven't tried it yet, so we don't know. And I 
think it is worth trying because of how many people are being 
injured by firearms.
    Mr. Lott. Can I respond to that?
    Ms. Clark. No.
    I wondered, if you were looking at setting up a similar 
agency, where would you look? What other Federal agencies 
besides the CDC would you include? By agency, I am referring 
back to NHTSA.
    Mr. Morral. Right. What my testimony suggests is that there 
is a role for the CDC, obviously, but also for NIH, for the 
National Institute of Justice, possibly for the National 
Science Foundation. I think that each of them could approach 
the problem of firearms violence prevention and firearms policy 
from a different and important angle. So I think there is 
potentially a role for all of them.
    Mr. Lott. I just have to say one thing, please.
    Ms. Clark. Thank you. This is my time, Mr. Lott, not yours.
    Mr. Lott. He misstated facts.
    Ms. Clark. I would like to also ask a question of Dr. 
Webster and Dr. Stewart.
    One of my concerns as I have talked to parents and 
community members, advocates, is the impact on childhood trauma 
by bearing witness to gun violence. We know that childhood 
trauma over years has the potential to even change the DNA of 
people in response. Can you address that and steps that we can 
take to help with this problem?
    Mr. Webster. You are absolutely correct that trauma, such 
as witnessing acts of gun violence, can very directly and 
physiologically affect your brain and your body. There is 
really growing research to that fact, and this is part of the 
public health emergency for gun violence.
    While I agree with Dr. Stewart and some of the other 
remarks about the importance of addressing trauma, the post 
part of the PTSD suggests something that happened before and 
the trauma is gone. What we have right now is too many children 
are living in communities where people get shot on a regular 
basis, and we have to certainly address their trauma, but the 
reason they have so much trauma is there is an abundance of 
guns readily available through a variety of means, and that is 
where I think we could have very valuable contributions to 
understanding that better and how we prevent it.
    Ms. Clark. Thank you very much.
    Ms. DeLauro. Thank you.
    Maybe we can get Congresswoman Bustos in.
    Mrs. Bustos. Thank you, Madam Chair, and thank you to our 
panel for being here.
    I was across the hall at another hearing, and that is why I 
came in late. And the reason I came over here was because I got 
a text to me saying that right now, as we sit here, there is an 
active shooter in my part of the State of Illinois, in 
Rockford, Illinois. I share the representation of this town and 
the county, Winnebago County, with Congressman Adam Kinzinger, 
and we are in constant communication right now. But I wanted to 
come over here knowing what the topic of this conversation is.
    Let me just tell you what happened. This is in the northern 
part of the State of Illinois. It is the farthest northeast 
part of the congressional district that I serve, and there is 
an active shooter right now.
    What happened was a law enforcement officer went to serve a 
warrant, and the initial reports are this man who was armed 
shot through the door and shot the law enforcement officer. I 
don't know how the law enforcement officer is doing right now. 
We have some preliminary reports, but it would be irresponsible 
of me to say exactly what his condition is.
    So, this shooter is now on the loose. Everybody in our 
community is being warned about how he is armed and dangerous. 
These kinds of stories, everybody is sitting up here, everybody 
sitting out there knows of these kinds of stories, and just the 
imminent threat, and you just never know when these things are 
going to hit.
    I just cannot imagine the fact that the Centers for Disease 
Control and Prevention has not invested more resources to get 
to the bottom of this. Congresswoman Clark hit on those issues 
and the importance, and I appreciate you drilling down. Dr. 
Morral, I appreciate your answer to that.
    But I am going to be going home to my congressional 
district to meet with folks, and I am just wondering, as we sit 
here and this is going on, and things are going on, I am sure, 
in other communities right now as well, but it just is really 
hitting home right now.
    Your message to people who I represent in Illinois? And any 
one of you can address this.
    Mr. Webster. I would like to respond. I am very sorry about 
that incident.
    One thing I want to underscore here in terms of thinking 
about gun violence as a public health problem, much of the 
science of public health is studying risk, right? And active 
shooters is one element of risk that we can study. The 
Consortium for Risk-Based Firearm Policy, which I am a part of, 
has analyzed the data, recognizing that quite often there are 
situations where people will give some warning signs, so to 
speak, that something of this nature may occur. That was the 
impetus for extreme risk protection order laws.
    So I think an area of research that we really need more of 
is understanding those risks, how do we gather the best 
available data and study different responses to those risks. I 
think this, again, underscores the value of the public health 
science approach to a very complex problem.
    Mr. Lott. If I could comment? God forbid that the officer 
ends up dying in this tragedy. But one thing that is 
interesting is that 90 percent of the people who commit murder 
have a past violent criminal history. This is not something 
that your typical person goes and does. That obviously suggests 
certain responses.
    But the notion of mental health, I wish it was that simple. 
Over half the mass public shooters in the last 20 years were 
actually seeing mental health care professionals in the year 
prior to their attack, and in not one single case were those 
individuals identified as either a danger to themselves or 
others.
    So the question becomes--you know, I am all for trying to 
treat mental health and things like that, but the notion that 
somehow you are going to be able to go and identify these 
individuals beforehand, people with mental health issues are 
significantly less violent on average than the general 
population, and people with mental health issues are also much 
more likely to be victims of violence than the general 
population. So you are talking about people who engage in 
violence at such low rates.
    There is a whole academic literature about the inability 
for mental health care professionals to go and identify people 
who are a danger to others. They realize themselves in the 
profession the difficulties that they have. If the issue here 
turns out to be a criminal who was being served a warrant 
there, unfortunately, as I say, the vast majority of murders 
are people who already have a violent criminal history, and it 
probably was illegal for the individual to own a gun to begin 
with.
    Mrs. Bustos. Thank you, Madam Chair. I yield back.
    Ms. DeLauro. What we are going to do is look toward closing 
comments. I am going to ask Ranking Member Cole if he has any 
further comments to make before we close, and then I will make 
some closing comments, and then we will draw the hearing to a 
close.
    Mr. Cole. Thank you very much, Madam Chair. I want to again 
thank all of the witnesses here. I really found the discussion 
exceptionally useful, and the materials that you all produced 
extremely useful as well as sort of prep for this. It has been 
a good discussion. It has been robust.
    I suppose one of the concerns I have here--and I am going 
to draw from a memo that was prepared for me, not by these 
gentlemen coming in, and it says that the public health push 
for banning guns goes back to the late 1980s. In a 1989 issue 
of the Journal of the American Medical Association, the Centers 
for Disease Control official, Patrick O'Carroll, stated ``We 
are going to systematically build a case that owning firearms 
causes death. We are doing the most we can do given the 
political realities.''
    I would suspect that that probably did more damage to the 
cause of legitimate gun violence research than probably any 
single statement in modern history, and it goes back to a point 
that Mr. Morral made. In some cases, the predisposition of the 
researcher can impact at least the conclusions, and you would 
hope an honest researcher--and I know all of you are, and I 
think most researchers are--just follows the data to where it 
takes him, as opposed to saying I already have my conclusion, 
now we are going to build a case to support my conclusion, the 
exact opposite of what good science ought to be.
    But I think you have shown a lot of areas where we could 
move ahead, I think, on common ground. I frankly like the idea 
of sort of keeping the Dickey Amendment as a guardrail because, 
again, it doesn't prohibit research. I would hope, frankly, the 
people at NIH and CDC who have been giving a lot of signals, 
both in report language and in statements by the Secretary--you 
know, if you have some legitimate ideas, go out there and do 
it. We are not trying to stop you from researching. Certainly 
this subcommittee has not done anything to try and discourage 
that, quite the opposite. This subcommittee, for the first time 
in a dozen years, started putting significant resources back 
into NIH and back into CDC. We were flat funded for 12 years 
under both Republicans and Democrats, and that has not been the 
case in the last four years, and I am pretty certain it won't 
be the case going forward. We have a bipartisan commitment 
here.
    So resources are available. We will have our discussion 
over whether or not we should direct it. I think that is a 
legitimate discussion, and there are some dangers there. We are 
pretty careful about trying to let researchers decide what the 
areas of research are that make sense, and let scientists 
decide which avenues of inquiry are important. We don't want to 
impede them, quite the opposite. Again, that is why the 
statements were made in the record, because I do think there 
has been some confusion here that hopefully the Secretary has 
cleared up, hopefully this subcommittee, working in a 
bipartisan fashion, has cleared up, and we will continue to 
work on that going forward.
    But there are persistent concerns--and this doesn't just 
apply to this politically sensitive area--as to do you adopt 
policies that seem on their surface to make sense and then get 
the opposite direction. There was a time in our country's 
history when drinking was a really bad thing, and it is, and 
over-drinking is terrible, and it is. So let's try prohibition, 
and we did, and it didn't work very well. It didn't solve the 
problem. It exacerbated the problem.
    I think Dr. Lott made a very good point when he talked 
about the strength of gun laws in Mexico, the laws and what you 
could buy, and then what the reality on the ground is. We know 
that, frankly, we have a great deal of responsibility, in my 
view, there because we are the market.
    I have talked to the president of Mexico before about 
violence inside his country and all the thousands of deaths, 
and he said maybe you should legalize drugs in your country. I 
would never do that here, and this was a previous president, by 
the way, not the one that is there now. He said your inability 
to control your consumption is killing us down here, because we 
don't have the resources to police as robustly as you do, so 
the production comes down here, smuggled across your border, 
and you have some responsibility for that. I thought that was a 
very fair point to make.
    But it also pointed out that the problems, for cultural or 
economic reasons, they were complex. They had to do with 
addiction and all sorts of behavior that is inappropriate.
    Again, Dr. Lott's point about 50 percent of the murders in 
2 percent of the counties is pretty staggering, and probably 
usually in counties that have pretty strict gun control laws.
    So we clearly have a whole complex of problems here that 
demand research, and hopefully this subcommittee will be in a 
position to robustly fund that research and widen it out in 
ways that help us get answers, and hopefully we don't jump to 
policy conclusions before that research is actually completed.
    So again, I want to thank all of you. I thought this was a 
terrific, terrific session. I want to thank you for the 
expertise and the passion. I used to be in academics. This is 
almost like being back on a college campus again, because we 
had some great debate too, particularly at both ends of the 
table over some of these things, but it was helpful debate, it 
was good debate, and it was civil debate.
    So, Madam Chairwoman, thank you very much. I enjoyed being 
here and enjoyed hearing our witnesses and look forward to 
working on this issue with you as we go forward.
    Ms. DeLauro. Thank you very, very much, Congressman Cole.
    I have to ask for a unanimous consent to enter into the 
record two statements, one by the American College of 
Physicians, and another by the American Academy of Child and 
Adolescent Psychiatry.
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    Ms. DeLauro. I am also sorry that Dr. Stewart, if we had 
gone further, I wanted to address a project which was really--
Project Longevity, which exists in my community.
    A small investment in intervention programs have a 
tremendous impact. It was launched in 2012 as high rates of 
violence in several cities--New Haven, Connecticut; Hartford, 
Connecticut; Bridgeport, Connecticut. Connecticut spent less 
than a million dollars of its $30 billion budget to fund 
Project Longevity, a modest investment.
    The number of fatal and non-fatal shootings were cut in 
half between 2011 and 2016. Researchers from Yale University 
directly attributed the 73 percent drop in the number of group 
or gang-related shootings per month to Project Longevity. On 
Monday I am going to have an event in my district where Project 
Longevity will be there, focused on research and the public 
health emergency with regard to gun violence. I would hope we 
might be in touch with others as well to get your views about 
more of these violence reduction strategies in which we can 
move forward, whether there is evidence of the results. If you 
do have those examples, I would ask you to share those examples 
with us and with the committee as we move forward to try to 
address this issue.
    If I might add, I think we have to not be fearful of 
research and where it takes us. That is what researchers do 
every day. When we research a particular illness or disease, we 
find that potentially the properties of one drug or of a 
therapy lead us to how it can help. That is the wonder of 
research and of science and of where we spend the millions of 
dollars every single year to plumb the new discoveries. We 
should not be afraid of research.
    Gun violence is a public health emergency. Anything that 
kills 40,000 Americans every year is a crisis. It is a public 
health crisis. The CDC, the Centers for Disease Control and 
Prevention, is the nation's foremost public health agency. And 
yet, it has been absent from this research agenda for more than 
20 years.
    I have in front of me--it has been said here that we do not 
direct research. We say, ``CDC, you go ahead; NIH, you go 
ahead.'' We were going to count the lines here of directed 
research that we say to the CDC, this is what you get to do. I 
am not going to go through all of these, but I have three 
pages, three pages of directed research.
    We can direct the CDC, the NIH to sit here and say--today 
we say here is the money, you go to it. We have directed 
millions to cancer research, to Alzheimer's, to brain research. 
We are earmarking. Yes, we are, to these areas. A moonshot 
effort. We talked here about opioids. We cannot keep track, and 
I am for spending money on the problems that we have and the 
crisis that we have in opioids nationwide. But we don't 
hesitate for a moment to say we need to do something about it. 
And yet for 20 years we have been unable, as Federal dollars, 
to look at research into gun violence prevention.
    Dr. Redfield, I might add, is the CDC director, has told us 
flat out, we just need a funding mechanism. We are poised to 
research in this area if Congress chooses to give us additional 
funding, if Congress chooses to do all of this research at the 
CDC and the NIH, if Congress chooses.
    Well, I am going to close with this. I think it was you, 
Dr. Stewart, who said we need to focus on needless deaths and 
suffering. If our research that we do at the Federal level--and 
I applaud the research that is done outside, and we have had 
collaborative partnerships outside of the government, and we do 
this every day with the NIH and the FDA, et cetera, and looking 
at these issues that are major challenges that we face in this 
country.
    Needless death and suffering. And if gun violence 
prevention research can lead us to trying to mitigate against 
needless death and suffering, then I believe it is our 
responsibility, and a moral responsibility, for us to fund at 
the Federal level gun violence research.
    I want to say thank you. It has been a great discussion, a 
robust discussion. And, you know, it is wonderful to get 
different perspectives. That is the way we move the ball 
forward, not shutting our minds to any kind of a direction that 
this kind of research will take us.
    Thank you all very, very much. I appreciate it.
    This concludes the hearing. Thank you.

                                           Tuesday, March 12, 2019.

  OVERSIGHT OF FOR-PROFIT COLLEGES: PROTECTING STUDENTS AND TAXPAYER 
                    DOLLARS FROM PREDATORY PRACTICES

                               WITNESSES

HON. RICHARD J. DURBIN, U.S. SENATOR
KEVIN CAREY, VICE PRESIDENT, EDUCATION POLICY AND KNOWLEDGE MANAGEMENT, 
    NEW AMERICA
MARC JEROME, PRESIDENT, MONROE COLLEGE
ERIC LUONGO, FORMER FOR-PROFIT COLLEGE STUDENT
ROBERT SHIREMAN, DIRECTOR OF HIGHER EDUCATION EXCELLENCE AND SENIOR 
    FELLOW, THE CENTURY FOUNDATION
    Ms. DeLauro. The hearing will come to order. My apologies 
for being late, but they pay us to vote. And I understand that 
Senator Durbin has to vote and he will be back. And we will, 
when he comes, give him an opportunity to be able to speak up.
    I would like to welcome everyone to the Labor, HHS, and 
Education Appropriations Subcommittee for our oversight hearing 
on predatory for-profit colleges. We were going to have two 
panels, with Senator Durbin first and then a second panel. I 
will introduce each of you before your remarks.
    But I want to say a thank you to you, Eric Luongo, who was 
formerly a student at a for-profit college, Marc Jerome of 
Monroe College, Kevin Carey of New America, and Robert Shireman 
of The Century Foundation.
    At the signing of the Higher Education Act in 1965 
President Lyndon Johnson said the law would, quote, ``swing 
open a new door for the young people of America.'' For them and 
for this entire land of ours it is the most important door that 
will ever open, the door to education.
    We have a duty to be examining predatory for-profit 
colleges, one, because this subcommittee is charged with 
oversight of the Department of Education; two, because we fund 
the Pell Grant Program, and for-profit colleges receive nearly 
14 percent of all Pell grant funding.
    Last year, the University of Phoenix was the largest 
recipient of Pell grants, not just among for-profits, but all 
colleges and universities. They received more than 
$200,000,000.
    Phoenix has committed a number of violations, including 
deceptive or unfair targeting of military veterans in the 
advertising, marketing, or sale of products or services. As a 
result, at one point the Department of Defense suspended the 
University of Phoenix's ability to recruit on U.S. military 
bases and restricted its access to Title IV eligibility.
    I have a list which I will submit for the record of all of 
the infractions by Phoenix University.
    And I also have a document of for-profit infractions 2005 
to 2019, several pages in length, which I will submit for the 
record as well.
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    Ms. DeLauro. So it is our responsibility in this arena to 
be sure we shine a light on those bad actors who seek to scam 
students and taxpayers and thereby block the door to education.
    I would note that our colleagues on the other side of the 
aisle agree on jurisdiction, on this jurisdiction, having 
pushed for riders to remove accountability measures with regard 
to for-profit colleges.
    So this is in our purview, it is an area that we must 
address, because predatory for-profit colleges are scamming 
students and taxpayers out of millions of dollars, and 
Secretary Betsy DeVos is helping them get away with it.
    Predatory for-profit schools have lower graduation rates 
and higher default rates than public and nonprofit schools. 
According to the Department of Education, the 6-year graduation 
rate is 59 percent for public institutions, 66 percent for 
private nonprofit institutions, but only 26 percent at private 
for-profit institutions. And while accounting for only 9 
percent of all students enrolled in postsecondary education, 
they account for more than a third of all defaults, 34 percent.
    Corinthian was an example of the worst kind of predatory 
for-profit school. Corinthian engaged in deceptive marketing, 
lied to the government about its graduation rate, and folded 
almost immediately when the Federal Government turned off the 
spigot--a for-profit private business that could not survive 
for 3 weeks without Federal assistance.
    The collapse of Corinthian Colleges has wrecked the lives 
of tens of thousands of students, leaving them with high debt 
and useless degrees. Dawn Thompson attended undergraduate and 
graduate programs through a Corinthian subsidiary, Everest. 
Less than a year after completing her online MBA Corinthian 
closed. Dawn was left with $250,000 in loans for degrees from a 
defunct college.
    Particularly alarming is how predatory for-profit colleges 
built their business model on targeting those who they deemed 
to be particularly vulnerable.
    The Senate Committee on Health, Education, Labor and 
Pensions, chaired by then Senator Tom Harkin, investigated for-
profit colleges in 2012. They uncovered internal recruiting 
documents from the institutions, including lists of those they 
targeted. And I quote, ``welfare moms with kids, pregnant 
ladies, military, active and retired, those who experienced a 
recent death, and those who were physically and mentally 
abused.'' And the list goes on.
    And there again this is the student profile of the people 
that they were looking for and what they laid out in terms of 
the most vulnerable.
    This is not, I might add, a new issue. It is not a new 
issue. And what I would just see here is I have here the key 
decisions to protect student borrowers during Republican 
administrations, going back to Dwight Eisenhower. President 
Eisenhower, 1956, there were major abuses of the original GI 
Bill after World War II. His Bradley Commission produced a 
final report in 1956 that indicated for-profit institutions 
enrolling former servicemembers on the government's dime and 
concluded that, I quote, ``Much of the training in profit 
schools was of poor quality.''
    In 1957 the National Defense Education Act passes creating 
the National Student Defense Loan Program, prohibiting funding 
to for-profit schools.
    President Nixon in 1974, Federal Trade Commission creates 
rule for proprietary schools to document job placement rates.
    President Reagan 1987 and 1988, Bill Bennett proposed new 
regulations under which more than 2,000 postsecondary 
institutions would immediately face a hearing to limit, 
suspend, or terminate their participation in PHEAA, in Federal 
student aid programs if their default rate on Federal loans 
exceeded 20 percent.
    In 1988 Bennett delivered a blistering attack: Kids are 
left without an education, and no job, and the taxpayer ends 
upholding the bag for a kid who gets cheated.
    President George H.W. Bush, 1991, Secretary of Education 
Lamar Alexander suggests States implement Federal benchmarks 
for vocational programs that include graduation, job placement, 
and default rate. So not a new issue.
    And it is not just who they target, but how. They train 
their employees on something called a ``Pain Funnel.'' It is a 
technique to wear down prospective students and coerce them 
into sham programs at these institutions.
    And that includes our veterans. Under current law, for-
profits are only allowed to receive up to 90 percent of their 
revenue from Federal financial aid through the Department of 
Education. However, through what is called the ``90-10'' 
loophole, DOD and the GI Bill benefits do not count.
    As a result, schools aggressively recruit veterans, 
servicemembers, and their families to get around this 
accountability provision and to extract more public dollars. A 
Department of Education analysis found that 200 for-profit 
colleges received between 90 and 100 percent of their revenue 
from taxpayers when DOD and VA benefits were counted as Federal 
assistance.
    Our witness this afternoon, Eric Luongo, will share his 
story. After being honorably discharged from the Navy, Eric 
attended DeVry for web graphic design. They promised he could 
make $80,000 a year. But as he will testify, they scammed him, 
repeatedly misleading him in order to get him to enroll, to 
take out loans, despite their promises to the contrary.
    He now owes $101,000 and the DeVry degree is worthless. 
Eric searched for a job unsuccessfully for a year because the 
DeVry program did not prepare him for a career in web graphic 
design. Now he is back in school and looking at a bachelor's in 
business administration.
    The 90-10 loophole gives predatory for-profit colleges a 
perverse incentive to target veterans and servicemembers like 
Eric, which is why groups such as the Iraq and Afghanistan 
Veterans of America, Student Veterans of America, Paralyzed 
Veterans of America, and Vietnam Vets of America support 
closing the 90-10 loophole.
    The behavior of predatory and for-profit colleges is 
egregious. They are private companies that can subsist entirely 
on Federal dollars. I would think that my colleagues who decry 
crony capitalism would particularly object to this, especially 
since it comes at the expense of veterans, students, families, 
and taxpayers.
    In addition, they are now creating other schemes to change 
their tax status from profit to nonprofit to avoid regulatory 
structure or, if you will, rules to protect students and 
taxpayers.
    Yet, the Trump administration and Secretary DeVos have 
rushed to let these predatory programs off the hook. In 
particular, Secretary DeVos is working to roll back two 
protections, the Gainful Employment rule and the Borrower 
Defense rule.
    The Higher Education Act requires all career-oriented and 
for-profit programs receiving Federal student aid to, quote, 
``prepare students for gainful employment in a recognized 
occupation.'' The Gainful Employment rule expanded 
accountability and transparency to fulfill that requirement, 
thereby protecting students from programs that charged too much 
and delivered too little.
    The Education Department itself estimated that eliminating 
the GE rule would cost $4,700,000,000. Supporters of the 
Gainful Employment rule includes 33 military and veteran 
organizations, State attorneys general, and student, consumer, 
and civil rights groups.
    Secretary DeVos missed her deadline for rolling back the 
strong rule, but we expect the Department of Education to 
finalize their effort in 2019.
    Meanwhile, the Secretary is also refusing to follow loan 
forgiveness started under the Obama administration. Students 
attending these worthless institutions should not be required 
to bear the burden of this student loan debt.
    The Obama administration's Borrower Defense rule created a 
process for students to apply for relief. The Department of 
Education's own inspector general found the Borrower Defense 
rule would improve the Department's procedures for, quote, 
``mitigating harm to students and taxpayers.''
    Supporters of the rule include State attorneys general, 
veteran and servicemember groups, and organizations dedicated 
to fighting for students, consumers, civil rights, faculty, 
staff, and college access. Yet, as of December 2018, more than 
139,000 loan forgiveness claims were still awaiting action, 
including Dawn Thompson, who I mentioned earlier, and our 
witness Eric.
    And Secretary DeVos is siding with the predatory for-profit 
colleges at the staff level. She has hired more than a half 
dozen staff who worked for for-profit colleges who have had 
oversight of them at the Department. This includes the former 
dean of DeVry University to lead the Department's Student Aid 
Enforcement Unit. And the senior political appointee behind her 
efforts to deregulate higher education is a former employee of 
for-profit colleges. You want to talk about the fox guarding 
the hen house.
    Our Nation's students strive to improve their lives. It is 
our responsibility to ensure that they do not have to worry 
about being taken advantage of while they seek to invest in 
their own skills. So we will continue to fight for students and 
taxpayers and demand the Trump administration enforce the 
strong Gainful Employment and Borrower Defense rules.
    I look forward to hearing from our witnesses today about 
the oversight that we must be conducting because we need to 
protect students and taxpayers from predatory for-profit 
colleges. We must ensure that door to education which President 
Johnson cited all those years ago is not sealed shut by the 
for-profit colleges who seek to profit at the expense of 
students' education.
    With that, please let me turn this over to my good friend 
and ranking member of the subcommittee, the gentleman from 
Oklahoma, Mr. Cole, for any open remarks he cares to make.
    Mr. Cole. Thank you very much, Madam Chair.
    I would like to thank all our witnesses for their testimony 
and sharing their time with the committee, especially those who 
traveled here. We really appreciated your efforts.
    I would particularly like to recognize Senator Durbin. I am 
honored to have the senior Senator from Illinois come and share 
his views on this topic before this subcommittee.
    So welcome.
    Not only somebody I admire as legislator, but I still think 
the best interview on ``Morning Joe'' out there, without a 
doubt. So I enjoy seeing you in all your many forms.
    This hearing season has addressed a number of difficult and 
challenging topics. This is certainly one of them today. And 
today we will learn more about proprietary institutions of 
higher education, sometimes referred to as for-profit colleges. 
I have enjoyed reading all the testimony, which I did last 
night and this morning, and look forward to our discussion 
today on helping students find the best option.
    I want to start by expressing my ardent support for 
programs helping young people to access quality higher 
education. This commitment to increasing opportunities can be 
seen in the strong support shown by this committee for programs 
like TRIO and GEAR UP over the last 4 years.
    These programs target low-income, first generation students 
by providing support, encouragement, and structure needed to 
attain a college degree. In the past 4 years these two programs 
have seen a combined increase of over 20 percent and I hope 
such robust bipartisan support for those programs continues 
under our new chair.
    I also recognize the value of having options in higher 
education. A 4-year college degree right after high school does 
not fit every individual or family situation. For a variety of 
reasons our higher education system offers a range of options 
to students.
    Many options come with benefits. Schools have found ways to 
serve working adults, students with special needs in different 
ways of teaching, both online and in the classroom. For 
example, proprietary institutions were some of the first 
schools offer online instruction. Now nearly every institution 
of higher education incorporates this method of learning.
    Proprietary institutions can serve as innovators, trying 
out methods that may not be possible in more rigid State 
university systems. And they can also serve populations that 
may have barriers to accessing higher education, such as 
working parents who do not find the typical in-classroom 
semester easy to accommodate the demands of a full-time job and 
a family.
    I do not want an overactive Federal Government closing off 
options and stifling innovation by forcing one-size-fits-all 
rules that can force good schools to close their doors.
    Yet I also recognize, and some of our witnesses made this 
abundantly clear in their testimony, that there are some 
unscrupulous institutions that have preyed on prospective 
students, including veterans, with egregious marketing tactics 
and in some cases outright lying. Clearly, such behavior by any 
school is abhorrent and the government has a role to intervene.
    Thankfully, I believe we can balance the interests of 
having multiple options in higher education while ensuring 
access to information and reasonable safeguards to prohibit 
predatory practices. Let's not throw out the baby with the 
bathwater. Efforts to include more information for students 
about outcomes attained by graduates of all school types seems 
like a reasonable first step.
    Today, I hope we can learn more about how to stop bad 
actors while still preserving the unique role proprietary 
schools can play. So I look forward, Madam Chair, to the 
hearing and the testimony today and learning ways we can ensure 
that the higher education system provides options for all 
student types, yet still ensures that we spend taxpayer dollars 
wisely.
    I yield back my time.
    Ms. DeLauro. Thank you very much.
    Now it really gives me great pleasure to welcome to the 
House side of the Capitol a dear, dear, wonderful friend, but 
more than that a tireless leader and someone who has spent a 
lifetime in promoting public education, affordable access to 
higher education.
    A fellow appropriator, I have had the opportunity really to 
work with the Senator over the years side by side on a number 
of oversight issues at the time, particularly on the 
Agriculture Subcommittee with the Food and Drug Administration 
and with a single food safety agency, which we keep pursuing.
    But we have worked on issues with respect to the Department 
of Education. We co-led a letter in February about an Office of 
Inspector General report about the potential waste, fraud, and 
abuse at for-profit colleges, including various Art Institute 
programs. I said we partnered on a food safety agency and other 
issues.
    So it give me great, great pleasure to introduce the 
Senator from Illinois, Senator Durbin.
    Senator Durbin. Thanks, Madam Chair. It is an honor to be 
with you and with your colleagues. And I know this is an 
oversight or investigative hearing, and the first thing you 
should investigate is how the ranking member would admit 
publicly he watches ``Morning Joe.'' He is going to answer for 
that.
    Ms. DeLauro. He has to answer for that.
    Senator Durbin. I am sure he will.
    Thanks, everybody, for allowing me to come over here.
    These hearings on this industry are so few and far between, 
and it is a darn shame, because what I am about to tell you is 
really a sad story, a tragic story for students and for 
taxpayers.
    So let me say at this point, if you forget everything else 
I am about to say, I want to ask you to remember two numbers, 
remember these two numbers when it comes to this industry. The 
numbers are 9 and 34. Nine percent of high school graduates in 
the United States of America go to for-profit colleges and 
universities; 34 percent of all the student loan defaults are 
students who attended for-profit colleges and universities.
    Why? Why would almost four times the percentage of students 
end up in default?
    The answers are obvious. These schools charge too much for 
tuition. They leave the students with too much debt. 
Discouraged students leave school with debt and not even a 
diploma. And those who end up with you a graduation certificate 
or diploma find that the inflated promises of employment and 
earnings just don't materialize and they ultimately default on 
their debts. Students graduating with all this debt then face a 
life that is compromised in terms of what they can do next.
    And then they learn the sad reality, that if they are not 
going back to that for-profit school that led nowhere, 
virtually none of the hours that they took at those schools are 
transferrable anywhere. This isn't like your community colleges 
and city colleges across the United States. These schools have 
been accredited by themselves.
    And shame on us. You can't fault the families that send 
kids to these schools. How would they know any better? These 
schools qualify for Pell grants, they qualify for government 
loans. They look like they are the real thing. And students 
coming from families with limited experience with college look 
at this and say, well, this must be a real college. And it may 
have that name on the door, but it turns out it isn't even 
close.
    John Murphy is a famous individual when it comes to this 
industry. He was the cofounder of the University of Phoenix, 
the big daddy of them all. He put it this way in Deseret News 
in 2015, referring to these for-profit colleges: ``They are not 
educators and they are looking to manipulate this model to make 
money. There is nothing wrong with making money, but I think 
anyone making money in an educational activity has a higher 
standard of accountability.''
    Murphy explained that quickly after its founding the focus 
of University of Phoenix became tapping into what he called the 
``open spigot'' of Federal student aid, what he also described 
as the ``juice'' of the industry. For-profit schools are one of 
the most heavily subsidized industries in America. Many for-
profit colleges receive 80, 90, close to 100 percent of all of 
their revenue straight out of the Treasury.
    Now, a lot of people have criticized me and say, ``Durbin, 
you are just angry because it is a business as opposed to the 
traditional means of higher education.'' I am not opposed to 
businesses. Frankly, I think they are fine. But to call this an 
exercise in the free market is to overlook the obvious: They 
exist because of massive subsidies.
    I have tried it to imagine, Madam Chairman, any other 
company or industry in America, I went through defense 
contractors, the big aggies, and all the rest of it, nobody 
takes the money out of the Treasury the way this industry does. 
This isn't a matter of attracting customers to a business, it 
is a matter of attracting students to a heavily subsidized 
industry.
    Murphy went on to say, Phoenix was the one that got it 
rolling and then all the others followed. Let's talk about 
them. Corinthian, collapsed in 2014. How many students were 
left in the lurch? Seventy thousand students nationwide. For 
years, Corinthian had inflated their job placement numbers and 
lied to the students, just flat out lied to them, and lured 
them into high cost programs that turned out to be worthless.
    In the decade that followed leading up to its collapse, 
Corinthian brought in more than $10,000,000,000 in Federal 
student aid funds. Its CEO, Jack Massimino, took home more than 
$20,000,000 in that 10-year period of time, personally took 
home more than $20,000,000. And on the other hand, nearly 40 
percent of Corinthian College's students, who should have begun 
to pay off their student loans in 2008, had defaulted by 2010.
    Now, who loses when that happens? Well, we know the 
students lose. They have got this on the record. They defaulted 
on their student loan. We know it is tough for them to continue 
their education or almost anything else. I have met a lot of 
them who have moved into their parents' basement, there was no 
place else to turn.
    But who know who else lost? The American taxpayers lost, 
because these students can't pay back their loans. These are 
tax dollars.
    Corinthian and it is fraud was not unique. It was the 
canary in the coal mine. Nearly every major for-profit college 
company has faced and continues to face investigation or 
lawsuits by State and Federal agencies.
    In 2016, ITT Tech--boy, doesn't that sound like a winner, 
wouldn't you like a diploma from that place?--in 2016, it 
collapsed, again leaving tens of thousands of students 
scrambling. In 2018, the Education Corporation of America--how 
about these names?--and Vatterott colleges disappeared.
    And we are currently in the midst of a collapse of another 
for-profit enterprise, schools owned by Dream Center Education 
Holdings, including Argosy University.
    I used to go to the Chicago Sun-Times editorial offices and 
I would get on the elevator and there were all these fancy 
looking offices and big names, Argosy University, and I thought 
it is a fraud. The poor students who are walking into this 
place think this is a real college.
    It is not. Argosy is gone. Do you know how many students it 
left behind in my State? Seven hundred holding the bag. That is 
the kind of situation which can be repeated in almost every 
State represented here.
    In this case, in addition to an ongoing collapse that has 
left students scrambling, millions of dollars in Federal 
student aid funds have gone missing. Chairwoman DeLauro and I 
have called on the Department of Education inspector general to 
investigate.
    Incidentally a former Department of Education inspector 
general, Kathleen Tighe, warned Congress that for-profit 
colleges represent a disproportionate risk to students and 
taxpayers to this day.
    There were some that who said Corinthian and ITT Tech were 
outliers in the industry and that it was the Obama 
administration hounding these poor institutions. But the 
collapse and practices of Education Corporation of America, 
Vatterott, Dream Center under Secretary DeVos and the Trump 
administration prove that the rot in this industry runs much 
deeper than Corinthian and ITT Tech.
    As appropriators in the House and Senate, we are 
responsible for ensuring that critical investments and Federal 
student aid don't become the juice that we were told earlier. 
Unfortunately, many of the key protections for students and 
taxpayers that the Obama administration advanced are under 
attack by this administration and the former for-profit college 
executives which have been hired by the Department of Education 
to keep an eye on the industry.
    In May 2018, The New York Times chronicled the DeVos 
Department's unwinding of the enforcement unit set up in the 
aftermath of Corinthian.
    Secretary DeVos has also attacked and refused to enforce 
the Gainful Employment rule, which cuts off Title IV funding 
for programs where graduates' ratio of student debt is too 
high. Secretary DeVos has taken steps to reinstate Federal 
recognition for the Accrediting Council of Independent Colleges 
and Universities, which maintained the accreditation of 
Corinthian and ITT Tech to their dying day in bankruptcy.
    Madam Chair, you have been patient. I know you have other 
witnesses coming before you. But let me just say this. If you 
have ever sat down with one of these students and got a feeling 
for where they are in life after they have been defrauded by 
one of these colleges and universities, I think you would rise 
to the same level of emotion as I have on this issue.
    This is unfair, and it is fundamentally unfair the American 
taxpayers have to subsidize it. And the collapse of these 
schools tell you they are not even good economic and financial 
models. They take all the money they can and then run for the 
border, and the taxpayers end up holding the bag for student 
loans that are defaulted on. Is that how we are going to 
educate or children? Nine and 34.
    Thank you, Madam Chair.
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    Ms. DeLauro. Thank you very, very much, Senator. Thank you 
for being here today and for your continued passion on this 
issue, not so much on the issue but what is happening to 
students in this country and their dreams and aspirations being 
dashed by these for-profit colleges. Thank you very, very much 
for being here this afternoon.
    Senator Durbin. Thank you.
    Ms. DeLauro. Let me please invite the second panel up. And 
I will introduce everyone and then we will move toward 
testimony.
    And introducing our witnesses, our second panel.
    Eric Luongo. Eric served in the United States Navy, was 
honorably discharged in 2003. He will provide the subcommittee 
testimony on his experiences enrolling and attending DeVry 
University.
    Marc Jerome, who is president of Monroe College in New 
York.
    And welcome, Jerome.
    Kevin Carey, vice president for education policy and 
knowledge management at New America.
    And finally Bob Shireman, director of higher education 
excellence and senior fellow at The Century Foundation.
    Following your presentations--and I will tell you that your 
entire testimony will be put into the record, submitted to the 
record, and so I will ask you to speak for about 5 minutes. And 
then we will proceed to 5-minute rounds for questions. We will 
go back and forth in order of arrival.
    If you will, Mr. Luongo, begin when you are ready. And I am 
told, housekeeping, put the mike on.
    Mr. Luongo. My name is Eric Luongo. I am here today to tell 
my story in the hopes that what happened to me isn't going to 
happen to anyone else.
    I enlisted in the Navy in September 1999. I served as an 
assistant LAN administrator on board the USS Wadsworth and 
served as the LAN administrator and the communications officer 
on board the Coastal Mine Hunter Heron.
    I was honorably discharged in 2003, and after taking a 
couple of years for myself I decided I needed to go to school 
again, earn an associate's degree in web graphics design, 
because I felt that is where I wanted my career.
    After looking around for schools, I picked DeVry University 
because I was told by the DeVry representative that their 
graduates were making $80,000 and more a year working in the 
field of web graphic design. So I started there in 2007.
    Before I enrolled, I told the DeVry representative that I 
did not want to have to pay for school and I wanted to use the 
GI Bill and grants so that I could go to school for free. In 
response she told me I would not have to pay for school and 
that my classes would be covered by my GI Bill and grants.
    So I signed up for classes. Then the DeVry representative 
told me I needed to fill out FAFSA. At the time I had no idea 
what FAFSA was, but they told me that I needed to complete it 
in order to receive grants. So I completed my FAFSA and I was 
approved for Pell grant, Stafford loan, and Perkins loan.
    I was asked to complete a master promissory note as well. 
The fact that I was approved for loans, combined with the 
language in the master promissory note, made me very 
suspicious. I thought it was very strange that it said I was 
signing for a loan, since I was told I would be going to school 
for free.
    So I called the DeVry representative and started asking 
questions. When I said to the DeVry representative I thought I 
was going to not have to pay for this, I was told that I wasn't 
because I fell under a veterans program and because of that I 
had the grants and the GI Bill and I didn't need to worry, I 
wasn't going to be charged for any loans. This led me to 
believe that I was not actually taking out the loans per se, 
that I was just approved for them. Every year I had to complete 
the FAFSA again, because I was told I was just recertifying to 
receive my grants.
    Then, after I graduated in June 2011, I started getting 
letters in the mail from loan service providers that said I 
owed money for student loans. I had no idea that I had these 
loans because I had used my GI Bill and the Pell grants to earn 
this associate's and was told that because of my veteran status 
I wouldn't have to pay for school at all.
    So here it is, years later, because of interest and whatnot 
I have over $101,000 for an associate's degree from DeVry 
University. The interest keeps accruing. I was never able to 
find a job working in web graphic design. I spent over a year 
looking for a job.
    At one point I ended up settling for a job working with the 
developmentally disabled. And later I became an immigration 
services assistant with USCIS under the Department of Homeland 
Security, where I work to this day. And I still never ended up 
working in web graphic design.
    A couple of years ago I made the decision that I need doing 
to go back to school and get something of substance. This time 
I am going for my bachelor's in business administration 
information systems. Because of the loans that I unknowingly 
took at DeVry, my financial aid has been maxed out and I was 
lucky enough to be able to get into the vocational 
rehabilitation program through the VA, because I am a disabled 
veteran.
    I am now attending Medaille University and working full-
time as an ISA with Department of Homeland Security. My time at 
Medaille has been like night and day compared to my experience 
with DeVry. Medaille has set up a department to specialize in 
veterans' affairs and work directly with the VA. Voc rehab 
works with DeVry and I have to pay nothing.
    I can even speak to the representatives at Medaille 
whenever I need. The professors and quality of classes are 
night and day. Medaille ensures that the students have the 
tools they need to succeed.
    Since being at Medaille I have been able to maintain a 3.77 
GPA. I am set to graduate in June with my bachelor's degree. 
And I never thought that I would be the subject of such 
predatory acts like those I experienced with DeVry. It just 
kind of shows that this really can happen to anybody.
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    Ms. DeLauro. Thank you very, very much for your testimony.
    Mr. Jerome.
    Mr. Jerome. Good afternoon. My name is Marc Jerome and I am 
the president of Monroe College in the Bronx. Thank you for 
allowing me to share my perspective today, which of course is a 
little bit different.
    I absolutely abhor the unethical behavior we have just 
heard about, but the current policies do not adequately address 
these problems. They unfairly penalize too many ethical 
institutions like mine and don't do enough to protect low-
income students wherever they attend.
    If you take one thing away from my comments today, it is 
this: Higher education as a whole is failing low-income 
students, especially minority students. Whether we look at 
graduation rates, loan default, or debt to earnings, shockingly 
weak outcomes for these students do demand accountability 
across the board.
    Eighty-six years ago my grandfather and great aunt founded 
Monroe College. I am the third generation of my family to lead 
the institution and I am passionate about what we do. 
Significantly, our Bronx campus is located in the poorest 
congressional district in the country, but has some of the best 
outcomes for low-income students of any institution across all 
sectors.
    Given the title of the hearing it was actually very hard 
for me to decide to be here today. I am respectfully asking for 
a lowering of the inflammatory rhetoric to describe every 
institution in the for-profit sector. The word ``predatory'' is 
unfair as a blanket statement and it immediately stifles 
thoughtful discussion.
    Students and families absolutely deserve accurate, easy to 
understand, and consistent information on the programs or 
schools they want to attend. Yet the current regulatory 
framework only requires for-profit institutions to provide 
relevant information and warnings. All students should be able 
to compare information about similar programs and be warned if 
outcomes are weak.
    Students should absolutely have a reasonable expectation 
that they will graduate from the college they want to attend. 
All colleges should be held accountable if too few students 
graduate. But in too many schools, across all sectors, this is 
not happening. In fact, there are 816 colleges with on-time 
graduation rates below 10 percent, and this is for full-time 
students. There seems to be no accountability for these 
unacceptable results, whether it be from accreditors, the 
Federal Government, or boards of trustees.
    Students also should have a reasonable expectation that if 
they take a student loan, their earnings will be enough to pay 
the debt, and colleges should be held accountable if doubt is 
too high and salaries are too low. Yet this is not happening. 
The data is clear that if a debt-to-earnings metric was applied 
across all sectors, huge swaths of higher education would fare 
poorly. Yet only for-profit students are deemed worthy of 
protection.
    Millions of students attend public and nonprofit and 
nonprofit schools with high debt and low earnings. They should 
be protected, too. There are 334 degree-granting institutions 
that have default rates above 20 percent, three-quarters of 
which are public and nonprofit. These institutions should also 
be held accountable to improve their results.
    The Department of Education recently announced that only 24 
percent of all borrowers are currently paying down interest and 
principal. Repayment rates are also low at community colleges 
and Historically Black Colleges and Universities. I don't 
believe this should be a punitive measure. Once again, the 
current regulations only hold for-profit colleges accountable.
    The notion that the difference in sector oversight 
justifies separate protections for students just does not 
withstand scrutiny. Public and nonprofit boards do provide 
oversight, but not always effective outcomes to oversight. If 
the oversight was effective, there would not be so many public 
and nonprofit institutions with such poor outcomes for low-
income students.
    Just think about this: High school principals would lose 
their jobs if their on-time graduation rates were below 10 
percent.
    Accountability and consumer protection should be extended 
to all institutions and to all students. To do anything else is 
to abandon the 18 million college students who do not attend 
for-profit institutions.
    On the other hand, some accountability metrics, such as the 
Gainful Employment rule, which I have been intimately involved 
with for many, many years, are so overbroad and imprecise that 
they have the exact opposite effect from what was intended. 
Rather than punish poorly performing programs, the rules 
actually close some of the best performing programs in the 
country while leaving the same programs at other institutions 
unaccountable, simply because they have a different tax status.
    This cannot be what was intended. Students deserve better. 
And I really think we all could do better.
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    Ms. DeLauro. Thank you.
    Mr. Carey.
    Mr. Carey. Thank you, Madam Chair, Ranking Member Cole, 
members of the committee.
    Senator Durbin mentioned this difference between 9 percent 
of students enrolling from high school and 34 percent of 
defaults. What accounts for this enormous imbalance?
    Well, to start, for-profit programs are often much more 
expensive than public programs, making for-profit students much 
more likely to borrow. A recent National Bureau of Economic 
Research study comparing students enrolled in certificate 
programs found that 83 percent of for-profit enrollees borrowed 
compared with 24 percent of comparable students at public 
community colleges.
    For-profit students are also much more likely to default on 
their loans or have trouble paying them down. Three years after 
for-profit borrowers left college in 2011 and 2012, only one-
third had paid down even $1 in principal on their loans 
compared with nearly half at community colleges and two-thirds 
at 4-year public and private nonprofit institutions.
    Why can't many for-profit students pay their loans back? 
Well, because their loans are larger because the degrees those 
loans finance are often worth very little in the labor market. 
The same study found that even though average for-profit 
tuition was more than 10 times greater than at community 
colleges, for-profit students actually earned less money in the 
labor market.
    The authors found that, and here I am quoting, ``Weak 
performance of the for-profit sector is not limited to a few 
poor-performing institutions, rather the majority of schools 
appear to have negligible average earnings effects.''
    The burden of this failure falls disproportionally on 
students of color, particularly Black students. A Brookings 
Institution study projects that 58 percent of Black borrowers 
who ever attend a for-profit college will default on their 
loans. A Center for American Progress study found that among 
Black borrowers who dropped out of a for-profit college the 
default rate is 75 percent.
    Unsurprisingly, given how much debt their students take on, 
for-profit colleges are unusually dependent on Federal 
financial aid, and as a result, when they go bankrupt the cost 
to the taxpayer is enormous. As of last September, the 
Department of Education had received over 200,000 claims under 
the Borrower Defense provision of the Higher Education Act, 
which allows students who have been deceived by their college 
to have their debts discharged.
    The vast majority of these claims, which amount to billions 
of dollars, are against for-profit schools. It will be the 
taxpayers, not the schools' owners, who pay those bill.
    Fraud and discharge claims against for-profits are common 
in part because for-profit and nonprofit colleges behalf very 
differently when they experience financial distress.
    We have seen just in the last week that the for-profit Art 
Institute of Seattle gave students 2 days notice last Wednesday 
that they would be closing on Friday, 2 weeks before the end of 
the winter term, leaving hundreds of students in the lurch.
    Meanwhile, for-profit Argosy University is currently 
embroiled in litigation over the unknown whereabouts of over 
$16 million in Federal aid that it ununaccountably failed to 
disperse to students while it, too, was in the process of 
shutting down.
    When for-profit colleges close, the financial interests of 
their owners come first.
    I would also note for the committee that the premise of 
this hearing is that we can identify for-profit colleges as 
for-profit colleges. That is increasingly not true. Both the 
collapsing Art Institutes and Argosy chains are technically 
owned by a nonprofit foundation. This is a new trend in for-
profit higher education.
    Let me give you an example. During the last academic year, 
Grand Canyon University received over $750,000,000 from Federal 
student loan programs, more than any other college in America. 
Grand Canyon University is a publicly traded corporation with a 
market capitalization of over $5,000,000,000 run by a former 
University of Phoenix executive named Brian Mueller. Grand 
Canyon University is also an IRS-approved tax-exempt nonprofit 
organization run by a former University of Phoenix executive 
named Brian Mueller.
    Now, how can both of those things be true at the same time? 
Because Grand Canyon University the for-profit set up Grand 
Canyon University the nonprofit as a conduit through which 
Federal financial aid now flows, immunizing the corporation 
from Federal rules governing for-profit colleges. Other for-
profit colleges have completed or are contemplating such so-
called conversions.
    The Federal Government has been providing student financial 
aid in different forms since the end of World War II. There are 
lessons in that history. For-profit colleges work from a 
fundamentally different sent of incentives and imperatives than 
do public and nonprofit schools. Without strong guardrails 
protecting students and taxpayers, there is a high likelihood 
of waste and exploitation.
    Thank you.
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    Ms. DeLauro. Thank you.
    Mr. Shireman.
    Mr. Shireman. Thank you for the opportunity to testify 
today.
    The United States experience with government funding of 
for-profit colleges is not a pretty one. While they 
theoretically can bring efficiencies to education, their 
financial structure rewards shortchanging students and 
taxpayers. And even when the government puts up guardrails to 
protect against that problem, the industry has repeatedly 
lobbied to eliminate those protections, leading to mass harms 
to veterans and low-income students.
    Rampant abuses emerged with the first GI Bill, then again 
in the 1970s, in the 1980s, and in the 2000s. Now we are 
hearing from for-profit lobbyists that the bad days are over. 
But those same promises were made before and lawmakers fell for 
it as if they thought that because it is dry under the 
umbrella, the umbrella can be ditched.
    The chair mentioned the Nixon administration. After the 
Nixon administration identified the problems, they instituted 
an 85 percent cap on the proportion of students that can be 
funded by any kind of Federal aid. It was something that they 
had learned had worked well in the Korean-era GI Bill. But when 
weakened abuses, those did not survive, when those weakened 
abuses led to abuses in the 1980s, we heard from William 
Bennett, who was outraged that some of the most disadvantaged, 
the most vulnerable members of society are left without an 
education, with no job, with the taxpayer ending up holding the 
bag for a kid who gets cheated by a for-profit college.
    New reforms were then adopted by Congress in 1992, leading 
to the closure of more than 1,200 schools. After just a few 
years, the head of for-profit college association declared that 
the industry had been purified, arguing that Congress should 
ease up. Congress weakened the 85-15 rule that had been adopted 
in 1992 and adopted some other weakening of the laws.
    Later, President Bush's Secretary of Education created 
several loopholes in the ban on commission-paid recruiting, 
insisting that abuses in student aid programs were, quote, ``no 
longer possible.'' None other than the CEO of Corinthian 
Colleges assured Congress in 2004 that, quote, ``Fraud and 
abuse perpetrated by certain for-profit institutions was in the 
past.''
    An amendment included in a budget bill then opened the door 
to rapid unchecked growth in Federal funding of online 
education programs.
    Congress should have known better. Combined with the other 
weakened protections, the result was a disaster that we are 
still grappling with.
    This is the part of the testimony where some will expect me 
to say that the problem is bad actors and we need to get those 
bad actors and extract them from the student aid programs.
    But that is not the way this usually happens. Most 
predatory schools did not start out with people who are aiming 
to be predatory. Instead, they are business people who launch a 
plan to do good by doing well, following market indicators like 
the number of new customers and the stock value.
    In many industries those signposts lead to a quality 
product at a fair price. But in education these simplistic and 
narrow indicators of business success are not adequate, 
especially when the customer is a third party, like the 
government, that is not able to check quality, the value for 
the money.
    Without the direct oversight of trustees or public 
appointees prohibited from taking the money for themselves, the 
for-profit navigation systems cause the schools to trample 
students' interests, not always, but frequently and 
unpredictably, and often without the school owners being able 
to admit to themselves that they have strayed far from their 
original intentions.
    My colleague on today's panel says that regulation should 
neutral with regard to a college's sector. This is a favorite 
refrain of for-profit advocates, like the tweet I saw recently 
that said all schools from all sectors should be held to these 
same accountability standards.
    That bumper sticker is nonsensical. The very definitions of 
each sector about their accountability the way each is 
regulated. Ignoring the fact that a school a run by investors 
is sector ignorant, not sector neutral.
    As the chart in my testimony shows, there are major 
regulatory requirements that apply to nonprofit and public 
entities that do not apply to for-profits, and those need to be 
enforced also. The sectors are very different beasts and the 
for-profits are more hazardous.
    The consumer protection afforded by nonprofit 
accountability is obvious when you examine school closures, 
which are sudden and calamitous at for-profits but generally 
not at nonprofits.
    I would be happy to expand on any of these points during 
the question period. Thank you very much for the opportunity.
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    Ms. DeLauro. Thank you very much.
    Thank you all for your testimony.
    We will now proceed to questions.
    Mr. Shireman, thank you for being here today and for your 
testimony.
    Given that overall enrollment in the for-profit industry 
has declined and that efforts by the Obama administration have 
led to a crackdown on for-profit abuses, why can't we take our 
foot off the gas peddle when it comes to the oversight of the 
industry?
    Mr. Shireman. I think there is a huge danger here that we 
will be lulled into the sense that, oh, well, Corinthian closed 
and Vatterott closed and Argosy closed and the other colleges 
are gone, but that is exactly the same mistake that previous 
Congresses have made.
    We are now about at the level of enrollment in for-profit 
colleges that we were in 2005, just before the last ramp-up in 
massive, quick expansion of colleges. So we need to be on the 
watch more than ever, especially with two major for-profit 
colleges, including Grand Canyon that Mr. Carey just mentioned, 
announcing big profits, which will cause all of the rest of the 
industry to have investors clamoring for more.
    They want in on the money. They see that the gravy train is 
coming again, just like before. And they want in early because 
that is how you make the big money, and that is how taxpayers 
and students will be ripped off again.
    Ms. DeLauro. My hope is that we will be able to talk in a 
subsequent round about the kinds of things that we might be 
able to do and the committee might be able to do.
    Mr. Carey, having looked at the public and private 
nonprofit sectors of higher education, is there reason for 
alarm with respect to the for-profit industry? What is it about 
this industry that is so concerning?
    Mr. Carey. Fundamentally all colleges and universities are 
financed through enrollment, but there is no limit on the 
financial ambitions of a for-profit college.
    And if you look historically, often the worst abuses are 
not in the education that is provided, although often we find 
that the courses don't lead to degrees, as we heard from our 
other witness today, it is abuses in recruitment and marketing, 
where you have large numbers of salespeople who are financially 
motivated to enroll anyone possible because, as a friend of 
mine said to me, what other business is there where you can get 
someone to buy something for $50,000 by calling them on the 
phone?
    Really just higher education, because these are things that 
can be with a few signatures on a piece of paper transfer over 
large amount of government money and take out large amounts of 
debt, no questions asked.
    So I think the combination of that easily available money 
and the extremely lucrative nature when it is successful 
presents a constant risk for the taxpayer and for students.
    Ms. DeLauro. And I will just add that I think the 
recruiting tactics of these institutions. We have to pay very, 
very close attention to that.
    Mr. Shireman, 2017-2018 largest recipient of Pell grant 
dollars was University of Phoenix, a for-profit college. Second 
largest recipient was Miami-Dade College, a public college. The 
third largest was Grand Canyon, a for-profit college that 
converted to a nonprofit college.
    Should we be concerned as a committee that the University 
of Phoenix and Grand Canyon University were two of the top 
three recipients of Pell grant dollars?
    Mr. Shireman. Given the tendency of for-profit colleges to 
collapse somewhat unpredictably, the size of those institutions 
and the amount of Federal money that they are getting should be 
of great concern.
    I also would recommend that the subcommittee pay attention 
to some of the funding streams that are in other subcommittees. 
For example, University of Phoenix is also the number one 
recipient of GI Bill dollars. Grand Canyon is about number 15, 
I think.
    Another subcommittee oversees the IRS, and IRS funding was 
cut for oversight of charitable organizations. The IRS is now 
basically rubber stamping applications for tax-exempt status. 
The denial rate has gone down 90 percent because Congress cut 
funding for the oversight of tax-exempt entities. That is what 
has allowed this very strange for-profit/nonprofit Grand Canyon 
beast.
    Ms. DeLauro. Thank you.
    I just have a few seconds left so I will yield back my 
time.
    Mr. Cole.
    Mr. Cole. Thank you very much, Madam Chair.
    I am just going to ask you all quickly, I am just curious, 
I will start with you if I may, Mr. Shireman, do you think 
that, frankly, for-profit colleges ought to just simply be done 
away with?
    Mr. Shireman. No, I think it is really important. I think 
for-profit colleges have provided that there are many very good 
ones. It is hopeful to note that some of the best ones actually 
get no Federal funding at all.
    And I think a good test of whether a for-profit college is 
just taking advantage of government funding or actually serving 
a marketplace need is the extent to which it has employers, for 
example, financing some of its students' education.
    John Murphy, in fact, the cofounder of University of 
Phoenix, who later was very concerned about what had happened 
there, he said that the first number of years what kept them on 
track was that they were accountable to employers. Those 
employers saw that this was a valuable education to their 
employees and it was worth the money, and that kept them 
anchored to a market indicator.
    Mr. Cole. Thank you.
    Same question to you Mr. Carey.
    Mr. Carey. No, I don't believe that for-profits should be 
categorically excluded from Title IV. I think it is perfectly 
possible to run a for-profit college that does a great job by 
its students. In fact, I think President Jerome the president 
of one of those colleges. The outcomes of Monroe College are 
quite good.
    So it can be done. It just isn't too often. And I think we 
need substantially higher standards of outcomes with a special 
scrutiny on institutions that are operating from a profit 
motive. And we ought to apply those standards vigorously across 
the industry to protect students and taxpayers.
    Mr. Cole. Thank you.
    I think I probably know the answer, but I want to give you 
an opportunity to respond.
    Mr. Jerome. Well, I actually agree with a lot of my 
colleagues.
    What I offer is a nuance. If you come to New York there are 
no publicly traded colleges. We have 12 family-owned 
institutions that have an average life of 90 years.
    And essentially, because we keep coming back year after 
year, I feel comfortable that the regulatory framework that is 
out there now isn't working. It actually doesn't address the 
marketing and the recruitment aggressiveness. It addresses 
outcomes.
    And what I would ask all of you to look at is, because this 
is what I look at and I have looked at it for 10 years, 
outcomes are very weak across all institutions. And the dilemma 
we face is that the rules that are proposed for for-profit 
colleges, they would not--independent and public institutions 
would not pass them. And that then brings up hypocrisy in 
higher education and should you be protecting a student.
    All of you can just go to the College Scorecard and look at 
the debt and the earnings of students and the institutions, and 
across all sectors there are places with very high debt and 
very low earnings.
    Similarly, to think that aggressive recruiting just is in 
the for-profit sector is just false. We are starting to see, 
and I am very upset about it, the abuses you saw only in the 
for-profit sector migrating to the real nonprofit and public 
sector with the growth of large, multi-State, fast-growing 
online institutions, whether they are public or private.
    My last comment on this is I think now the largest 
advertisers in the country are either nonprofit or publics. The 
world is changing. As Mr. Carey said, you can no longer tell 
the difference between a public, a nonprofit, and a for-profit, 
and especially because so many nonprofits and some publics 
contract out education to very aggressive for-profit companies 
and it is all hidden.
    So I hope that is enough.
    Mr. Cole. Mr. Luongo, I want to give you a chance to answer 
that question, too.
    Mr. Luongo. I am not necessarily qualified to answer the 
question, but I do have an opinion on it. And my opinion is 
that colleges, like people, are all individual. There is no set 
mold that everybody fits into.
    And like I have had negative experiences at DeVry, there 
are people out there who have had fantastic experiences. I have 
had fantastic experiences at Medaille. There are people who 
have had horrible experiences there.
    I don't think that--I don't know, I don't think there is 
any one mold that everybody fits into. I don't think that all 
for-profits fit into this mold and I don't think all nonprofits 
fit into this mold.
    Mr. Cole. I would just say as a guy who earned a doctorate 
and began my career as a college professor, I agree very much 
with that, that there is a lot of variety in this marketplace.
    We actually had a situation in my State where, I am sad to 
say, a public institution was sort of rapped pretty severely by 
the Department of Defense, they are located near a military 
facility, for just basically being a degree mill, if you will. 
They had to reform and refund money and do some things like 
that. So we clearly have a problem in the industry in the 
whole.
    Mr. Jerome, and I don't have a lot of time, but you have 
obviously done this successfully and thought a lot about this. 
Again, tell us the things we ought to be doing to make sure 
that all these taxpayer funds are put to good use and that all 
of our students have the best chance for success, because we 
want them all to succeed.
    Mr. Jerome. I don't want to have to keep coming back to 
Washington to testify on this. I would really love to find the 
policies that stop the really abusive practices.
    I would say for this committee you should look at growth, 
and that is a big issue, and you may find that both in the for-
profit and the nonprofit sector.
    Last thing is, I would look at return on investment. How 
much Pell dollars go to each institution and how many Pell 
students do they graduate? As far as I know, no one has ever 
looked at it. I haven't looked at it. I think I will. But I 
think that is an interesting way to see how the money is being 
spent.
    Mr. Cole. Madam Chair, I would yield back my time, but 
maybe that is something we should look at and the Department of 
Education should take a look at. It seems to me to be a 
reasonable metric.
    Ms. DeLauro. Thank you.
    Mr. Pocan.
    Mr. Pocan. Thank you, Madam Chair.
    And thanks to the witnesses.
    So the question series that Mr. Cole asked about was 
interesting about the for-profit colleges in the sense that 
there was a for-profit that became a nonprofit in my State, 
Herzing University, that has an excellent reputation. I have 
toured multiple locations. They work for a lot of the 
employers, one of the very things that you said I think is 
important, around looking how they are working.
    But at the same time, I can't help but recognize the 
extremely large percent of the for-profit colleges that are in 
the failed category.
    I guess maybe a question first for you, Mr. Jerome. You 
started to talk about growth and you didn't really say much 
more on the return on investment for where we should be going. 
But just in the recognition that we do seem to have this much 
larger percent that are failing, I mean, what are the things 
that you are saying that you think should be looked at 
specifically that we should be addressing to try to solve this?
    Mr. Jerome. I mean, a couple of things. Number one, 
actually in the State of New York the two largest closures were 
two independent colleges, Dowling College and last week, as a 
shame, College of New Rochelle announced its closure after, 
like, 200 years.
    But I think, whether it is enrollment or revenue growth, it 
is a fair thing to look at. Higher education is highly 
regulatory. I am an attorney, I am at my institution 25 years, 
it is very difficult to keep up. For me to imagine doing this 
growing and in many, many States at the same time I think leads 
to difficulty. So I would say that.
    I also think it is fair to come up with one or two metrics 
that should cause an audit, whether it is low completion rates 
or a high default rate or a high debt-to-earnings rate. And it 
should be a rebuttable presumption, but there are certain 
metrics either Congress or the Department of Ed could implement 
that could cause much more accountability.
    Mr. Pocan. Just to the question of the high number that is 
there. I mean, what do you think has been the cause of that up 
to this point?
    Mr. Jerome. I think the answer is unchecked growth without 
proper regulation. I mean, I absolutely remember speaking to a 
high level Department of Ed person who said: We sit on investor 
calls and we hear different institutions have different ethics. 
They knew who to go after. In my mind, they just didn't enforce 
the rules on the books or there wasn't just enough 
institutional will to identify and go after those places.
    In New York, even if it is a for-profit college, we 
recommend our Department of Education regulate effectively and 
close. But we look at that at all institutions.
    Mr. Pocan. So this is a question for everyone. I know that 
Secretary DeVos overturned an Obama-era decision that 
terminated recognition of ACICS, which was around when we had 
failed Corinthian and FAST TRAIN. What do people think of that 
decision? Is that something that--was it a good idea, bad idea? 
I am just trying to get some input on that.
    Mr. Shireman. The decision to reverse on ACICS was not 
well-founded at all. The staff recommendation was that ACICS 
should not be re-recognized.
    I talked to some of the other accreditors where some of the 
schools--so ACICS had become known as the place where you could 
get cheap and easy accreditation. Right before the action by 
the Obama administration a number of the Kaplan campuses had 
decided to go over there. And they said, oh, wait a second, 
ACICS is in trouble.
    I talked to some of the accreditors where some of those 
schools applied to become accredited and they were shocked at 
how bad some of those colleges were that had been approved by 
ACICS.
    So it has now sent a message to accreditors that it 
actually doesn't matter whether you are a strong accreditor 
because you can muscle your way back in and get re-recognized 
by the Secretary of Education.
    Mr. Pocan. Mr. Carey.
    Mr. Carey. In addition, I would note a couple of things. A 
number of the colleges that had been accredited by ACICS when 
it was shut down tried to find another accreditor and couldn't, 
which gives you a sense of what the standards were at ACICS, 
that one else would take those institutions.
    And I think it is worth noting that the Department of 
Education official who decided and approved the reinstatments 
was a former lobbyist for a university that was accredited by 
ACICS. The Department issued a statement claiming that, I 
believe, nine other accreditors had endorsed the move. That 
turned out to be a false statement. The accreditors quickly 
clarified that was not true, they had not endorsed it.
    So there appears to be no basis for reinstating an 
organization that was really disproportionately responsible for 
overseeing a number of the very worst collapses of the for-
profit industry.
    Mr. Pocan. Mr. Jerome, 2 seconds. That is all I have left.
    Mr. Jerome. On the difference. All accreditors should be 
held accountable to make sure their institutions have good 
outcomes. I mean the two institutions--while we exist, the two 
public institutions next to us have had below 3 percent 
graduation rates for 10 years in a row. Nothing happens, there 
seems to be no accountability, and I watch the students.
    Ms. DeLauro. Congressman Harris.
    Mr. Harris. Thank you very much.
    And thank you all for being here.
    Clearly, education is something we have to get right, and I 
am not sure we are getting it right in the United States right 
now.
    Mr. Luongo, let me ask you, I was a Navy person, too, did 
the VA or the DOD, do you think, give you adequate information 
once you separated from service or were separating from service 
about how to go about getting an education that is actually 
paid for instead of with loans? Do you think they gave you 
enough information?
    Mr. Luongo. None, I was given none, no information 
whatsoever.
    Mr. Harris. That is what I suspected. I suspected that was 
the answer. Because part of problem is that is one of the 
checks in the systems. I mean, obviously, it should have been 
very easy for you to--we should have made it easy for you to 
figure out whether you were being told the true by DeVry 
University. And I mean even prospective so that you know what 
the--because we owe that to our veterans.
    But I hear it all the time, that we just don't educate our 
veterans enough upon separation about what the benefits are and 
how to get them and how to avoid being taken advantage of. So I 
appreciate that answer.
    Mr. Shireman, you started off by saying the government 
funding of these for-profits doesn't have such good results. 
But I will tell you, government funding of the not-for-profits 
doesn't have such a good result either. The bottom line is we 
are not educating a workforce to what is needed in the United 
States.
    My wife will think terribly of me, but she was an art 
history major. You can graduate from a very prestigious 
institution with an art history degree and end up doing 
something totally unrelated and graduate with hundreds of 
thousands of dollars' worth of debt. And I know it happens 
because it happens to a lot of people.
    You know, the for-profit sector, I will tell you, I 
remember when I took my business degree, that they said, you 
know, we say nonprofit, but it is really just excess revenues 
over expenses. That is the difference.
    And the bottom line is, I just looked up the 10 highest 
paid presidents, and Mr. Jerome's name wasn't on it. At least 8 
of the 10 were either private or not for-profit, including--
because I think someone, maybe it was the Senator testified, 
well, the president wanted these profits made, $40,000,000 over 
10 years.
    Well, actually, the highest paid president was a public 
university president last year, University of Louisville, over 
$4,000,000. I won't even talk about what basketball coaches 
get.
    Mr. Jerome, do you have anyone on your faculty or in your 
university who earns $9,000,000 a year?
    Mr. Jerome. No.
    Mr. Harris. Okay. $8,000,000 a year?
    Mr. Jerome. No.
    Mr. Harris. $7,100,000 a year?
    Mr. Jerome. No.
    Mr. Harris. Because those are the salaries of just the 
three highest paid basketball coaches.
    I have got to tell you, I love basketball, like anybody who 
is 6'4'' loves basketball. It doesn't add a nothing to 
preparing our workforce. If you don't think that that is a for-
profit sector in our public-slash-private universities, think 
again. It is.
    Mr. Jerome, I have got to ask, because I looked quickly up, 
I should have remembered, I was a New Yorker way back when, you 
have got a nursing program. What is the percent of your BSNs 
who get employed?
    Mr. Jerome. 100 percent.
    Mr. Harris. 100 percent. So you are actually providing a 
very important--because I know, look, I work in a hospital, we 
don't have enough nurses. You are providing something very 
valuable.
    I do want to ask you the question, why does someone choose 
your college over a community college? Because we heard the 
community college--and I know the community college more--but 
we also send a lot of money to community colleges. Why would 
they choose yours over a community college?
    Mr. Jerome. The first thing, our community college system 
is a wonderful system. It has open access, it has a different 
mission.
    But in reality today's students are looking for completion, 
they are looking for completion quickly, and they are looking 
for it to lead employment.
    And the thing we are missing is it is not all about 
academic expense, they are actually looking for support. So in 
my institution the minute the student arrives, there is a 
mentor. It is very expensive.
    On the area of student loans, I think we have one of the 
largest, most experienced team that helps all these low--some 
of the low-income students who get loans make sure they don't 
default and they handle it well. But when you have been doing 
this for 85 years and graduate 3,000 students a year in one 
borough, people know.
    Mr. Harris. I appreciate that. And I will tell you that I 
don't understand why we would not ask for the rules to be 
uniform. Basically the outcome, employment outcome versus debt 
for someone who is a liberal arts major at a large university 
and graduates $150,000 in debt and can't get a job in their 
field, why we wouldn't hold that private not-for-profit up to 
the exact same standard. Because I think that is the way to 
make education better for everyone and more cost effective.
    I yield back, Madam Chair.
    Ms. DeLauro. Thank you very much.
    Just if I may take as a point of privilege, I just want to 
mention a couple of things.
    This is an independent analysis of default data. When you 
talk into account certificates and degrees, the number of 
institutions with default rates above 20 percent is as follows: 
197 public institutions, 59 nonprofit, 232 for-profit.
    I also might add, and, President Jerome, I would just say I 
appreciate no one makes $9,000,000 at your institution, but I 
think it is also important to taking a look at average annual 
costs, and this is four Bronx colleges. Monroe costs more than 
CUNY Lehman College, CUNY Bronx Community College, CUNY Hostos 
Community College. Monroe was $11,831 on average. The others 
were $8,000, $7,000, $6,000 and $5,000.
    Students receiving Federal loans, 77 percent of students at 
Monroe College received Federal student loans, 8 percent at 
CUNY Hostos, 11 percent at CUNY Bronx, and 22 percent at CUNY 
Lehman.
    Debt after graduation, Monroe was $21,000, the others were 
below $10,000.
    Salary after attending, a range, $43,000 at CUNY Lehman, 
CUNY Bronx $34,800, CUNY Hostos $31,200, at Monroe it was 
$30,200.
    Financial aid and debt, 31 percent of students at Monroe 
College were paying down their debt, 39 percent at CUNY Hostos, 
32 percent at CUNY Bronx, and 51 percent of students at CUNY 
Lehman College.
    So I will just introduce that for the record.
    Congresswoman.
    Ms. Clark. Thank you, Mr. Chairwoman.
    And thank you to the panelists for being here.
    I am interested in the status of the Borrower Defense rule. 
As you know, this was put forward by the Obama administration 
that allows students to have their Federal student loan 
discharged if their school misled or defrauded them and it 
prohibits the use of forced arbitration. In July of 2018, 
Secretary DeVos tried to undermine this and rewrite it but was 
stopped by the courts.
    According to the information we have, as of September of 
2018, more than 139,000 claims were awaiting action, including 
more than 45,000 former students from Corinthian and thousands 
from former students of ITT, Argosy, and the Art Institute.
    Do you have any current information about is DOE still 
refusing to process these claims? And do you have any 
estimation on the impact on students and their risk of default?
    Mr. Shireman or Mr. Carey.
    Mr. Shireman. I don't know whether Mr. Luongo is still 
awaiting payment.
    Ms. Clark. Yes, Mr. Luongo, I did want to ask about your 
personal experience with this.
    Mr. Luongo. I applied and was told since my dealings were 
over the phone there is no record, there is no proof, and that 
was it. There is nothing that can be done.
    Ms. Clark. Have you found that this is a typical situation 
for our students?
    Mr. Shireman. This Department of Education has made the 
decision to require the kind of documentation that, frankly, 
the college recruiters make sure that a student does not have.
    Students feel that they have been told a lie, but it is not 
on paper. They are provided with assurances by somebody who has 
befriended them and acted as an adviser, portrayed themselves 
as an adviser, providing them with advice about how they can 
better their lives and this Department of Education has decided 
that that is just too bad for the student.
    And this is a tragedy, hundreds of thousands of students 
who were misled, manipulated. We have the documentation of the 
systematic manipulation by the schools, the strategies that 
they would implement, very similar across different chains, 
which should result in a group discharges for students that 
were enrolled in many of these programs. But instead the 
Department of Education is requiring each student to go in and 
go through a third degree kind of review that has caused this 
to go on for far too long.
    Ms. Clark. Yeah.
    Mr. Luongo, where does that leave you? Where does that 
leave you with your claim?
    Mr. Luongo. As far as I know, it leaves me on the hook for 
$101,000 that, quite frankly, I will never be able to pay off 
based on my salary.
    Ms. Clark. Yeah. And what have you heard from DOE on your 
claim, anything?
    Mr. Luongo. That was the last thing I heard, is that the 
school responded, that here are our emails and that is it, it 
is not mentioned. And it is not mentioned in emails because 99 
percent of my dealings were over the phone.
    Ms. Clark. Yeah. And do you feel that was on purpose and 
specific to not have a paper trail?
    Mr. Luongo. I didn't think anything of it at the time and 
now I feel 100 percent they knew what they were doing, they 
knew exactly what they were doing.
    Ms. Clark. Yeah.
    This brings me to another question, the way we can 
evaluate. Mr. Shireman, your testimony mentions the 85-15 rule 
that was from earlier under the Clinton administration. Can 
that be something that we should be looking at in response to 
the 90-10 with the loophole for our veterans and GI 
beneficiaries?
    Mr. Shireman. Absolutely. I think it would help to address 
this rapid growth problem, to check rapid growth, because a 
school would need to make sure that they are not just relying 
on the ability to sell a student on taking Federal loans, 
Federal grants and loans that feels like a free education, but 
instead have a responsibility and a need to make sure that 
there are employers, for example, or private scholarship 
programs that are helping to enroll students.
    Ms. Clark. And I almost--I am out of time, but, Mr. Jerome, 
do you agree? Do you think the 85-15? I can let you expand 
later.
    Mr. Jerome. I actually have a substantive policy suggestion 
on this. So in my mind I understand the reason for 85-15, but 
an institution like mine in the Bronx, even if it received 100 
percent of money from the government, if the outcomes are 
excellent, I think you should not be upset.
    And what is not happening is there is no credit for 
programs that use Federal aid, not loans, that help students. 
So at my institution, you gave some data about the students who 
borrow, 3 years ago we implemented a program for a thousand New 
York City Public School kids to go for free, no student loans.
    I would want an 85--if there ever was a change, to have 
some portion of it incentivized good behavior. And in my mind 
good behavior is graduating students with no student debt.
    So I would like to you think about that, because it is a 
way, instead of everything being punitive, I am imploring you 
to think about ways to make the policies help the students and 
make the institutions help the students.
    Ms. DeLauro. Ms. Lee.
    Ms. Lee. Thank you very much.
    I want to thank all of you for being here.
    And I want to, of course, thank Mr. Shireman for being 
here. I know you go back and forth between Washington and 
Berkeley. And so welcome. Good to see you.
    Mr. Shireman. Thank you so much.
    Ms. Lee. Yes. And thank you for all of your work.
    Let me ask you about one very timely issue with regard to--
and you may know about this Mr. Shireman--Argosy University. 
Okay, it closed its campuses on Friday. I believe it has put 
about 10,000 students at 22 campuses--one is in my district, in 
Alameda--quite frankly, in jeopardy.
    Now, I am not clear on what took place, but I do know it is 
alleged that they stole, quite frankly, $16,300,000 in Federal 
funds which were meant for students and instead used it for 
payroll and for other expenses.
    Now, the Secretary of Education, Betsy DeVos, failed to 
take critical action to address this issue before cutting off 
access to Federal aid. Even though the administration--and I 
know that they were fully aware of this--the Department was 
derelict in its oversight duty.
    They also did not keep students informed of the financial 
issues. The Department could have stopped marketing for this 
University knowing that they were under severe financial stress 
and they did not do so. Students were not warned that they 
would not be receiving financial aid disbursements and only 
found out because their refunds never arrived.
    So could you kind of explain what will happen now? This is 
a recent closing. How in the world do some of these 
institutions continue to receive taxpayer dollars and public 
financing given these kinds of examples? And what is going to 
happen to this missing money from Argosy? Will it be paid back 
to the taxpayers? Will the students get refunds? What is going 
to happen?
    Mr. Shireman. Yeah, I will do my best to untangle this, 
though it will take probably years for this mess to really be 
untangled.
    This it was a completely avoidable situation. Dream Center, 
which had no experience running an institution of higher 
education, actually came to the Obama administration in its 
final year and asked to buy ITT Tech and the administration 
said, no, you don't have the qualifications to run this 
struggling school.
    This administration said yes to the offer to buy the EDMC 
properties, Argosy and the Art Institutes, and we have seen the 
results of Dream Center, which apparently was then contracting 
with for-profit entities to do some of work. And when you 
insert that for-profit entity--and this is where we see when 
schools collapse there is a big difference between for-profit 
and nonprofit.
    In the for-profit space, which Dream Center was really more 
in that territory, the people who are in control of what is 
going on in the school look at all of the accumulated assets, 
including money that has come from the Department of Education, 
they see the ship is going down, and they want to know, what 
can we take for ourselves.
    At a nonprofit, a genuine nonprofit organization, they look 
at all of the accumulated assets and they say--and they don't--
do not--it would be illegal for them to take it for themselves. 
And so they are looking for a good landing for the students and 
the institution overall.
    What has happened at Dream Center seems to be somewhere, it 
is still a mystery what happened to these funds. Obviously, one 
of the creditors felt that they wanted to have access to these 
funds. Whether they broke laws or not, it was the ability of 
folks in control of the school to decide to even put money in 
the direction that helps--into their own pockets that drove 
them to this situation where we have schools precipitously 
closing.
    Now students may be able to get closed school discharges, 
depends on the situation, students that stuck it out. Students 
that left earlier maybe won't be able to. The Department of 
Education needs to open up as far as possible the window for 
students to get discharges on their funds.
    Ms. Lee. Okay. Now, let me ask you--and I said stole the 
$16,300,000--are there criminal charges being filed or what 
type of criminal investigation----
    Mr. Shireman. I don't think there are yet, but it does seem 
like it is possible.
    Ms. Lee. Do criminal investigations follow in instances 
where it could warrant that?
    Mr. Shireman. I suspect that they will in this case.
    Ms. Lee. And one more question I would like to ask. With 
regard to now this 90-10 rule, okay, it is my understanding 
that the 90-10 rule bars for-profit colleges from receiving 
more than 90 percent of their revenues from student loans and 
grants. But also it is my understanding that at least half of 
the all-profit schools actually get over 70 percent of their 
revenue from student loans and grants. Is that accurate? And if 
it is, how do they get around that? Or if it is not, what is 
the deal?
    Mr. Shireman. Well, what happens with 90-10 is that a lot 
of the schools get GI Bill money on top of Federal student aid 
from the Department of Education. And that loophole allows them 
to basically defeat the purpose of the 90-10 rule.
    Ms. Lee. Okay. The 85-15 rule that we just talked about, 
could you explain that, the difference between that and the 90-
10 rule?
    Mr. Shireman. So the 90-10 rule, used to be an 85 percent 
cap.
    Ms. Lee. The same rule.
    Mr. Shireman. There is also for the GI Bill an 85 percent 
cap on the proportion of students who can get GI Bill aid.
    Ms. Lee. I see. Okay. Thank you very much for clarifying 
that. Thank you.
    Ms. DeLauro. Thank you. I want to, just for the record, we 
haven't talked about the Gainful Employment rule, but sometimes 
there is a mistake about the Gainful Employment rule and who it 
applies to. It does not just apply to for-profit schools, it 
applies to nondegree programs at nonprofit and public 
institutions.
    As well, 61 percent of programs that are covered by the 
Gainful Employment rule are offered by public colleges, 
community colleges. Repealing the Gainful Employment rule would 
cost taxpayers roughly $5,000,000,000 over 10 years, according 
to the Department of Education's own analysis, and part of this 
cost would be charged to the Pell Grant Program plus student 
loans.
    So that repeal of this rule would serve to hurt students 
and helps institutions, quite frankly, that peddle low quality 
education.
    Mr. Carey, in your testimony you highlight programs, that 
for-profit institutions tend to cost more than programs at 
public institutions. Given the poor student outcomes at the 
majority of these for-profit schools, do you believe that the 
increased cost to students is justified? What accounts for the 
higher cost?
    Mr. Carey. I don't believe they are justified. And one 
thing people will note is that public universities get public 
subsidies to bring their costs down, that is true. But actually 
there have been some good academic studies of this issue. And 
even if you account for the public subsidies that public 
institutions get, they are still substantially less expensive 
than for-profit institutions and I think there are two reasons 
for that.
    One, for-profit institutions divert some of their revenues 
to profits. That is what their business is, they are designed 
for that, either to shareholders or executives or some 
combination of the two.
    Second, much of for-profit industry, and this is becoming 
more so, is very competitive, very marketing, very marketing 
driven, very recruitment driven, particularly in the fast 
growing online higher education space. It is enormously 
expensive to go through and compete online.
    If you look at the data that the colleges themselves submit 
to the U.S. Department of Education, you will see that the 
typical for-profit college spends more money on marketing and 
recruitment than it does on faculty salaries. So I think it is 
a combination of the profits and the marketing and recruitment 
that account for the difference.
    Ms. DeLauro. Do you know whether or not the marketing or 
the advertising is tax deductible?
    Mr. Carey. I imagine it is all tax deductible in the sense 
that it is a business expense that therefore reduces your 
taxable profits.
    Ms. DeLauro. We will pursue that at the some point.
    Mr. Shireman, what happens to the profit at a nonprofit or 
a public university? And what happens to the profits at a for-
profit institution?
    Mr. Shireman. So all of the excess of revenue over expenses 
at a nonprofit are required to be reinvested into the 
institution or saved for the future, which is part of the 
reason that we see endowments at nonprofit colleges and 
universities.
    Surely the people who are running, who are overseeing the 
college, the trustees, if they could take that money for 
themselves they probably would. And that is the way it works at 
a for-profit college and university. They behave differently 
because they know that any excess of revenue over expenses that 
they generate becomes money that can go in their pocket.
    In fact, I once figured out that over about a decade period 
if all of the profits at University of Phoenix had been instead 
put into a savings account that they would have an endowment 
that would be second only to Harvard's endowment, which, 
frankly, could pay off a lot of ripped-off students that we 
have out there.
    Ms. DeLauro. Mr. Carey, after President Trump was elected 
several for-profit institutions saw a bump in their stock 
prices. Are there any publicly traded nonprofit or public 
colleges or universities? Can you buy stock in any of these 
colleges?
    Mr. Carey. You can't buy stock in a nonprofit university.
    Ms. DeLauro. Is it true that you can only purchase stock in 
publicly traded for-profit institutions?
    Mr. Carey. Yes.
    Ms. DeLauro. Well, let me ask you, Mr. Carey, about 
conversions. Predatory for-profit institution converts to a 
nonprofit, does it somehow shed its predatory nature? Also, why 
is the trend of for-profit conversions so alarming? Is there 
concern for students?
    Mr. Carey. I would urge the committee to not even take the 
word conversion at face value. Conversion implies that you were 
something and then you became something else.
    The example I gave was Grand Canyon University, which has 
been widely reported as having converted to being nonprofit. 
And yet, Grand Canyon Education, the publicly traded 
corporation, still exists. It exists right now. It has a market 
capitalization of over $5,000,000,000, which has actually gone 
up quite a bit during the process of so-called conversion.
    Because it didn't really convert to being a nonprofit at 
all. What it did was set up a new nonprofit organization that 
is run by the same person who runs the for-profit corporation. 
It essentially lends money to the nonprofit, which then handed 
it right back to the for-profit company, creating an annual 
interest payment debt, and then signed a contract in which 60 
percent of all tuition revenues that go to the nonprofit, which 
is now the legal face of the college, 60 percent of the 
revenues and the interest payments go back to the for-profit, 
which is a pretty good business to be in, at least by the 
judgment of the market, which again has bid up the value of 
Grand Canyon Education the corporation.
    Because it is officially a nonprofit for government 
purposes, it doesn't pay property taxes and it can advertise as 
a nonprofit. And if the Gainful Employment regulations were to 
be reinstated, it would not be subject to them.
    Ms. DeLauro. Thank you.
    I apologize to my colleague. Congressman Cole.
    Mr. Cole. No problem, Madam Chair.
    I just want to go back to an issue that has been raised a 
couple of times, and that is standards and measurements. I know 
when we have discussed metrics I have been lobbied as hard by 
public institutions as by private institutions, that they 
didn't want to be measured, that I had to understand all the 
various sophistications and the various goods they were doing 
and they were doing research. It just goes on and on.
    So, number one, I want to ask you each in turn, just 
quickly moving down the aisle, I will start with you, Mr. 
Shireman, is a common set of measurements that we could 
literally compare, is there merit in that? Is that a bad idea?
    I understand we are comparing very different institutions, 
I understand we are comparing very different student bodies, in 
many cases sort of like the idea that Mr. Jerome suggested of 
Pell grant loans versus Pell grant graduates. If you were to 
pick out some things that would really be helpful for us in 
measuring the effectiveness of all institutions, what would you 
focus on if you think that is even an achievable objective.
    Mr. Shireman. No, I think that debt to earnings measures 
are very useful. I think market indicators, like students who 
are paying without aid so that the value for the price is what 
is being analyzed in that situation, is a very useful measure. 
Those are probably the top two that I would pick.
    And I would not put graduate rates there for exactly the 
reason that you stated when you noted that public institution 
that turned out to be a diploma mill. Graduation, giving a 
diploma, is completely determined by the college.
    So using it as a--I think it is really important for people 
to know graduation rates, for them to be reported as a consumer 
information tool, but when you tie an accountability measure to 
a strict--to a graduate rate, you will drive diploma mills.
    Mr. Cole. Same question.
    Mr. Carey. I think all colleges, public, nonprofit, and 
for-profit, should be held accountable. I actually think it 
would be a great idea if we could get more information about 
the earnings and debt income for programs at public and 
nonprofit universities. We don't have that now.
    I think there is the question of what information do we get 
and how do we regulate around that information. I do think that 
short-term job-focused programs, it is more appropriate to take 
the earnings and debt information and make very quick judgments 
about how successful they are, because those programs are 
designed to lead to an immediate employment outcome. Whereas a 
bachelor's degree in a liberal arts field--long-term people 
with bachelor's degrees in liberal arts actually have good 
success, but it can take longer. You go to graduate school. It 
is a different career path. And so you wouldn't want to 
regulate on the information in exactly the same way.
    Mr. Cole. Believe me, as a guy who has a Ph.D. In Victorian 
history, I am very well aware of that point.
    Mr. Carey. There we go.
    Mr. Jerome. So on this area I actually disagree with my 
colleague, Mr. Shireman. I actually think completion is one of 
the most important areas you could look at. All the academic 
studies show that the people who drop out of college have the 
worst outcomes with everything. And right now if you go and 
look at completion rates across the country, they are miserably 
low, and they are much too low for the most vulnerable people, 
students of color.
    Number 2, I actually like cohort default rates, even though 
everyone doesn't like them. I think they can be changed so they 
can't be manipulated. But the thing about cohort default rates 
is if an institution puts resources towards counseling 
students, there are plenty of options to make sure they avoid 
default that are good options.
    And then the last thing is I like debt to earnings. I just 
don't like the debt-to-earnings rule that exists now. I think 
it was rigged. And you can see it in the results. You are 
right, community college certificates were subject to it. 
Ninety percent, something like 40,000 of the 50,000, weren't 
measured because they didn't graduate enough students.
    The other thing is all the institutions with the worst 
default rates, worst graduation rates, highest number of 
defaulters passed the debt-to-earnings rule. And so I think it 
can be jiggered around to make it really right.
    Mr. Cole. Let me change it a little bit for you, Mr. 
Luongo. What information would have helped you the most when 
you were making these decisions? What as a potential student 
did you need to go that wasn't provided for you?
    Mr. Luongo. It was provided for me, but it was provided 
inaccurately, and that is what an employer thinks of that 
degree from that university. Because otherwise it is just a 
worthless piece of paper. And I was told 80 percent of people 
were hired at that degree making $80,000 a year, so that puts a 
lot of value on that little piece of paper. It turned out that 
was a boldfaced lie.
    So that is my opinion, is that unless the marketplace puts 
value on that degree from that university, the whole thing is a 
waste of time anyways.
    Mr. Cole. Thank you very much.
    I yield back, Madam Chair.
    Ms. DeLauro. Congresswoman Watson Coleman.
    Mrs. Watson Coleman. Thank you, Madam Chair, for holding 
this. And I apologize, having been pulled out to another 
meeting. So if some of my questions are redundant, excuse me.
    I have one overarching question and then I have some 
questions regarding disparities regarding Black students.
    My one question is that if a college shuts down and 
students have paid their tuition or Pell grants or something 
has paid their tuition, I understand the forgiveness to the 
student, I understand that there have been some agreements that 
students are not liable, but what should we be able to do as 
the Federal Government, as Congress, to recoup that money, 
which is indeed taxpayer money?
    Mr.--I am sorry, I can't see your name, but since you are 
shaking your head.
    Mr. Shireman. Well, there were some provisions in the 
Borrower Defense rule that the Obama administration adopted 
that attempted to get at clawing back, as we say, from 
executive stockholders, et cetera, in situations where 
essentially a school, when it was on its way down, folks 
grabbed the money that was there.
    But it is very difficult, which is why public institutions, 
which are usually backed by the full faith and credit of the 
State, they end up not usually behaving in the predatory ways 
because they have deep pockets.
    Mrs. Watson Coleman. What is the status of that clawing 
back rule?
    Mr. Shireman. Well, so it is in effect for now, but this 
administration has proposed essentially repealing the Borrower 
Defense rule as well as the Gainful Employment rule. So it may 
not last for long.
    Mrs. Watson Coleman. Thank you.
    Mr. Carey, I am sorry I missed your testimony, but my 
understanding is that you did mention three studies, two from 
the Brookings Institute, one from the Center for American 
Progress, which found that students who default on loans are 
disproportionately Black. Can you tell us why this might be the 
case and what can this committee do to address this chronic 
issue?
    Mr. Carey. I think there are several reasons, 
Congresswoman. First of all, as we all know, there is a very 
large wealth gap in this country between African American 
households and White households as a result of current and 
historical racism and discrimination. And so Black households 
don't have as much money to pay for college so they have to 
borrow more.
    Second of all, I think there is a pattern of for-profit 
colleges in particular that market themselves to first 
generation college students, lower income college students, 
disproportionately women of color, in fields like health and 
cosmetology, often nonlicensed fields. So these are not 
programs, high quality programs that get people into, say, a 
good nursing jobs, but rather programs that might induce 
someone to borrow $20,000 for a medical assisting certificate 
with no value in the labor market. Often these are women of 
color who take these programs.
    Mrs. Watson Coleman. That is a statement of the problem. 
What is it that you think we should or could do about that?
    Mr. Shireman. I think we should reinstate the regulations 
of for-profit colleges that were implemented by the Obama 
administration that have been suspended by Betsy DeVos.
    Mrs. Watson Coleman. Like which ones?
    Mr. Shireman. I think we should set new or higher 
standards. I don't think that even those regulations went far 
enough. And I think a tighter regulatory environment is the 
best protection for those students.
    Mrs. Watson Coleman. Okay.
    Forced arbitration is a bipartisan issue that Members on 
both sides of the aisle oppose because we agree everyone 
deserves a day in court. The Department of Education recently 
proposed allowing for for-profit universities to force students 
into arbitration, a process that is one-sided, secretive, and 
binding.
    Do you think this will further allow predatory universities 
to continue to deceive students at the school's expense?
    Mr. Carey. I am sorry.
    Mr. Carey. I think forced arbitration is for all kinds of 
reasons a bad idea. Students are not sophisticated business 
people who kind of come in with their eyes open. They trust 
their colleges. It never occurs to them that they might up in 
some kind of financial dispute or be deceived by their college. 
They don't see their colleges as used car salespeople.
    And so they don't, as we heard today, go into the process 
gathering the kind of information that would ever give them a 
leg up in a process like that.
    Mrs. Watson Coleman. So my time is just about up, but I 
would like to ask for information that could be furnished to 
us. And it has to do with, what reform should Congress consider 
to protect both students' and taxpayers' hard-earned money? 
What should this committee pursue to that end?
    And if, Mr. Shireman and Mr. Carey, if they would be able 
to send us that information, Madam Chair, through you, I would 
be grateful.
    Thank you, and I yield back.
    Ms. DeLauro. I thank the gentlelady. And in fact we will 
try to draw on the panel for giving us information as we move 
forward to try to see how we address this problem. So we would 
love to have your recommendations.
    Congressman Harris.
    Mr. Harris. Thank you very much.
    Let me just, Mr. Carey, let me follow up on what you said. 
Which standards are you talking about that were suspended? Are 
you talking about the GE standard?
    Mr. Carey. Both the Gainful Employment standards, yes, and 
also the Borrower Defense regulations had some additional 
regulatory standards that were also essentially suspended.
    Mr. Harris. Right. And let me just go to the Gainful 
Employment, because I think in response to another question you 
said basically you think all colleges should be subjected 
earnings-debt analysis. Is that right?
    Mr. Carey. Analysis, yes. Regulation not in the same way. 
So we should know for all college programs.
    Mr. Harris. Okay. Why would you make it different for 
analysis and regulation? Because my understanding is the 
Department of Education says, look, we are going to eliminate 
GE, but we are going to put it on the College Scorecard. So I 
am kind puzzled, why--so, why?
    Mr. Carey. Because there is a huge variety of programs in 
our higher education system. Some of them, like the ones 
currently being regulated under the existing rules, are 
designed for--only designed for immediate short-term employment 
outcomes. You don't get a certificate in cosmetology in order 
to build lifelong learning skills, understand the world better, 
et cetera, et cetera, in the same way that you might with a 
longer undergraduate degree.
    So for a program that has only a short-term outcome, I 
think a short-term measure of debt to earnings is completely 
appropriate to regulate around.
    I think for programs that have longer term outcomes, we 
would benefit by providing that information to students and 
parents choosing colleges, but I would not regulate with that 
information in the same way.
    Mr. Harris. But my understanding is that before that rule 
was suspended, that if you were a for-profit college offering a 
degree, so not a certificate, you were subjected to GE.
    Mr. Carey. Yes.
    Mr. Harris. But if you were a community college offering a 
degree you were not subjected to GE.
    Mr. Carey. Yes.
    Mr. Harris. So you disagree with that. You think that we 
should have made--it is all--I mean----
    Mr. Carey. Again----
    Mr. Harris. So you think we should reapply the GE to for-
profits that give a degree but not to not-for-profits.
    Mr. Carey. I think the Gainful Employment regulations were 
in part an attempt to recognize the very different set of 
organizational incentives that for-profit colleges operate 
under, that we have heard ample evidence of today in this 
hearing, and that the additional scrutiny of degree programs at 
for-profits under Gainful Employment more than anything 
recognizes that.
    Mr. Harris. I guess I just didn't hear your answer. Do you 
think that we should subject--when Mr. Jerome offers a bachelor 
of nursing in his program, and down the block the community 
college or a private not-for-profit offers that same degree 
program, why shouldn't both be subjected to a debt-earnings 
ratio? They are both going to have 100 percent employment when 
they are done.
    Mr. Carey. I think we should know the debt-earnings ratio 
for both of them. I think for-profit colleges should be 
regulated with more scrutiny.
    Mr. Harris. So you think we should regulate his, but not 
the not-for-profit down the road that graduates someone, both 
of whom are going to be 100 percent employed. So if that for-
profit--that not for-profit down the road charges twice the 
tuition of his, they both earn--because I know nurses get the 
same thing no matter where, you got BSN you are golden--you 
think that shouldn't be something we regulate, that other 
nonprofit?
    Mr. Carey. Well, the nonprofit almost surely charges half 
as much, not twice as much. I mean, that almost never happens.
    Mr. Harris. Really? You think that, for instance, the Ivy 
League schools, with schools of nursing, you think charge--I 
don't know, Mr. Jerome, you have a few Ivy League schools in 
the neighborhood. Do you think your tuition for your nursing 
program is twice as much as the top tier nonprofit schools?
    Mr. Jerome. So we know it is not twice as much.
    Mr. Harris. Okay.
    Mr. Jerome. And generally community colleges are more 
affordable than for-profit----
    Mr. Harris. I am not talking about community college, 
because they get public subsidies.
    Mr. Jerome. No, no, but independent colleges are more 
expensive than proprietary.
    Mr. Harris. Thank you very much. That is exactly what I--so 
in essence, so you think that even though those independents 
can charge more, they shouldn't be subjected to a debt-earnings 
regulation?
    Mr. Carey. Again, Congressman, I think that for-profit 
colleges should be regulated with more scrutiny than nonprofit 
colleges.
    Mr. Harris. Okay. And why won't the College Scorecard be 
adequate? Do we not trust students to actually--if we make that 
College Scorecard available and if the Department says it now 
puts debt-earnings on there, why isn't that adequate?
    I mean, these are college-level students, these are people 
with--I would hope that our public education system graduating 
a high school senior can point them to an information--I mean, 
look every other decision we make as Americans is based on 
information we get.
    If we make that information very widely available, why 
should we take the college, the degree-granting programs at a 
not-for-profit and not subject them to regulation, but their 
private competitor, their private for-profit competitor we 
subject to regulation?
    Which, Mr. Jerome, I have got to imagine that costs you 
money, the regulation. I have got to imagine you have people 
who comply with regulation.
    Mr. Jerome. It costs money and it is very hard 
competitively.
    Mr. Harris. That is what I thought. It was kind of a 
rhetorical question. Thank you.
    I yield back.
    Ms. DeLauro. Ms. Lee.
    Ms. Lee. Thank you very much.
    Let me follow up on the issue as it relates to African 
American students, because we know that they are more likely to 
attend a for-profit college than White students. And we also 
know that they typically borrow at a much higher rate than 
their White peers. And we also know this is extremely--this is 
especially true at the predatory for-profit colleges.
    Now, according to the data that we have, 75 percent of 
African American students default on their student loans. And 
what is worse, as you mentioned, Mr. Carey, these institutions 
provide degree programs that may or may not lead to a good-
paying job.
    A couple of things I want to ask you about that. One is 
this administration continues to put onerous work requirements 
as it relates to eligibility, for example, for housing, for 
food stamps, for whatever it takes to live a decent life and as 
a bridge over troubled water. These students who receive these 
bogus degrees, who can't get a good-paying job, and then still 
work requirements are imposed on them, is that fair, is that 
right, first of all?
    Secondly, would these students who default on their student 
loans, they can't get a job and they can't file for bankruptcy 
either. Now if it is the institution that is the majority of 
problem, which it looks like it is with the majority of African 
American students, then shouldn't we do something to repair the 
damage that these institutions have caused? And shouldn't we 
try to let in no uncertain terms these institutions know that 
this is racist, it is discriminatory, it is continues the 
institutional racism that we have been addressing for decades, 
for centuries in this country?
    Mr. Carey. I agree, it is not fair. I would recommend to 
the committee the work of Dr. Tressie McMillan Cottom, who is a 
sociologist at Virginia Commonwealth University, who has 
written a whole book that looks at the intersection between 
for-profit higher education and particularly--there it is right 
there, Madam Chair. It is a great read and really worth 
reading.
    No, it is not fair. And, frankly, as we have heard today, 
for many, many, many hundreds of thousands of victims of for-
profit colleges there is no reparation in sight. There is no 
money coming back from the Federal Government. There is no loan 
forgiveness.
    Ms. Lee. As you said, reparation, good example of why we 
need to repair the damage.
    Mr. Carey. I agree.
    Ms. Lee. Mr. Shireman.
    Mr. Shireman. Yeah, the purpose of the Borrower Defense 
rule was to provide that relief where it is called for, and 
this administration needs to get on the ball and provide those 
students with that help.
    I will say on the work requirements around support, they 
partly do drive students. So school is work. Doing well in 
school is work. And one of the ways that for-profit colleges, 
especially online, lure students in is they promise it won't be 
too much work so you can continue working in that job.
    What we need is the kind of support so that students can 
focus on their studies, get a high quality education, get that 
degree, and get a job, and recognize that being a full-time 
student requires that time and they need the support to do 
that.
    Ms. Lee. And then when they get these degrees, though, that 
may or may not lead to a job, which many--and I know a lot of 
these students, they have a degree or a certificate that is 
worth absolutely nothing.
    So what happens when they go through school, they have 
these student loans, they try to get a job from these predatory 
colleges, and they can't get a job because it is a bogus 
certificate that leads to nowhere? So shouldn't they be given 
some kind of reparations and compensation or assistance to get 
through these difficult times?
    Mr. Shireman. First, we need to prevent that from happening 
in the first place. But in the instances when it has happened, 
if they have been misled in any way, if there is any evidence 
that the school had these boiler room operation with these 
manipulative tactics going on, then their loan should be 
forgiven.
    Other than that there is some help for borrowers who are 
low-income relative to their debt, but the first place to go 
should be to forgive the loans of people who were misled, 
manipulated into programs that were really not what they said 
they were.
    Ms. Lee. Thank you very much, Madam Chair.
    Ms. DeLauro. Thank you.
    We are going to wrap up. And I will ask the ranking member 
to make any closing comments that he cares to make.
    Mr. Cole. I want to thank my friend the chair for the 
hearing.
    I want to particularly thank each you for coming down and 
sharing both your professional opinions and your personal 
experiences. It has been extraordinarily helpful, it really 
has. And I appreciate the written testimony very much as well.
    I know we have made it tough on you in terms of the timing 
today, we all apologize for that, but as the chair said, we get 
paid to vote around here. So every now and then we do have to 
show up and do that.
    And, again, I particularly thank those of you who have come 
there some distance. I thank all of you, quite frankly. But we 
know it takes a big chunk of your time and a commitment to come 
down here to help this committee grapple with this really 
important issue and see if we can do a little bit better than 
we have been doing.
    So thank you again for coming.
    And, Madam Chair, thank you for holding the hearing.
    Ms. DeLauro. Thank you so much.
    Just in terms of just I need to get this put into the 
record. We have received complaints from Argosy doctoral 
students who are facing dire circumstances as a result of the 
mismanagement and the closure of Argosy. So without objection, 
I would enter those into the record.
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    Ms. DeLauro. Let me also express my thanks to all of you 
for being here. And, again, pardon us for the delay in 
starting, and appreciate your patience with all of us.
    This is an area where public policy, it is my view, can 
make a big difference. That is what we need to do here. And my 
hope is that we can draw on your expertise in order to look at 
the kinds of recommendations to move forward.
    Because the stakes are high. The stakes are very high. 
People are trying to better themselves. They are trying to 
better their families and their family's lives through 
education.
    We know that education is the great equalizer and that it 
should pay no attention to your gender, to your religion, your 
socioeconomic group, your political party. It is about your 
God-given talent that ought to let you be able to move forward 
and to be able to succeed, and that is what education is all 
about.
    So we can't sit idly by. And I would just say to you, 
President Jerome, you are, I would just put it this way, you 
are a drop of success and we applaud you for that. But it is in 
a, if you will, it is in a bucket of failures of for-profit 
colleges who have really hurt students, put them at a great 
disadvantage, and taken advantage of them. And we can't sit 
idly by and allow these individuals attending for-profits to be 
targeted, to be taken advantage of on the government's dime.
    So not a new problem. And I might add that, except for, I 
will be flat out, we are looking at--I went back and talked 
about Eisenhower and Nixon and George H.W. Bush that recognized 
what was happening and they said we have to change. The Obama 
administration recognized that we need to have changes. Quite 
honestly, it is this administration and it is the current 
Secretary of Education who refuses to acknowledge that we have 
to do something and who is rolling back, rolling back any 
protections.
    We need to enforce the Gainful Employment rule, we need to 
enforce the Borrower's Defense rule, and weed out the folks 
here who are misrepresenting and hurting people, because some 
of these institutions are nimble, very, very nimble in coming 
around the protections that we put in place, because profit is 
a strong motive. So we see the aftermath of Corinthian. Living 
through Argosy right now and those students and their comments.
    So this subcommittee, we have oversight over Federal aid 
and the grants, the Pell grants, and we have a duty to stand 
guard over this. So we heard last week at the loan servicing 
hearing how borrowers are being taken advantage of as well. So 
what we are trying to do with these hearings is to start in a 
direction of how we assist those who are vulnerable and how we 
give them a voice. So I look forward to the continuing debate 
and discussion.
    And, President Jerome, you asked, and I understand your 
question, but it is, why does predatory often precede the for-
profits? Well, I won't go through the litany. You have got when 
a for-profit steals over $16,000,000 in student aid, I think 
the label is appropriate. When they shut their doors with 2 
days' notice, I think the label is appropriate. When the 
largest recipient of Pell grant dollars is for a for-profit 
institution that has been engaged in harmful practice, that 
label is appropriate.
    I say to you, you are a success in this bucket of failures, 
and, again, we applaud you for that. But we have to go 
cognizant of what is happening overall in this industry. And as 
a subcommittee it is to take it on and do something to turn it 
around.
    I thank you all for being here today. Thanks very, very 
much. And I call this hearing to a close.

                                            Tuesday, April 9, 2019.

 COMBATTING WAGE THEFT: THE CRITICAL ROLE OF WAGE AND HOUR ENFORCEMENT

                               WITNESSES

PAUL DECAMP, EPSTEIN, BECKER & GREEN
LAURA HUIZAR, NATIONAL EMPLOYMENT LAW PROJECT
DANIEL KATZ, WASHINGTON LAWYERS' COMMITTEE FOR CIVIL RIGHTS AND URBAN 
    AFFAIRS
HON. KWAME RAOUL, ATTORNEY GENERAL, STATE OF ILLINOIS
    Ms. DeLauro. Good morning. The subcommittee will come to 
order. Let me welcome everyone here this morning, and a 
particular shout-out to the high school students from Herndon 
High School. Where are you, guys? Okay.
    [Applause.]
    Ms. DeLauro. Congratulations, Virginia. All right. I hope 
every--well, I don't know. I watched the game last night. It 
was terrific. It was a great game, right? God.
    Just to tell you this anecdote, and my colleagues will 
appreciate this. When I played basketball, which I did for a 
girls' high school in Milford, Connecticut, but at that time 
women could only play half court. That is how old I am, guys, 
so, you know, you don't even remember that. Anyway.
    Again, good morning. Welcome, everyone, to the Labor, HHS, 
and Education Appropriations Subcommittee. Today's oversight 
hearing will examine wage theft and the critical role of the 
Department of Labor's Wage and Hour Division in combatting it.
    I will introduce them again before their remarks but let me 
thank our distinguished panelists for being here today--Daniel 
Katz, senior counsel with the Washington Lawyer's Committee for 
Civil Rights and Urban Affairs; Paul DeCamp, member, Epstein, 
Becker & Green; the Honorable Kwame Raoul, Attorney General of 
the State of Illinois; and Laura Huizar, senior staff attorney 
with the National Employment Law Project.
    Today we are focused on combatting wage theft and the 
critical role of the Wage and Hour Division. The National 
Interfaith Committee for Worker Justice is a grassroots 
organization. It was founded to spotlight and combat wage 
theft. They defined wage theft as a violation of the Fair Labor 
Standards Act, which provides for a federal minimum wage and 
allows states to set their own higher minimum wage, if that is 
what they would like to do. It requires employers to pay time 
and a half for all hours worked above 40 hours per week.
    When employers violate those requirements in Federal law, 
and thus fail to pay working people the full wages that they 
have earned and are legally entitled to, those companies are 
committing wage theft. We need to call it for what it is, which 
is wage theft, and we have an agency responsible for 
investigating all forms of wage theft, the Wage and Hour 
Division of the Department of Labor. Its mission is to, and I 
quote, ``promote and achieve compliance with labor standards to 
protect and enhance the welfare of the nation's workforce.''
    This is so important because the single biggest economic 
challenge of our time is that people are in jobs that do not 
pay them enough to live on. They are struggling. It is even 
more difficult for people to survive if they are not being paid 
the wages they have earned. It creates that much more of an 
economic burden.
    The Wage and Hour Division, under the Trump administration, 
has itself recognized the fact--has recognized the problem of 
wage theft, and on its website, under Data, it champions that 
the Wage and Hour Division has recovered $304,000,000 in, 
quote, ``wages owed to workers in fiscal year 2018, more than 
$1,300,000,000 in the last five years.'' And it has outlined--I 
have a document here that outlines all of the cases in which 
they have really moved to address the issue of wage theft.
    Unfortunately, these amounts are just a drop in the bucket 
when we look at what workers are owed. According to informed 
analysis by the Economic Policy Institute, the Federal 
Government, states, and private action in the U.S. has 
recovered only $2,000,000,000 in 2015 and 2016. Yet, that is 
not even 10 percent of the total cost of wage theft, which EPI 
estimates to be as much as $50,000,000,000 a year. For context, 
motor vehicle thefts cost to the U.S. $5,900,000,000 in 2016, 
and that is according to the FBI. Working people are losing 
nine times that.
    It is not just fly-by-night businesses. In fact, a 2018 
report by Good Jobs First found more than half of wage theft 
cases involved Fortune 500 companies or Fortune Global 500 
companies. Nor are these just small violations. A 2014 study by 
the Department of Labor found minimum wage workers in 
California, quote, ``experienced violations equal to 49 percent 
of the earnings they took home.'' Nearly half. It is egregious 
and it is inexcusable.
    Again, with informed analysis, those who can least afford 
it are most affected. The National Employment Labor Project 
conducted a groundbreaking survey in 2009, of more than 4,000 
low-wage workers in New York, Los Angeles, and Chicago. It 
found that women, immigrants, and minorities were 
disproportionately affected.
    There is a significant and severe problem taking place that 
is hurting working people and middle-class Americans. We must 
be doing more to address wage theft, to prevent it, to combat 
it, to ensure working people receive the pay they earned and 
are legally entitled to.
    Some states are stepping up, and I look forward to hearing 
from the Attorney General of the State of Illinois, Kwame 
Raoul, later this morning. He and other witnesses will share 
what efforts states are taking to protect workers. California, 
Illinois, Massachusetts, my home state of Connecticut, to name 
a few, are states that are leaders in this fight. Many state 
attorneys general have established units to combat wage theft 
by targeting high-impact violators through investigations and 
legal action.
    Yet we cannot leave this to the states. For example, 
Georgia, Alabama, Florida, Louisiana, Mississippi--there is no 
state-level enforcement. Claims of wage theft must be filed 
directly with the U.S. Department of Labor.
    So I believe firmly that the Federal Government has a 
central role to play in addressing and combating wage theft. I 
have introduced legislation, the Wage Theft Prevention and Wage 
Recovery Act, that is comprehensive legislation that will 
strengthen current Federal law, empower employees to recover 
their lost wages. Whether it is compensation for a day's work 
or overtime, employees should be paid what they earn. This 
legislation not only protects workers but it will help our 
economy grow.
    That is a legislator reform that I believe is warranted, 
but as the title of our hearing should indicate, we need more 
enforcement at the Department of Labor and at Wage and Hour, in 
particular. Wage and Hour is the cop on the beat. We need to be 
helping them to leverage their resources in smart ways, because 
right now they are having to do less with less. In fact, Wage 
and Hour employs less investigators today than it did in 1948, 
despite the workforce having grown significantly in that time, 
and, as a result, the number of cases investigated by Wage and 
Hour decreased by 63 percent between 1980 and 2015. I believe 
it is part of an alarming trend with this Administration.
    Last week I laid out the unacceptable rollbacks of the 
Department of Labor under the Trump administration. The 
department is moving away from being a tough cop on the beat 
for workers to being an ally of industry. But we need more 
enforcement and investing in enforcement at Wage and Hour 
Division is a smart use of Federal funds.
    As we know, not all companies are bad actors, but we can 
identify where the greatest risks are. That is why Wage and 
Hour should pursue, quote, ``strategic enforcement.'' Former 
Wage and Hour Administrator David Weil has written, quote, 
``Strategic enforcement seeks to use the limited enforcement 
resources available to regulatory agency to protect workers as 
prescribed by laws by changing employer behavior in a 
sustainable way.
    Just to quote David Weil, ``Strategic enforcement 
represents a proactive approach to using limited enforcement 
resources available to a regulatory agency to protect workers 
as required by the law. It does so by using enforcement tools, 
outreach, collaboration with other government agencies, worker 
advocates, businesses, and the public, to change employer 
behavior in a sustainable way,'' and it deals with both 
outreach to workers and to employers.
    The idea is to make excellent use of the data, to identify 
industries and employers most likely to be violating wage and 
hour laws and those types of workers more likely to be 
exploited, and it then prioritizes precious resources there. 
Sounds like a common-sense approach. I hope the subcommittee 
can come together on a bipartisan basis to increase our 
investment in the Wage and Hour Division and in a strategic 
enforcement approach.
    We certainly should not be taking away from their 
enforcement work, which is why I challenge the Secretary's 
efforts to expand the Payroll Audit Independent Determination 
Program, which lacks any evidence of its success. And that is 
why I oppose the President's budget proposal for the Wage and 
Hour Division. It fails to increase funding for Wage and Hour 
Division's enforcement, only a 1.6 percent increase, and that 
is mainly for IT.
    Kim Bobo is a worker rights advocate and author. She has 
said, and I quote, ``If you steal from your employer, you are 
going to be hauled out of the workplace in handcuffs. But if 
your employer steals from you, you will be lucky to get your 
money back.''
    This subcommittee has as duty to understand the breadth and 
the depth of wage theft and to help combat it. We must. Working 
people cannot afford to have us stand pat.
    And with that now let me turn to my dear friend from 
Oklahoma, the ranking member of the subcommittee, Congressman 
Cole, for any opening remarks that he may have.
    Mr. Cole. Thank you very much, Madam Chair, and I want to 
thank all of our witnesses for being here today. I had the 
opportunity to read your testimony last night so it will be 
great to have the opportunity to visit with you today.
    We learned last week that our economy created 196,000 jobs 
in the month of March, beating economic forecasts by almost 
20,000 jobs. The unemployment rate of 3.8 percent is one of the 
lowest in almost 50 years. The economy-boosting policies of the 
Administration are raising household incomes, helping small 
businesses succeed, and supporting the American worker.
    The Wage and Hour Division, Department of Labor, is 
responsible for the enforcement of the nation's Federal labor 
laws, including minimum wage, overtime pay, family and medical 
leave, and migrant and seasonal worker protections. 
Collectively, these laws cover most private, state, and local 
government employment, protecting over 143 million workers in 
nearly 10 million establishments nationwide.
    Last year, the agency recovered more than $300,000,000 for 
more than 265,000 workers. This represents more recovered back 
wages than in any other year of the agency's history. The 
amount translates to more than $800,000 in back wages for 
workers every day and averages more than $1,150 for each worker 
found to be due back wages.
    In addition to this impressive amount of back wages 
recovered, the agency has also assessed more than $6,500,000 in 
civil monetary penalties for violations of the child labor 
regulations, the second-highest amount ever assessed in the 
agency's history. The Wage and Hour Division has also increased 
the proportion of agency initiative investigations to 53 
percent, surpassing 46 percent in the previous administration.
    In addition to its enforcement responsibilities, a critical 
function of the Wage and Hour Division is compliance 
assistance. Last year alone, the agency conducted a record-
breaking 3,600 outreach events for thousands of employees, 
employers, and industry associations. Compliance assistance is 
a critical component because Federal labor laws can be complex 
and therefore time-consuming and confusing for small 
businesses.
    The Department of Labor announced a proposed overtime rule 
that would make more than 1 million additional American workers 
eligible for overtime. The department estimates average 
transfer to employees to be more than $425,000,000 per year 
over the first 10 years. The efforts by this Administration 
represent a strong commitment to ensuring the rights of both 
the employee and the employer while preserving economic growth. 
By all accounts, the agency appears to be meetings its 
statutory responsibility and fulfilling the mission given to it 
by Congress.
    I look forward, Madam Chair, to hearing the testimony today 
and learning ways that we can ensure the rights of workers and 
employers are respected and adhered to.
    I yield back the balance of my time.
    Ms. DeLauro. Thank you very much, Congressman Cole. Let me 
once again thank all of our panelists for being here. Again, we 
have Daniel Katz, Senior Staff Attorney at the Washington 
Lawyers' Committee for Civil Rights and Urban Affairs; we have 
Paul DeCamp, member of the firm Epstein, Becker & Green; we 
also have Laura Huizar, Senior Staff Attorney at the National 
Employment Law Project; and let me yield to my colleague from 
Illinois, Congresswoman Bustos, to introduce the Illinois 
attorney general.
    Mrs. Bustos. All right. Very good. Thank you, Madam Chair, 
and once again you are demonstrating, Congresswoman DeLauro, 
how every single day you are fighting for the people. I think 
with our high school students out there today this is democracy 
in action, and welcome to our hearing.
    It is my distinct honor to be able to introduce Attorney 
General Kwame Raoul, who serves in my home state of Illinois. 
From his time as a young attorney handling labor and employment 
issues, to his career in the Illinois state legislature, 
spearheading workers' compensation reform, Mr. Raoul has been a 
tireless advocate for men and women who are in the workforce.
    As attorney general, Mr. Raoul's tenure has been dedicated 
to bettering the lives of Illinois workers. Due in part to Mr. 
Raoul's advocacy with other attorneys general, four large fast-
food franchises will no longer use ``no poach agreements.'' He 
is also pushing to create a worker protection unit within the 
Attorney General's Office, and amen, Mr. Raoul, for fighting 
for working men and women.
    I would like to thank Mr. Raoul for joining us today and we 
look forward to hearing your testimony.
    With that, Madam Chair, I yield back.
    Ms. DeLauro. Thank you very much, and to our panelists this 
morning please understand that your full testimony will be 
entered into the record, and you will be recognized for 5 
minutes. And then what we will do, when we conclude the witness 
testimony, we will proceed to 5-minute rounds for questions, 
and I will recognize members in order of their seniority at the 
time that we gaveled down. And then after that I will call on 
members in order of their appearance.
    And I guess I am told as housekeeping to make sure the mike 
is on when you are speaking and off when you are not speaking.
    Thank you. Mr. Katz, please begin when you are ready.
    Mr. Katz. Thank you very much, Chairwoman DeLauro, Ranking 
Member Cole, and members of the subcommittee. Thank you for the 
opportunity to testify today. My name is Daniel Katz. I am 
senior counsel at the Washington Lawyers' Committee for Civil 
Rights and Urban Affairs. The Lawyers' Committee labors to 
defend the rights of working people and address poverty, 
racism, and other forms of discrimination. In order to serve 
low-wage workers we host weekly workers' rights clinics which 
monthly assist over 100 low-wage workers who face wage theft 
and other violations of their rights, as well as we litigate 
claims on behalf of employees who suffer wage theft and 
discrimination.
    My testimony is informed by these experiences as well as 
the 25 years' experience I have litigating claims on behalf of 
low-wage workers and counseling many hundreds in regard to wage 
theft issues. Each day we speak with individuals who work on 
construction sites and restaurants, hotels and daycare centers, 
nursing homes and elsewhere, who do not receive the minimum 
wage, do not receive overtime pay, who get paid for only a 
percentage of the hours that they work, tipped employees who 
are forced to perform unpaid hourly work, and others who work 
and simply do not get paid at all.
    Wage theft impacts every aspect of a worker's life, whether 
she can pay for her family's housing, her ability to provide 
clothing and food for her children, whether her kids get 
medical care, and even her ability to get a job in the first 
place.
    This is what wage theft is. I would like to spend a couple 
of minutes talking about the ``who'' of wage theft. Who are the 
victims?
    A small subcontractor working on luxury apartments in Foggy 
Bottom hired six workers to hang drywall for 3 weeks. When they 
tried to collect their wages the subcontractor was nowhere to 
be found. When they brought their plea to the general 
contractor, who was onsite and helped supervise them, the 
general contractor claimed it had no responsibility to pay them 
since it had not directly hired them. They received nothing for 
their work.
    A young mother worked 50 hours per week in a pizza 
restaurant in a tiny indoor market. The restaurant paid her for 
only 40 hours' work. When she complained, the employer told her 
she was lucky. After all, he had paid her minimum wage for all 
of those 40 hours. She received nothing for those overtime 
hours--not straight time, not time and a half.
    Six back-of-the-house restaurant workers were not paid for 
4 weeks of work at the time that their Connecticut Avenue 
restaurant changed owners. The new owner told them they could 
keep their job but had no obligation to pay them their back 
wages, and they could not figure out who the old owners were 
because their pay stubs referred only to an LLC which was then 
defunct.
    Over 300 janitors worked for a tristate custodial company, 
some for up to 15 years, earning just over the Federal minimum 
wage. Their paychecks for the last half of August 2018 did not 
arrive, and as their paychecks for the first half of September 
became due they found out the company had closed. This has been 
ruinous for their families.
    A server regularly worked a 12-hour shift at a DC bar. She 
made only tips. The employer did not even pay her the $3.89 per 
hour that an employer must pay a tipped employee. When she 
complained, they gave her two options--keep serving or leave.
    Thirty workers performed electrical work constructing a 
public hospital. They were hired by a labor broker and worked 
side-by-side with individuals performing the same work who were 
hired directly by the electrical contractor. But they were paid 
less than half the wage of those directly hired and did not 
receive overtime pay. When they sought the wages owed to them 
the labor contractor was nowhere to be found and the general 
contractor disclaimed any responsibility.
    I realize that time is tight, and I want to just address 
one more issue. The protections of the FLSA would be seriously 
undermined by a pernicious Department of Labor proposal that 
would gut a core protection for low-wage workers. For 
vulnerable workers such as those I have described, the current 
FLSA joint employment rules provide the only hope that when the 
labor broker or the fly-by-night contractor or subcontractor 
disappears the workers still might recover the wages she had 
earned.
    However, last week the DOL proposed a new four-part test 
for determining joint employment under the FLSA. This test 
would insulate general contractors and others in the employer 
chain from the consequences of wage theft from which they 
directly benefit. The DOL proposal would upend decades of court 
precedent and ignore the reality of the subcontracting and 
outsourcing structure of employment today. This change would 
leave thousands of workers who are unpaid without any potential 
relief from wage theft. I urge the committee to consider any 
step it may take to ensure that the DOL never implements this 
proposal.
    Thank you.
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    Ms. DeLauro. Thank you.
    Mr. DeCamp.
    Mr. DeCamp. Good morning, Chairwoman DeLauro, Ranking 
Member Cole, and distinguished members of the subcommittee. My 
name is Paul DeCamp and I am a member of the law firm of 
Epstein, Becker & Green here in Washington. Thank you for 
allowing me to present my testimony today.
    The phrase ``wage theft'' is not a concept recognized under 
Federal wage and hour law, nor should it be. Instead, wage 
theft represents an amorphous cluster of notions, some of which 
involve violations of Federal law and some of which do not. 
That being said, because the phrase has worked its way into the 
title of this hearing, it is worth defining the terms we use.
    The concept of theft has a well-settled legal meaning. 
Black's Law Dictionary defines theft as, quote, ``the felonious 
taking and removing of another's personal property with the 
intent of depriving the true owner of it, larceny,'' unquote. 
In short, a perpetrator intending to steal property knowing 
that it is not his or hers to take. Theft is a serious crime.
    In the context of wages, it is exceeding rare for an 
employer to pay an employee wages and then to steal some or all 
of that money back from the employee. In legal terms, true 
theft of wages is almost nonexistent. When it occurs, state 
criminal and civil laws already provide a robust penal and 
remedial structure, as with theft of non-wage property. The 
much more common scenario is that an employer fails to pay 
wages allegedly owed. Sometimes the employer clearly owes 
wages, understands that it owes the money, and has the ability 
to pay, yet chooses not to pay. There is a broad consensus 
among businesses and workers alike that such an employer is a 
bad actor who needs to compensate the workers and face 
punishment.
    This type of situation may constitute fraud or theft of 
services under State law, or even theft itself. Under Federal 
law, assuming the Fair Labor Standards Act applies, this 
conduct would amount to a woeful violation, subjecting the 
employer to civil money penalties and an additional year of 
liability. The FLSA also provides for criminal liability for 
certain willful violations with fines as well as imprisonment.
    This type of knowing, willful, intentional refusal to pay 
wages that are indisputably due is the image that most 
naturally comes to mind when one hears a vague and loaded term 
like ``wage theft.'' This conduct is already illegal and often 
criminal under State law, and when this type of violation 
involves wages owed in the FLSA the result can be a Federal 
crime as well.
    For purposes of Federal wage and hour enforcement it is 
misleading and inappropriate to label anything other than the 
willful, intentional nonpayment of wages indisputably owed 
under the FLSA or another Federal statute as wage theft. The 
FLSA does not federalize all facets of wage payment. Instead, 
it establishes a floor relating to minimum wage, overtime, and 
child labor. It is simply wrong to use a term like ``wage 
theft'' when describing circumstances where conduct is not 
willful or intentional.
    The FLSA can be so confusing that even the Department of 
Labor itself has repeated violated it over the years, certainly 
through no desire to steal wages. The Wage and Hour Division 
misclassified its entire nationwide cadre of investigators as 
exempt from overtime for the first three decades-plus of its 
existence until another agency took a closer look during the 
1970s, forcing a reclassification. And in 2016, the department 
paid $7,000,000 to settle a claim that it had misclassified 
thousands of employees as exempt. If even the Federal agency 
with the most experience and expertise dealing with the FLSA 
has significant trouble complying, we should all pause before 
assuming bad motives on the part of other employers.
    Where the facts are reasonably in dispute, the law is 
sufficiently ambiguous that the obligation to pay is unclear or 
an employer was not aware that it owed the wages at issue there 
may well be an FLSA violation in which case the law provides 
make-whole remedies for the workers plus costs and reasonable 
attorney's fees, as well as a presumption of double damages. 
But this type of situation has virtually nothing in common with 
felonious theft. These non-purposeful errors are qualitatively 
different form the category of worst-of-the-worst violations 
discussed earlier. Lumping all of these scenarios together 
under a broad heading of wage theft obscures critical 
differences and leads policy astray. In short, it is 
fundamentally unfair to impose criminal or quasi-criminal 
punishment where an employer was not on clear notice of what 
the law requires and did not act with criminal intent. In my 
experience, all but a small percentage of wage hour violations 
fall into this non-willful category. By all means, protect 
workers and make them whole but do not treat unintentional FLSA 
violators like felons.
    The best safeguard for workers is clear, understandable, 
easily enforced legal standards. The vast majority of employers 
consist of decent people who care about their workers and want 
to do right by them. Federal wage and hour law should help make 
that happen rather than falsely trying to brand millions of 
honest people as thieves.
    Madam Chairwoman, that concludes my prepared remarks. I 
will be happy to answer any questions you or the members of the 
subcommittee may have.
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    Ms. DeLauro. Thank you very much, and now let me recognize 
Attorney General Raoul.
    Mr. Raoul. Thank you. Good morning, Chairwoman DeLauro, 
Ranking Member Cole, and members of the subcommittee. My name 
is Kwame Raoul and I am the Attorney General for the State of 
Illinois. I thank you for the opportunity to talk with you 
today about the ways in which I and other state leaders are 
responding to the crisis of wage theft by engaging in more 
strategic wage law enforcement and the critical importance of 
the Federal Government as a partner in these efforts.
    For decades, state attorneys general have been at the 
forefront of enforcing the rights of the residents of our 
states in areas such as civil rights, criminal prosecution, 
consumer rights, and environmental protections. Until 
relatively recently, few state attorneys general have engaged 
in much workplace rights enforcement. However, more and more 
state attorneys general have come to believe that we must help 
address rampant violations of wage and hour laws.
    For example, a comprehensive survey of low-wage workers in 
Chicago found that a full 26 percent of workers had been paid 
less than the minimum wage in the week before. Of workers who 
had worked more 40 hours in the preceding week, a full 67 
percent were not paid overtime. These statistics are echoed in 
what we hear from constituents every day. From home health 
workers to security guards to truck drivers to restaurant 
employees, every day my office hears from people who don't know 
how they will pay their rent or feed their kids because they 
have not been paid all of their wages that they have earned. 
Not only is this unfair to workers, it harms other businesses 
that do comply with the wage laws by making them less able to 
compete. It is an unfair business advantage for bad actors.
    In 2015, my office established the Workplace Rights Bureau 
to fight wage theft and to protect workers. Mo recently, the 
attorneys general of the District of Columbia and Pennsylvania 
have also started dedicated units in their offices, and other 
states have started getting more active on labor issues. These 
efforts join established labor bureaus in New York, 
Massachusetts, California, and the state of Washington.
    This small group of state attorneys general has taken 
significant actions to protect the working people of our 
respective states. For example, in Illinois, we investigated 
wage violations in the Chinese-style buffet restaurant 
industry. We found evidence that workers were working around 11 
hours a day, 6 days a week, and paid less than $5 an hour. 
Workers were housed by their employers in deplorable conditions 
and transported to and from work by their bosses. Those cases 
resulted in four Federal consent decrees, shutting down 
employment agencies that had enabled this exploit, and 
requiring payment of back wages of up to $15,000 for some of 
the kitchen workers.
    We reached a $1,000,000 settlement with a construction 
employer that had systematically falsified payroll records for 
a period of years to make it look as though employees were 
being paid legally required wages.
    While I am proud of our accomplishments in this area, my 
office has done this work with limited statutory authority. 
That is why, as a State senator, I sponsored a bill to give the 
attorney general authority to enforce state wage laws. Although 
the bill passed, it was vetoed by our former governor. It has 
now been introduced again with bipartisan support and it passed 
out of committee unanimously two weeks ago, and I anticipate it 
will pass out of the Senate this week.
    The bill does not take any enforcement away from the 
Illinois Department of Labor. It simply gives the attorney 
general supplemental authority to investigate and file suit to 
enjoin violations of State wage laws. It will also allow us to 
strategically partner with local prosecutors, labor, business 
and community organizations.
    But we do need the Department of Labor as a partner. From 
research to worksite investigations to detailed employer 
compliance assistance, the U.S. Department of Labor performs 
critical tasks that benefit employees, employers, and state 
enforcers. The department is also the only public enforcer that 
can investigate wage compliance issues across state lines. The 
importance of the Department of Labor, if anything, has 
increased as mandatory arbitration provisions and class action 
waivers prevent more employees from pursuing private wage law 
actions.
    In short, we are doing the best we can at the state level 
to address the issues of wage theft affirmatively and 
strategically, with limited resources.
    I thank you for the opportunity to speak with you today. I 
would be happy to answer any questions.
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    Ms. DeLauro. Thank you very much.
    Ms. Huizar.
    Ms. Huizar. Thank you. Good morning, Chairwoman DeLauro, 
Ranking Member Cole, and distinguished members of the 
subcommittee. Thank you for the opportunity to testify today. 
The National Employment Law Project, or NELP, is a nonprofit, 
nonpartisan organization focused on research and advocacy. We 
specialize in employment policy, including labor standards 
enforcement.
    Today I hope that my testimony will shed light on the 
problem of wage theft and also the importance of ensuring that 
the U.S. Department of Labor has the resources that it needs in 
order to adequately enforce our basic labor protections.
    Unfortunately, for many workers across the country and 
across industries, the Fair Labor Standards Act exists only in 
theory. A groundbreaking study in 2009 surveyed over 4,000 
workers. Twenty-six percent were paid less than the required 
minimum wage in the previous work week and nearly two-thirds 
have experienced some kind of pay-related violation in that 
period. Dozens of studies have found similar high rates of wage 
theft. For example, another recent NELP study highlighted that 
nearly 90 percent of fast-food workers experienced some kind of 
wage theft, in the warehouse and logistics industry, 25 percent 
suffer minimum wage violations, and we know that overtime 
violations are significantly higher. About 80 percent of port 
truck drivers are classified as independent contractors but we 
estimate that about 80 percent of them are actually employees 
and misclassified, and they suffer persistent wage theft.
    A 2017 study by the Economic Policy Institute, or EPI, 
looked at the 10 most populous states, and they found that 2.4 
million workers in those states lose about $8,000,000,000 
annually to unpaid minimum wages, and nationally, as I think it 
has been mentioned before, EPI estimates that workers lose 
about $15,000,000,000 per year to minimum wage violations 
alone.
    Good Jobs First also analyzed more than 4,000 wage and hour 
cases and more than half of those cases involved Fortune 500 
companies or Fortune Global 500 companies. So we know that this 
is not just a problem about small, fly-by-night corporations or 
businesses.
    Wage theft is a racial and gender justice issue. Women are 
significantly more likely than men to experience wage theft, as 
are foreign-born workers. Among U.S.-born workers, the rate of 
minimum wage violations for African American workers was three 
times higher than that of white workers. Nevertheless, wage 
theft is an issue that affects all demographic categories. The 
majority affected are over 25, they are native-born U.S. 
citizens, and nearly half are white.
    Low-wage workers who experience wage theft also face myriad 
hurdles in accessing justice. Labor agencies across the country 
are under-resourced and understaffed. Retaliation remains 
rampant and the fear of retaliation keeps countless workers 
from coming forward. The growing use of non-compete agreements 
and no-poaching agreements has only made it more difficult for 
low-wage workers to find work, and it does discourage workers 
from coming forward and risk getting fired. Legal assistance, 
especially for low-wage workers can be very difficult to find 
and extremely costly.
    Finally, the recent U.S. Supreme Court decision in Epic 
Systems effectively adds another barrier for workers. It allows 
employers to force their workers to sign mandatory arbitration 
agreements that effectively bar collective action and close the 
courthouse doors. For more than 60 million workers who are 
subject to mandatory arbitration agreements around the country, 
the U.S. Department of Labor and agencies like the USDOL may be 
their only recourse, because those agencies are not bound by 
such agreements.
    Ultimately, an enforcement agency must be able to pursue a 
strategic enforcement strategy that effectively leverages their 
limited resources. Strategic enforcement refers to an agency's 
ability to be selective about where and how they use their 
resources in order to focus on where the problems are largest, 
where workers are least likely to come forward, and where the 
agency's efforts are most likely to improve industry 
compliance.
    Given the magnitude of the problem of wage theft and the 
crucial role that USDOL plays in enforcement, Congress must 
ensure that USDOL and the Wage and Hour Division within USDOL 
have the resources and the staff that they need in order to 
carry out their work strategically.
    Thank you for the opportunity to submit testimony today and 
I look forward to your questions.
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    Ms. DeLauro. Thank you all very much for your testimony. We 
will now begin questions.
    Let me just, before I go to my questions, just make a 
point. There seems to be--I guess, Mr. DeCamp, you talked about 
wage theft is non-existent or it is exceedingly rare. It seems 
to be in dire contrast to all of the information that has been 
provided by the other panelists, so maybe at some point the 
four of you can get into that discussion. What I would like, at 
the end of the--if we can get to either this morning or you get 
back to us, in terms of what kinds of recommendations you have 
for the subcommittee to be able to try to move forward.
    With that, NELP estimates in 1948, one investigator for 
every 22,600 covered workers. Today there is one per every 
135,000 workers. In recent years, Wage and Hour reached a high-
water mark of 1,446 full-time employees in 2015. In contrast, 
DOL estimated Wage and Hour had just 1,297 in 2019. A 10 
percent decrease, alarming, over four years.
    Instead of requesting more resources for aggressive 
enforcement, Secretary Acosta is looking to expand the 
compliance assistance program. That is the PAID--Payroll Audit 
Independent Determination. Quite frankly, where we have had no 
evaluation, no determination of its effectiveness at all.
    A question for you, Ms. Huizar. In your view, can 
compliance assistance serve as a substitute for strong Federal 
enforcement? Can you walk me through why the Labor Secretary's 
approach will not help solve the wage theft crisis we are 
seeing?
    Ms. Huizar. Yes. Thank you, Chairwoman DeLauro.
    So I think compliance assistance means different things at 
different times, and I think, as has been said before, 
compliance assistance can come in the form of outreach and 
education to employers, and it is crucial to make sure that 
employers understand their rights and their responsibilities as 
it is crucial to understand--for workers to understand their 
rights and when they can come forward.
    But what we are seeing is that the Wage and Hour Division 
of the U.S. Department of Labor is carrying out a program 
called PAID, where, you know, labeled as compliance assistance 
they allow employers to come forward voluntarily and self-
report violations. And through that program the agency hopes 
that employers will pay back wages to workers, but there are no 
consequences for employers who come forward through that 
program.
    So essentially there are no incentives for employers to 
change their behavior or for employers who are watching what is 
going on with enforcement to change their own practices. And we 
at NELP believe that the PAID program is not a form of 
compliance assistance. It is actually a form of amnesty for 
wage violators.
    So we believe at the cornerstone of strategic enforcement 
we must place deterrents as a goal and a strategy that does not 
impose a higher cost on employers for violations is not doing 
that.
    I should--oh----
    Ms. DeLauro. Go ahead.
    Ms. Huizar [continuing]. I should also mention that a 
worker who has suffered wage theft and is then offered simply 
the wages that they were owed at the beginning is not receiving 
a true remedy for what they have experienced. Workers in those 
cases are basically giving their employers a zero-interest 
loan, based on their unpaid labor, and at the same time 
workers, especially low-wage workers, are struggling to make 
ends meet. Most workers are living paycheck to paycheck. And so 
that is why the Fair Labor Standards Act provides for damages 
for workers and for penalties.
    Ms. DeLauro [continuing]. A strategic enforcement. So let 
me move into that with a question for Attorney General Raoul 
and for yourself, in the strategic enforcement efforts, state 
labor departments, state attorneys, using these smart ways in 
which to deter violations.
    Let me ask you, Attorney General, can you explain how you 
are leveraging the scarce resources of your Workplace Rights 
Bureau to target investigations and lawsuits in ways that 
achieve the greatest impact?
    Ms. Huizar, your organization published a report, ``Winning 
Wage Justice: Strategies for Effective Local Wage 
Enforcement.'' Can you explain how local agencies may approach 
complaints differently based on the potential impact of the 
investigation?''
    Mr. Raoul. Thank you, Chairwoman.
    So as I explained, we have introduced legislation to allow 
us to collaborate with local prosecutors, with labor, with 
community organizations. We utilize that collaboration to be 
able to enforce--I gave the example of the Chinese-style buffet 
restaurant. It is important for us to be able to rely on the 
Department of Labor. Oftentimes at the State level we have--the 
Federal law sets a floor and oftentimes at the State level we 
are a little bit more--we set a higher floor. And so to the 
extent that the Department of Labor is not working as a 
partner, and we have enjoyed working as a partner with the 
Department of Labor, it does not enable us to leverage our 
limited resources. We only have 10 investigators in our State 
Department of Labor for a population of 12.7 million in the 
State of Illinois. It is difficult for us to act alone to 
enforce these violations.
    Ms. DeLauro. What I am going to do is since I have got 4 
seconds left here, Ms. Huizar, we will get back to you and have 
you address that question.
    Let me yield to my colleague from Oklahoma.
    Mr. Cole. Thank you very much, Madam Chair, and I think we 
probably all agree that one case of this is one too many.
    But I want to pick up where our chair was headed in her 
opening remarks and try to get some idea of the magnitude. So I 
am going to ask each of you, and I ask you to be pretty brief 
if you can because I want to get all of your responses in. But 
no. 1, give us some sense of the magnitude of this, either in 
terms of the percentage of workers that are impacted or the 
frequency, the numbers of firms that are involved in this, so 
that we can get that grasp.
    And second, your view of the balance, again, between 
deliberate violation and accidental, you know, either the 
employer misunderstanding or what have you.
    So if we could start with you, Mr. Katz, and then we will 
just go right down the line.
    Mr. Katz. Thank you very much. In terms of how widespread 
this is, I would say that if we literally walked out of this 
room and were able to interview individuals working on the 
construction sites on K Street or in the restaurants on Capitol 
Hill or in nursing homes within a couple-mile radius, we would 
find that different forms of wage theft are affecting well over 
50 percent of the individuals who we would consider low-wage 
workers.
    That may be a low number when it comes to certain 
industries, because I would say our experience in, for example, 
the restaurant industry is that well over 50 percent of 
restaurants do not comply with minimum wage and overtime 
requirements.
    In the context of how difficult is it to comply, I would 
say there is no question that there may be certain aspects of 
the FLSA which are more difficult to understand than most, but 
I would say that essentially 98 percent of what the FLSA 
instructs us to do in regards to paying minimum wage, paying 
over time, keeping accurate records so that there are not 
disputes over what people are paid, those provisions are easy 
to comply with. They have been the law for approximately 80 
years now. And so I would say that when an employer violates 
those provisions, by and large that is a willful violation.
    Mr. Cole. Thank you.
    Mr. DeCamp.
    Mr. DeCamp. If we are talking about wage theft the way that 
the other members on the panel are defining it, which is any 
FLSA violation or perhaps any FLSA and any state wage law 
violation, then I would agree that the numbers are very large. 
If we are talking about the category of willful, intentional 
acts, I think it is much, much smaller category, probably less 
than 1 percent.
    Look, I don't think there is an employer out there where I 
couldn't go through their records and talk to their employees, 
including in this building, and find violations of the FLSA or 
State wage and hour law. These are next to impossible to comply 
with 100 percent of the time. But when we are talking about 
deliberate versus good-faith or unintentional violations, I 
think there is a big difference there.
    I think that the comment here, from the previous witness, 
that 98 percent of the requirements of the FLSA are crystal 
clear to comply with, that is true at 30,000 feet--time and a 
half, overtime, minimum wage, keep records. That is easy. But 
at the ground level, when you are actually applying these 
rules, in their details, in the 1,000-plus pages of regulations 
under the FLSA, and 80 years of case law, everybody gets it 
wrong. There are so many ambiguities that nearly all the 
violations that I see--and my practice is 100 percent wage and 
hour--is in the non-willful range.
    There are willful violations. They are small but they are 
out there. But that is not most violations.
    Mr. Cole. Thank you.
    Attorney General Raoul.
    Mr. Raoul. You know, I think we have heard a little bit of 
consensus from the previous two speakers. The bottom line is 
whether willful or intentional the end result is a worker not 
being paid the wages that they worked for. And to the extent 
that we are facing consequences where there are mandatory 
arbitration agreements and class waivers, that enhances the 
burden on public enforcers because there is no private action.
    So for my office, where I have no investigators, it creates 
a huge burden, particularly if we do not have the partnership 
of the U.S. Department of Labor.
    Mr. Cole. Thank you, General.
    Ms. Huizar.
    Ms. DeLauro. Can I interrupt for a second?
    Mr. Cole. Certainly.
    Ms. DeLauro. This is an important question, I want to say 
to my colleagues. Because we are over on the time----
    Mr. Cole. Yeah, no, you control the time.
    Ms. DeLauro. No, no. Well, but I just want to just say 
don't feel--I mean----
    Mr. Cole. Yeah.
    Ms. DeLauro [continuing]. Let's----
    Mr. Cole. Yeah, no. I think we all want to get this one. So 
please. Thank you, Madam Chair.
    Ms. Huizar. Thank you. So I think that the definitive study 
at this point on wage theft prevalence was a study conducted--
or released in 2009. It was NELP. It was the UCLA Institute on 
Research and Labor--Research on Labor and Employment, it was 
the Center for Urban Economic Development at the University of 
Illinois, and a number of other partners.
    They surveyed over 4,000 workers in several cities and 
through that survey they were able to basically gather 
information about a market that is representative of the low-
wage market. And through that study, which has been cited over 
and over again, we found minimum wage violations in about 26 
percent of cases for the previous work week that was analyzed. 
As I mentioned, nearly two-thirds of workers in that study had 
experienced some kind of pay-related violation.
    When we look at industries within that study, the home care 
industry had overtime violations above 80 percent, for example. 
Within the food and drink, hospitality sectors, agriculture, 
and others, we know that rates are that high.
    And I think I will say, in terms of whether these are 
small, technical violations that are hard to detect and hard 
for employers to understand, you know, just from my personal 
practice--I started my career at the grassroots level, 
administering economic development programs in Connecticut--and 
I will say that in my experience most of the violations that I 
have come across are not small or technical.
    I have seen employers instruct workers that only their 
first 40 hours will be placed on their paycheck and will be 
recorded, and then the next 20, 25 hours will not be recorded 
anywhere. And they may get paid some portion of the minimum 
wage for those extra 40-plus hours, but they often do not get 
the full overtime pay for those hours. And that is when workers 
would come to me and to my fellow attorneys for help. I think 
they understood that they were working all day, basically, 
every week, for very little in pay.
    And, of course, we see workers--you know, I saw countless 
workers in the construction industry who go back to their 
employers at the end of two weeks or a month of hard work and 
the employer either gives them just a portion of what was 
promised, what was explicitly promised, or gives them nothing 
at all.
    And so I think that in our practice most violations are 
very clear to workers, and that is when workers come forward or 
they seek help, but that is also why we need strategic 
enforcement to go out and find industries that are taking 
advantage of these practices and undercutting their 
competitors.
    Mr. Cole. Thank you. Thank you, Madam Chair.
    Ms. DeLauro. Thank you.
    Congresswoman Frankel.
    Ms. Frankel. Thank you. Thank you for the hearing, thank 
you to the panelists, and welcome to the students.
    So I think, if I listen to you all, for a worker I guess 
whether the wage violation is deliberate or not, it is the same 
effect. You are not getting what you earned, right?
    What is the most common type of wage theft? You mentioned--
somebody mentioned Fortune 500 companies. What is the most 
common wage theft for a Fortune 500 company?
    Ms. Huizar. So I think in terms of the most common form of 
wage theft I would say, in my experience and based on the 
research that I have reviewed, it is often overtime violations. 
So workers will get oftentimes the minimum wage for the first 
40 hours and then nothing for the overtime hours, or some 
iteration of that.
    But we do see violations, for example, in the restaurant 
industry, where tipped workers who are supposed to get a base 
wage from their employer, or a guaranteed base wage plus tips, 
where there is a sub-minimum wage for tipped workers, we often 
see that employers are not tracking precisely how much in tips 
workers are recovering each week. If you talk to most 
bartenders and most waitresses and waiters, they will tell you 
that they get sort of the same paycheck every week from their 
employer, which is a very small amount, and then the rest is 
sort of an informal system that does not guarantee them the 
minimum that they are owed under the law.
    Ms. Frankel. Is this detected by the worker? I mean, do the 
workers know they are not getting overtime, and then what is a 
worker supposed to do, other than talking to their boss and 
then they are told, sorry. Then what is a worker supposed to 
do?
    Mr. Katz. If I may, Congresswoman, one of the issues is 
essentially what are the resources available to that worker. 
Unfortunately, in our experience, what we can say is it is a 
small percentage of the individuals who are not paid the 
overtime, are not paid minimum wage, or are paid as, you know, 
so-called independent contractors when they are really 
employees. It is only a small percentage who ever find their 
way to a workers' rights clinic or to a private lawyer to 
assist them. Unfortunately, the resources available to low-wage 
workers are very limited, and unfortunately, also, many times 
employers do not keep the records that the law mandates they 
keep so that the employees can, at some later point, figure out 
what are the wages they are actually owed.
    Ms. Frankel. So, I mean, I read some of the estimates of 
the lost wages. I think it was something like $4,400,000,000 
annual for women workers, $3,600,000,000 for men annually. I 
guess that is because more women are in minimum wage jobs. What 
is it, two-thirds of the minimum wage jobs are for women?
    So what can we do to enforce the law? I mean, what can we 
do better, from a Federal point of view?
    Ms. Huizar. So I think that a lot has been done at the 
Federal level, especially under the last administration. I 
think Administrator David Weil has conducted a lot of research 
and study on what works best, how do we leverage limited 
resources in the best way. And that is where this idea of 
strategic enforcement really comes from. It is about employing 
the principles of prioritization to cases and deterrence, and 
thinking about how an agency can influence a system-wide 
change.
    And those are things that the agency has already started to 
put in place. We are seeing more and more directed 
investigations by the agency instead of simply responding to 
complaints as they come in. And what the agency needs, and 
what, I think, most agencies need are more resources, more 
investigators, in order to really have a chance to analyze the 
data that they have and use that data as strategically as 
possible to find the high violators, to find workers in 
industries that are too afraid to come forward, and to really 
use their power to make a difference in employers' decisions.
    Ms. Frankel. How does that happen? If you don't have a 
complaint, how do we know that there are violations?
    Mr. Katz. Madam Congresswoman, the DOL has the authority to 
investigate workplaces without there being a complaint, and we 
would urge that the number of investigators be increased, that 
they be properly budgeted, and that when the DOL investigates 
and identifies wage violations in the workplaces that, as one 
of my colleagues mentioned earlier, that the remedy for those 
individuals is not just what they were previously owed but 
remedies to the full extent that the law provides, right now 
double damages, and as proposed in this bill, increased 
damages.
    Ms. Frankel. Madam Chair, if I could just ask. So more 
resources. Does anyone have a figure in their mind what kind of 
increase in the budget or the amount of personnel that would be 
needed?
    Ms. DeLauro. I know Mr. DeCamp wants to get into this 
conversation.
    Ms. Frankel. Okay. Yeah.
    Ms. Huizar. So I will not put a specific number out there, 
but I will reiterate the number that was cited before where, in 
1948, we had about 1,000 investigators in the Wage and Hour 
Division for about 22.6 million workers across the workforce. 
Today we have fewer than 1,000 investigators for 135 million 
workers. So I don't think we can say that we are doing as much 
as we were doing in the 1940s, or as much as we can, given the 
prevalence of the issue and the growth in the workforce.
    Mr. DeCamp. First, on the resource end--thank you, Madam 
Chairman--for the resource issue I think it is important to 
recognize that the Wage and Hour Division does a lot of good 
and with more resources they could do more good. Obviously, 
there are competing demands for the money and that is up to the 
appropriators, but certainly more resources could be helpful 
and could benefit especially low-wage workers.
    From the standpoint of how do you prevent violations, I 
think it really depends on the type of violation. There are 
certainly willful violators out there where putting out all the 
compliance assistance information in the world is not going to 
change their behavior. For them you need punitive, coercive 
enforcement.
    But for the vast majority of employers, certainly in my 
experience, if you give them the information and if you give 
workers the information about what the law requires, they will 
want to comply. The workers will be aware of their rights. The 
employers will want to comply because they don't want a visit 
from the Department of Labor or a plaintiff's lawyer or 
anything like that because it is a lot more expensive in that 
instance not to comply than to get it right in the first 
instance.
    So to prevent those types of violations, having clear legal 
standards, having more information put out there, having the 
Department of Labor and State agencies having more information, 
more compliance assistance with employers, with community 
groups, with workers, to make sure that everybody understands 
the standards, and clarifying some of these gray areas in the 
law--and there are a lot of them--would benefit workers and 
prevent a lot of violations.
    Ms. DeLauro. Thank you very much. And I would just say I 
think we should get a copy to everyone of the abstract that the 
former Wage and Hour Division head, David Weil, wrote about the 
concept of strategic enforcement, which, in fact, does talk 
about some of the things that all of you are speaking about in 
terms of making the agency do what it needs to do, and have the 
kind of outreach it needs to have in order to get at this 
problem.
    With that let me recognize Congresswoman Herrera Beutler. 
Do you want to wait for a few minutes?
    Ms. Herrera Beutler. Could you----
    Ms. DeLauro. Oh, absolutely. No, take your time. Let us 
know. Okay. Thank you.
    Let me just take a moment to--thank you all for coming, by 
the way, guys. Do well, all right? Run for office. All right.
    Mr. Cole. Can we find out where they live first?
    Ms. DeLauro. Let me take a moment to question the premise 
that the misclassification of workers is somehow not part of 
wage theft. Employers are often willfully miscategorizing 
workers as independent contractors, and then, in the process, 
denying them the wages they should be rightfully paid under the 
Fair Labor Standards Act. Historically, Wage and Hour has had 
many cases involving civil monetary penalties and liquidated 
damages in misclassification cases.
    So I have two questions, one for Mr. Katz, one for Ms. 
Huizar.
    Mr. Katz, it is my understanding that you have seen, first-
hand, worker misclassification and has resulted in vulnerable 
workers not getting their promised wages. Can you walk us 
through some examples of cases where this happened?
    And, Ms. Huizar, in your view, does the Wage and Hour 
Division have a role to play in holding employers accountable 
for misclassification resulting in workers losing promised 
wages and overtime?
    Mr. Katz.
    Mr. Katz. Thank you, Congresswoman. I can think of two 
quick examples. One is from the group of electrical workers 
that I talked about earlier in my testimony, who were working 
side-by-side with electrical workers hired directly by the 
electrical contractors. The individuals whom I represented in 
that case, approximately 45 of them, were paid as so-called 
independent contractors. They received an hourly wage, $18 to 
$20 an hour, and that is what they received. They did not have 
taxes withheld from their paychecks. The employer did not pay 
the employer portion of those taxes. When they worked overtime, 
they were paid $20 an hour instead of the $30 an hour they 
should have received.
    Similarly, I can think of an example involving three 
construction workers who worked for a contractor in the 
District of Columbia, in Maryland. The three of them worked 
approximately 8 to 10 years for this contractor. They were paid 
a straight hourly wage. Again, they were never paid overtime. 
The employer never paid their portion of the--never paid--
withheld the employee taxes, never paid the employer portion of 
those taxes.
    So that has a couple of consequences. Number one, it means 
they were not getting--because they were treated as, in quotes, 
``independent contractors,'' they were not being paid time-and-
a-half overtime they should have been paid. Number two, when 
they went to file their taxes each year, they had a real 
headache with the IRS, because the IRS had, of course, no 
record that any taxes had ever been withheld and so they got 
hit by huge penalties.
    Number two, that kind of a situation basically denies 
Federal and State taxing authorities of funds they should be 
receiving. All of us pay employment taxes, okay. They go to 
support also to different government functions. In that kind of 
a situation the employer was essentially denying tax monies 
owed to Federal taxing authorities and also not paying into, 
for example, the unemployment insurance fund, so that when 
people get laid off, you know, they can collect unemployment 
insurance.
    Ms. DeLauro. Ms. Huizar.
    Ms. Huizar. Yes. Thank you.
    So in terms of whether the Wage and Hour Division has a 
role to play----
    Ms. DeLauro. Right. Yes.
    Ms. Huizar [continuing]. In tackling misclassification, I 
think I would first say that the Wage and Hour Division's 
explicit goal is to enforce the Fair Labor Standards Act, which 
means to protect employees and their right to minimum wage and 
overtime and other basic, basic protections. And so in order to 
do that, the Wage and Hour Division absolutely has a role in 
identifying industries where misclassification is happening. I 
think some estimates put the number at around 10 or 20 percent 
of workers that are misclassified in the economy these days, 
and the agency has the power to use its resources to analyze 
data, to look at industries, at sectors, to use complaints to 
figure out when employees are being misclassified, and then to 
use the agency's resources to bring the most impactful, 
targeted cases against violators.
    Ms. DeLauro. Thank you.
    Congressman Harris.
    Mr. Harris. Thank you very much, and, yeah, I am sorry that 
I had to step out. We have the Secretary of Agriculture next 
door.
    Mr. DeCamp, I am sorry I missed your testimony, but some of 
this is confusing to me. I am not a labor attorney. My 
understanding is that some states, including mine, actually set 
a higher minimum wage than other states, and in those states 
that what is an exempt and a non-exempt job don't necessarily 
overlap with the Federal minimum wage. Is that true?
    Mr. DeCamp. There are, in some states, different standards, 
higher compensation standards or different compensation 
standards to be exempt or non-exempt for the most commonly used 
exemptions under the FLSA. That is correct.
    Mr. Harris. Right. And I know that, I think in the opening 
statement, the ERG study from 2014, sponsored by the Department 
of Labor, you know, a statistic was mentioned that has to do 
with California. California is one of those states that had a 
higher minimum wage and also, I think, had different--a 
slightly different definition of which jobs it applied to. Is 
that right also?
    Mr. Harris. Not just slightly different. Very different in 
terms of the types of duties that qualify and how you assess 
whether somebody is exempt.
    Mr. Harris. Okay. And are you aware of that statistics, 
that again was quoted, where 49 percent of the wage was 
underpaid to the--in that study, to the people in California 
who were subject to the minimum wage?
    Mr. DeCamp. I have heard that number used in the written 
testimony and the oral testimony. It is not something I had 
seen before. It is hard to know without more context what that 
really represents or how good that number is.
    Mr. Harris. Yeah. I am asking for your comment on that, 
actually, because I went and actually read through the study. 
And it is interesting because it claimed that a $63 decrease, 
or underpayment of that, of minimum wage in a weekly salary, 
was actually 49 percent--it was a 49 percent effect on the 
income. And I guess that wasn't kind of a full-time job, on 
average.
    I may ask you again to look into that and get back to me on 
exactly how that was derived, but it is just not--and, look, I 
know statistics. I have taken a course in statistics. You know, 
you pluck one number out of the air and you make it seem, in 
California, you know, you are underpaying by 50 percent, but it 
appears to be a very small number of people. And again, it 
seems because of the definitional differences in California it 
might actually be a hard number to determine.
    But where are the places, if you could just review for me 
where you believe that the term--and I enjoyed reading your 
testimony a lot. I am sorry I didn't hear it, because again, 
you know, we should just be honest. I mean, theft is a crime, 
is a felony--I guess normally a felony. I mean, it involves 
actually stealing something. So I understand the emotions of 
calling this wage theft, but you make the point that there are 
many things that occur where theft is probably a little too 
strong, like you didn't really understand what the law--it was 
unintentional, for instance. Most times if you think of, you 
know, auto theft, for instance, it is rarely unintentional.
    So what are the major parts, or what are the contributors 
to the overall problem when it is actually an unintentional 
act?
    Mr. DeCamp. Largely it is ambiguous legal standards. For 
example, the issue of who is an employee versus an independent 
contractor. That is an issue that has bedeviled Congress since 
at least 1978, and well before that with the passage of Section 
530 of the Internal Revenue Code. Recognizing that determining, 
for tax purposes and other purposes, where that line is can 
oftentimes defy word tests, and you only know it after the fact 
when a court applies a test that it may make up on the fly, for 
purposes of the litigation.
    Exempt, non-exempt. When we look at the Department of 
Labor's own violations historically, those were in the area 
primarily of exempt versus non-exempt. Is an employee properly 
classified under the administrative exemption? Do they have 
sufficient discretion and independent judgment regarding 
matters of significance? These are terms that--they exist in 
regulations and they have been in regulations for decades and 
decades, but nobody knows what they really mean, in part 
because they don't really have meaning. They take on meaning in 
the context of a given case, but they don't, in many instances, 
lead to noble outcomes ex ante. That is another area of 
significant problems.
    Another concern is identifying what constitutes compensable 
work. Everybody understands that if you are hired to swing a 
hammer in a factory, the time you spend swinging the hammer is 
work. But what about the time you spend putting on your gear at 
the start of the day or waiting in line in security to get 
checked out at the end of the day? There have been cases, and 
some have reached the Supreme Court, dealing with what 
constitutes work. In today's day and age things like travel 
time, commuting, use of mobile devices, use of computers at 
home. You get a phone call from your supervisor and it lasts 3 
1/2 minutes, after hours. Is that work? Is it not work?
    These are gray areas that cause a lot of concern. When 
people are on call, is that work or is it not work? And these 
are areas where employers who want to get it right find it very 
difficult to comply, and it is doubly so for smaller businesses 
that don't have sophisticated legal and HR staffs in-house to 
deal with these questions. A lot of the times the people who 
are trying to deal with these standards, to the extent they 
even know about them at all, are non-lawyers, regular human 
beings who are not used to reading statutes and regulations, 
don't even know that some of these laws exist. Maybe they have 
heard of overtime but they don't know what the specifics are in 
terms of what is required.
    Mr. Harris. And my understanding in some states--because I 
think I remember this when I was in the State legislature I sat 
on the labor committee, that even the definition of independent 
contractor can be different in different states. Right?
    Mr. DeCamp. Absolutely. There are multiple different tests 
that are used. The Federal standard differs from what is used 
in California, it differs from what is used in many other 
states.
    Mr. Harris. That is what I thought. Thank you very much. I 
yield back.
    Ms. DeLauro. Congresswoman Herrera Beutler.
    Ms. Herrera Beutler. Thank you, Madam Chair.
    I have a couple of thoughts and I wanted to direct a couple 
of questions to Mr. DeCamp. You know, Washington State has been 
dealing with a bill at the State level that is similarly 
attempting to get at the problem of when people who have worked 
for their money don't get paid, period. I don't think anybody 
is going to disagree that that is biblical, actually. So I am 
not going to fight that one.
    But as we all know, we can create layers that maybe attempt 
to get at a problem but can create a lot of unintended 
consequences for other people who are fair actors, and that is 
what we need to get to here.
    You know, I am aware, in my state, with a bill that is 
moving forward, you know, the testimony was brought if a small 
general contractor--and I think about my father-in-law who had 
his own business. It was him and then my mother-in-law did 
books. So oftentimes they are hiring many different subs to 
complete a house or a project. Sometimes those subs have many 
more employees that it would dwarf the general contractor. 
Correct? And that is where I want to get into some of these 
things, because that can have such a negative impact on 
everybody involved.
    So I was hoping that perhaps you could explain how 
businesses, contractors, homebuilders, who are fair-minded 
folks, who want to pay their employees, may find themselves in 
violations of the Fair Labor Standards Act, and is there any 
ambiguity in the law? Are there things that we should be 
looking at really to tighten up this process? That is the first 
question.
    Mr. DeCamp. Sure. There is tremendous ambiguity in the law 
regarding the employment relationships in a multi-tier 
contracting situation. That has led to a lot of DOL enforcement 
in a variety of industries. We have seen it in residential and 
commercial construction, among others. And a lot of times the 
lines get blurred, and who is a joint employer? These are tough 
questions. And if they were easy questions we wouldn't see so 
many violations.
    And it is the kind of thing where a lot of the practices 
are uniform, or relatively uniform, within an industry because 
people are not going to lawyers to find out how do I structure 
this. They are basing it on how other folks in the industry do 
it and how they learned it when they were coming up through the 
industry. So there is a lot of HR, by word of mouth. And we see 
a lot of convergence of practice, classification in pay, 
otherwise, within a given industry for that reason. People move 
from company to company and practices spread. And what you can 
do, if there is a way to get there, is to provide clearer legal 
standards.
    I don't have any better answer to the question than 
Congress has had for the last 40 years, trying to deal with how 
do you draw that line--coming up with a word test that neatly, 
through all cases, draws the line between independent 
contractor and employee. Lots of people have tried and nobody 
has come up with a particularly good answer. It is either a 
vastly over-expansive line that kills the concept of 
independent contracting or vastly under-inclusive and doesn't 
provide adequate remedies for workers. So trying to strike that 
balance, it is hard. It defies words.
    Ms. Herrera Beutler. So would it be worth our time to spend 
more of our energy focused on helping people comply, not 
necessarily taking the penalty approach first off? Because you 
said--gosh, I didn't write it down--it seems like a lot of 
people violate this, not intentionally. So in my mind, I think, 
so then how do we get people to comply so that we can, number 
one, penalize the truly bad actors, right, and then, number 
two, make sure people are getting their wages?
    Mr. DeCamp. Well, to the extent that there are clear 
standards then you can get into helping people comply with the 
standards, compliance ex ante is easier because the standards 
are clearer, and then punishing those who don't comply is also 
easier and more appropriate because there has been clear notice 
of what is required.
    When we are talking about helping people comply with a 
standard that is gray to begin with, now it is more a question 
of risk tolerance and what do we want people to do. Do we force 
them to be so far away from where the gray area is to avoid 
penalties or do we take some other approach?
    I think, on that particular issue of employee versus 
independent contractor, Congress could do a lot of good if 
there were a way to legislate an answer to that question.
    Ms. Herrera Beutler. Thank you. I yield back.
    Ms. DeLauro. Thank you. Let me ask General Raoul a 
question, if I might.
    At a recent hearing on predatory for-profit colleges we 
heard how many students are subjected to mandatory arbitration 
clauses that deny them the right of private action--the private 
right of action. I am startled to hear that in Ms. Huizer's 
testimony that more than 60 million workers are subjected to 
these agreements, shutting off rights to be able to seek 
justice in court.
    General, you speak of this issue in your testimony. Just 
how has the growth of these waivers in employment contracts 
affected the ability of Illinois workers to seek their promised 
wages?
    Mr. Raoul. Yeah. So Fair Labor Standards, that contemplates 
both public enforcement as well as private right of action, and 
the balance of which, you know, can have impact on what the 
burden is on public enforcers like myself and my office, and 
like the Department of Labor, and like State Departments of 
Labor.
    We saw, from a 2018 study, where in 1992 there was 
approximately 2 percent of workers subject to these mandatory 
arbitrations, and that it has now grown to, as reflected, close 
to 60 percent.
    And so what that means is it chokes off the----
    Ms. DeLauro. Private right.
    Mr. Raoul [continuing]. The private right of action, and 
then, if we are not appropriately resourcing the U.S. 
Department of Labor and, in our case, the State Department of 
Labor--and I testified before our state appropriations 
committee just a couple of weeks ago, asking for more resources 
to get investigators and lawyers in my office, we are thereby 
overburdened and unable.
    And if I could touch on the conversation around 
misclassification and intentional bad actors and unintentional 
bad actors, you know, the reason I mentioned before that I 
introduced legislation to enhance the capacity of the Attorney 
General's Office, it is not to supplant the authority of the 
Department of Labor but it is to go after egregious actors, 
egregious to the level where it is clearly not unintentional.
    And we have heard complaints, not just from employees but 
from contractors who are left at an unfair competition in 
bidding wars. You know, if it is a public works project, for 
example, they rely on the fact that they--bad actors are 
relying on the fact that they are misclassifying workers to be 
able to bid lower on public works projects.
    Ms. DeLauro. Thank you. I just have a question about--we 
have, today, a situation, the growth of what is called the 
fissured workplace in our economy. Core business activities are 
outsourced or contracted out. Staffing agency conducting HR 
functions, housekeeping firms cleaning hotels, contractors for 
manual labor in distribution centers.
    The firms often turn to their own subcontractors to hire 
workers at a specific location or to perform other supporting 
functions. When wage theft occurs, who is responsible? How do 
we get businesses to make sure their contractors and 
franchisees are compliant with the law?
    Mr. Katz, you mentioned your concern that changes in 
interpretation of joint employer liability would harm your 
clients. Do you have anything to add to that point?
    Ms. Huizar, complicated contracting relationships are out 
there between workers and the businesses in today's economy. 
How can strategic enforcement on the Federal and State levels 
deter the behavior?
    Mr. Katz.
    Mr. Katz. Thank you. An example that I think I mentioned 
earlier in my testimony is a group of--let me say this. If we 
took a walk down K Street in the District of Columbia and 
observed some of the construction sites in the booming 
construction industry in D.C., we would see the banners of the 
large general contractors and the other large contractors, you 
know, hanging from, you know, the building that is being 
constructed.
    However, large numbers of the individuals who are pulling 
the electrical wires, who are pouring the concrete, who are 
hanging the drywall, work for either labor brokers or highly 
undercapitalized subcontractors. And so that if you have, 
within that industry, essentially business entities that are 
able to control the workplace, yet able to structure the 
workforce so as to attempt to avoid liability, many individuals 
who are not paid, even though it is the general contractors who 
are benefitting from the labor of those individuals.
    If the Department of Labor moves backwards and eliminates 
the ability of the individuals who are doing the work to try to 
seek unpaid wages from the general contractors who are 
benefitting from the labor, in reference, again, to the 
proposed change in joint employment, then essentially those 
individuals will be out of luck.
    If I can mention one more example, we represented a group 
of five women who were employed by essentially a fly-by-night 
cleaning outfit to work at a hotel in Georgetown, and they 
worked 11:00 at night to 6:00 in the morning, vacuuming the 
hallways, cleaning the bathrooms. Every single operation they 
did was a direct instruction of the hotel itself--this is how 
you vacuum the hallway, this is how you clean the bathrooms.
    However, when that fly-by-night subcontractor didn't pay 
them for four weeks and disappeared, the position of the hotel 
was, ``We didn't hire these people.'' So we now have what has 
been referred to a fissured workplace, where despite the fact 
that these individuals worked in the hotel, wore the uniform of 
that hotel, and were under the supervision of cleaning 
supervisors, janitorial supervisors in that hotel, the hotel 
still attempted to disclaim responsibility for those unpaid 
wages.
    Ms. DeLauro. I am going to--and I checked with the ranking 
member--Mr. Huizar, just about how can the issue of strategic 
enforcement bear on this instance?
    Ms. Huizar. Yeah. So I think it is important too, to 
recognize that the fissured workplace is not a new phenomenon. 
I think the garment industry is a great example of how this has 
been around for a very long time. We have layers and layers of 
contractors and subcontractors. But it has become an issue 
where companies are using the fissured workplace to shed 
liability, to be able to essentially turn a blind eye to 
violations in their own supply chairs in their industries.
    And so through strategic enforcement we can apply some of 
the lessons of the past in dealing with industries like the 
garment industry, and also some of the research that has been 
developed in recent years. And some of the things that have 
been done, have proven successful are prioritizing cases and 
looking for the lead companies in an industry, the people and 
the companies that truly exercise influence and power over 
conditions of work, down the chain and across the industry.
    So if you focus on those you can bring them to the table, 
if they care about their brand name and their reputation, and 
you can work with them to fix some of the issues voluntarily. 
You can also use a joint employer kind of strategy to hold 
accountable more than one employer, when the reality is that 
multiple companies are responsible for violations.
    When it comes to penalties, we have damages and fines that 
can be used, but we have research telling us that we can be 
very careful and strategic about where we use those fines and 
penalties.
    Ms. DeLauro. Thank you.
    Congressman Cole.
    Mr. Cole. Thank you very much. I want to go back to this 
issue of the joint employer, and I will start with you, Mr. 
DeCamp, because usually when I come across it it is in the 
context somewhat different than you discussed, Mr. Katz, which 
is big national or international corporations that are 
basically operating franchisee systems. And, you know, they 
come in and they say, ``Look, we don't hire the workers. We 
don't have somebody there supervising them. We are not doing.''
    What we have done is create a structure that has allowed, 
particularly in these communities--and I know a lot of these 
people in my area. In small towns, this actually becomes the 
way up for a lot of people to actually become very successful. 
These can be very lucrative, but the people that pursue them 
are usually working 80 hours a week. They have had to amass 
capital. They are the classic small businessman but with the 
structure around them now to support them.
    And while I certainly would agree with Mr. Katz--and I will 
give you a chance to respond as well--you know, on some of the 
egregious examples he mentioned, I don't want to kill a goose 
that is laying golden eggs out there and giving people an 
opportunity--and, frankly, sometimes creating entrepreneurs in 
communities that have very, very few, and where they are 
tethered in the community and they stay there and they spend 
money there and they employ people there.
    What is your reaction to what the Administration has done? 
What, in your view, is the appropriate balance on this joint 
employer issue?
    Mr. DeCamp. Historically, contractors that engaged in the 
kind of behavior described by Mr. Katz, if we are talking about 
a general contractor that is running all aspects of everything 
that happens on a work site, including directing the hiring and 
firing of employees of subcontractors, and setting the wages 
rates, and controlling every piece of what happens, effectively 
is the employer, and that has always been the case under the 
FLSA, back to the 1930s or 1940s. That has not changed.
    I think what is interesting about where the law was going 
for a while, recently, was that it was threatening more 
traditional arrangements like franchising, like related 
corporations, and trying to make people financially responsible 
or making entities financially responsible where they were not 
actually exercising control as an employer.
    I think that the proposed joint employment regulation 
restores more of a realistic approach to looking at who is 
actually, with respect to the workers at issue, acting like an 
employer? Who is controlling the work? Who is hiring and 
firing, maintaining the records, setting the wage rates? If a 
company somewhere up the chain is actually directing all that 
then that is going to be an employer, or a joint employer at 
least, and will be liable. And if they are not, then they 
won't.
    And so I think that the current proposal reflects where the 
FLSA has been, historically, and I think it is a good way to 
strike the proper balance.
    Mr. Cole. Obviously you have a different view, Mr. Katz, 
and I want to give you an opportunity to express that.
    Mr. Katz. Thank you, Congressman. The concern that is what 
we see in workers is not the issue of minor violations. It is 
not the issue of an occasional business in which it is unclear 
what is the relationship between two businesses. What we see 
regularly are the situations, some of the examples I have been 
describing, where the violations of the FLSA are very clear and 
where--in situations where the employer, the business that 
controls the work situation is consciously taking advantage, 
essentially using another entity in order to attempt to avoid 
liability for wages that are owed, for taxes that are owed.
    I would also say the situations that I am describing, if we 
are, you know, addressing fairness that some of my colleagues 
mentioned, it is not only unfair to the workers who, you know, 
I have described in these instances, it is also unfair to the 
other contractors, to other businesses that are trying to play 
by the rules, who are trying to follow the law who, as one of 
my colleagues says, end up being underbid on a contract 
essentially because they are trying to play by the rules.
    Mr. Cole. Thank you very much. There is actually not that 
much difference, if I understand both of you, I mean, your 
respective positions in some ways, and it gets down to this 
difficult area of legal ambiguity that you mentioned, and 
obviously just the determination of the appropriate facts on 
this issue.
    Let me ask this one quickly, and I will try to ask it 
across all of you. You know, we all know that we have different 
minimum wages, by states, in many cases, above the Federal 
floor, which, by the way, makes it very difficult to legislate 
federally. It is sort of--we would be better off with a one-
size-fits-all, or allowing state and locality, because of cost 
of living, to take different things into different 
consideration.
    So I would like your view on that. What should we be doing, 
going forward, on minimum wage, at the Federal level? And we 
will just start with you, Mr. Katz, and go down the line, if I 
can.
    Mr. Katz. I would say that a significant increase in the 
Federal minimum wage would help address, number one, any 
ambiguities that may exist between states, or even within 
states in which there are different minimum wages. I would say 
that increasing the Federal minimum wage would help lift up the 
living standards of all of those who are working for a living 
and who are covered by the Fair Labor Standards Act, and that 
where we lift up the minimum wage we are lifting up the living 
standards of working people.
    Mr. Cole. Thank you. Mr. DeCamp.
    Mr. DeCamp. I think we need to be very careful about 
increases to the minimum wage in areas where the wage levels 
are low, where the economies have different price levels and 
wage norms. What might work perfectly fine in San Francisco and 
New York does not work in rural Alabama. We have to look at 
making sure that we are not killing jobs. Now modest increases 
don't seem to have a significant effect on job. Significant 
increases do.
    And we are already seeing this is in the restaurant 
industry. If you increase the minimum wage too steeply it 
incentivizes automation and the destruction of jobs, and we 
need to be careful not to make it cheaper for businesses to not 
hire workers than to hire workers, because the true minimum 
wage is zero. If you don't have a job then the minimum wage is 
simply a barrier to entry. It doesn't protect you. It keeps you 
down.
    Mr. Cole. I will----
    Ms. DeLauro. Go ahead.
    Mr. Cole. Well, is that okay? Finish up?
    Ms. DeLauro. Yeah. Go ahead.
    Mr. Cole. Thank you. General.
    Mr. Raoul. Yeah. Sir, I certainly echo the sentiments of 
Mr. Katz that it is important to lift the minimum wage on a 
Federal level to make sure that we are maintain the capacity 
for workers to lift, you know. And I recognize what you pointed 
out, Congressman, that in different regions there are different 
costs of living, but the reality is that we, in this country, 
have not maintained lifting the minimum wage with the increase 
of cost of living throughout the country.
    Mr. Cole. Thank you. Ms. Huizar.
    Ms. Huizar. Thank you. So I think NELP Is a big supporter 
of raising the minimum wage, and nationally we know that more 
than 40 percent of workers are earning under $15 an hour. We 
also know that most workers, especially if they have children, 
anywhere in the country, cannot afford their basic necessities 
earning under $15 an hour, at this point.
    So we are supporters of the Raise the Wage Act and a 
careful phase-in of a $15 minimum wage federally, and I would 
also say tying that issue to wage theft and the enormity of the 
problem, I think that in some ways making workers less 
vulnerable financially could go a long way in helping workers 
come forward and protect their rights. I think currently 
workers have almost nothing in savings, they are living 
paycheck to paycheck, can barely afford to live week to week, 
and I think if we lift more workers out of those circumstances, 
empower them to invest time into protecting their rights I 
think that we can also make a difference when it comes to wage 
theft.
    Mr. Cole. Thank you. Thank you for your indulgence on the 
time, Madam Chair.
    Ms. DeLauro. Congresswoman Frankel.
    Ms. Frankel. Thank you very much. Well, let me just add 
that there is something wrong with somebody working all day and 
then not being able to pay for their necessities because they 
are not getting paid a fair wage. And thank you all again for 
being here.
    Listening to this, it seems quite obvious to me that one of 
the reasons that women earn 80 cents on a dollar that a man 
earns, and actually much less for women of color, part of it is 
because of the wage theft problem. I saw that NELP--I don't 
know if it was in your testimony or something I read, that 30 
percent of women experience a minimum wage violation compared 
to 20 percent of men. Is there a reason for that?
    Ms. Huizar. So I think--oh, if I may--I think part of the 
reason is that there are more women in the low-wage workforce. 
They are overrepresented nationally and so they are more 
vulnerable.
    Ms. Frankel. So, and I think there is another sort of side 
effect, a bad side effect, is the exploitation in some of these 
service jobs, like the massage industry and the nail industry, 
where there is a real exploitation of women, sometimes 
immigrant women and undocumented women, women who don't speak 
English. My question is if there was more of an enforcement by 
the Department of Labor, just on the wage issue, whether or not 
there would be more detection of this exploitation.
    Mr. DeCamp. If I could address that, the Department of 
Labor has actually, from time to time, partnered with criminal 
law enforcement agencies, human trafficking task forces, and 
others, State and Federal, to address that kind of concern, 
recognizing that sometimes it is about more than just the 
wages. There may be other things going on with these workers. 
And those kinds of partnerships can be very helpful in 
protecting low-wage works.
    Ms. Frankel. Thank you. Okay. Thank you for that.
    Can you--somebody explain to me--you talked about how--we 
sort of talked about mandatory arbitration and poaching limits 
enforcement. But could someone just explain to me why that is, 
how that works?
    Mr. Raoul. Well, from my standpoint as a state public 
enforcer, as I mentioned before, FLSA contemplates both a 
private right of action as well as public enforcement, and we 
have all been talking about, both at the Federal and State 
level, limited resources----
    Ms. Frankel. Excuse me. Not to interrupt you but I am, 
obviously.
    Mr. Raoul. That is all right. [Laughter.]
    Ms. Frankel. But let's start with arbitration. The employer 
and the employee goes to arbitrate. Is there something that is 
preventing an enforcement? What is it that is preventing the 
enforcement?
    Mr. DeCamp. If I could speak to that, it doesn't prevent 
public enforcement. It doesn't prevent a State or Federal 
agency from taking a matter and commencing an investigation. 
What it prevents is private litigation by the client.
    Ms. Frankel. Oh, I see. So are you saying that the employee 
is at a disadvantage?
    Mr. Raoul. What I was trying to say is if you look at the 
universe of enforcement, we don't get to all of the cases, not 
nearly all of the cases we experience in Illinois. So if we 
choke off one route of enforcement, that creates a greater 
burden on public enforcement, whereas if you have that private 
right of enforcement, you know----
    Ms. Frankel. Got it. And what is the poaching?
    Ms. Huizar. If I could maybe get to that as well, I think 
for both mandatory agreements and for poaching it boils down to 
a worker's ability and incentive to come forward. I think with 
mandatory agreements if a worker knows that the arbitrator is 
going to be paid by the employer and they won't be able to 
appeal their case in any significant way they really have no 
incentive to come forward.
    When it comes to poaching agreements, I think we are seeing 
more----
    Ms. Frankel. What does that mean? I am sorry to be ignorant 
about that, but----
    Ms. Huizar. In most cases, and especially, I think, in the 
low-wage industries, we are seeing that employers are basically 
coming to agreements with their competitors, where they say, 
``You are not going to hire my workers if I fire them or if 
they leave.''
    Ms. Frankel. Oh.
    Ms. Huizar. And so in many ways--that is one way in which 
these no-poaching agreements work. And I think it all ties into 
the issue of retaliation as well, because if an employee leaves 
their job or protests, with a no-poaching agreement not only 
are they losing their job but they are losing their ability to 
secure a new job, or it is going to be a much harder situation 
for them.
    Ms. Frankel. Madam Chair, may I just ask one more question?
    Ms. DeLauro. Go ahead.
    Ms. Frankel. I am going to ask a question for Mrs. Bustos. 
Anyway, no. There was a comment early on about an FLSA 
proposal, which--maybe it was Mr. Katz who made a mention of an 
FLSA proposal that you were against. Do you remember that?
    Mr. Katz. Yes.
    Ms. DeLauro. Joint employer.
    Ms. Frankel. Yeah. Could you just explain what--how that 
impacts all this?
    Mr. Katz. Yes. That was in reference to a proposal, I 
believe it was issued by the Department of Labor last week, 
which would cut back on the entities that would be considered 
joint employers under the Fair Labor Standards Act. Basically 
the DOL has proposed a regulation which would have a four-part 
test which would essentially move us back a full generation, 
you know, failing to recognize sort of what is the structure of 
the present workplace, failing to recognize, you know, the 
widespread use of outsourcing subcontractors, et cetera, so 
that the business entities that are controlling the workplaces 
can attempt to avoid liability for unpaid wages within the 
workplace that they control.
    The DOL regulation would essentially cut off any 
possibility that large numbers of low-wage workers would be 
able to get any type of remedy.
    Ms. Frankel. Thank you.
    Ms. DeLauro. Congressman Harris.
    Mr. Harris. Thank you very much, and let me follow up on 
that with you, Mr. DeCamp, because in your testimony you say 
that, you know, the department's recent joint employment 
regulatory proposals are fair, sensible, even-handed 
approaches. And I know I had a lot of complaints with the last 
administration joint employer proposal, a lot of complaints 
from small businesses, especially franchise owners, in my 
district.
    So could you explain why you feel they are a fair, 
sensible, and even-handed approach?
    Mr. DeCamp. I think that where the department is going now 
is consistent with where the FLSA has been historically. I 
think that, historically, when Congress passed the FLSA, and 
for decades since, it was clear that certain types of business 
arrangements did not constitute joint employment, things like 
traditional franchising, things like traditional bona fide 
contracting and subcontracting relationships where somebody up 
the chain is not actually directing the work and controlling 
the employment. That, traditionally, was not seen as giving 
rise to a joint employment situation.
    I think during the last administration the waters got 
muddied a bit and there were some aggressive attempts to use 
the concept of fissured workplace as a way to assign broader 
responsibility to other individuals and other entities who 
historically would not have been regarded as employers. And we 
saw some case law start to develop going down that road.
    And I think that what the current DOL proposal does is to 
walk back perhaps the last five years of the most out-there 
case law. The department already, at the start of the 
Administration, withdrew some of the department's informal 
guidance that came out on some of these issues and this joint 
employment regulation follows through with that, restoring the 
notion of who is and is not an employer. It is not going to 
answer every single question with clarity, but I think it does 
reset the balance in a way that is very much in line with what 
Congress intended when it passed the law and the way it was 
enforced and understood for more than 70 years.
    Mr. Harris. Okay. And, Mr. Katz, do you think that my 
franchisees have a point about the problems with the joint 
employer guidance of the last administration? It would have 
made, you know, McDonald's, for instance, responsible for their 
franchisees' employees.
    Mr. Katz. I would need to have more specific information, 
specific facts in any situation about who would be responsible. 
What I would say is the following, that the problem that the 
Administration, you know, was trying to address, in the joint 
employment and the guidance that was issued in 2015, directly 
addressed a critical problem that we see in this economy, which 
is that businesses that essentially own and control the 
workplace are structuring the workplace so as to attempt to 
avoid responsibility for violations of the law in the workplace 
that they own and control.
    Mr. Harris. Okay. So, yeah. So, I mean, obviously, 
McDonald's doesn't control the workplace of its franchisees, so 
we are probably in agreement on that, I guess.
    Mr. DeCamp, there is--you know, problems arise with the 
tipped worker. Could you go through where the problems arise 
with determination of whether tipped workers are being--you 
know, are being paid legally, under the law?
    Mr. DeCamp. That problem goes back to the 1960s, when the 
FLSA first applied to restaurant employees and hospitality. It 
has been confusing everybody since, because there have been 
numerous Department of Labor regulations and subregulatory 
pronouncement the courts have held to be inconsistent with the 
statute. There is ongoing litigation about who is and is not a 
tipped employee, what hours of work a tipped employee can get 
paid a tip credit wage as opposed to full minimum wage. That is 
ongoing and in dispute. The Department of Labor has changed 
position on some of these issues over time. There has been 
recent statutory amendment to address part of these issues.
    And so that is a real challenge for restaurants, even 
knowing what they are supposed to do. How do I pay my people? I 
mean, a restaurant is not a complicated business situation, for 
the most part. People work in a building, by and large, and 
there are vertical relationships within that structure. It 
should not be difficult. It should not require levels and 
levels of Federal litigation and regulation to try to 
understand, does this person get $2.13 an hour or more, under 
State law, or does this person have to get full State and 
Federal minimum wage for this particular work or for their 
entire work? It has been maddening.
    Mr. Harris. So you think the current law is just ambiguous, 
I mean, it creates gray zones?
    Mr. DeCamp. I think the statute is clear enough. I think 
that the subregulatory pronouncements and the regulations have 
been ambiguous to the point of disaster.
    Mr. Harris. Okay. Thank you very much. I yield back, Madam 
Chair.
    Ms. DeLauro. Just a point of clarification. It is my 
understanding, and for my colleague, as well, Mr. Katz, it 
would appear that McDonald's controls how franchisees fry the 
fries, what uniforms they wear, how they set up the store, and 
there are many, many employment practices that they dictate to 
their franchisees.
    With that, if I can, in 2009, the survey that NELP did 
found that workers who made a complaint to their employer, 
there was a stunning 43 percent experienced one or more forms 
of illegal retaliation. Easy to imagine how this might have a 
chilling effect in the workplace, keep many victims of wage 
theft silent, hindering the efforts of enforcement agencies to 
learn about many violations.
    Mr. Katz, can you discuss some examples of retaliation you 
have seen by employers and supervisors on workers? Can you walk 
us through the kinds of experiences that workers may live 
through when they stay silent? And, Ms. Huizar, you have talked 
about employer retaliation in your testimony, how this 
challenge affects the efforts of the Wage and Hour Division, 
State labor departments, and State attorneys general to crack 
down on violating employers.
    Mr. Katz.
    Mr. Katz. Thank you, Congresswoman DeLauro.
    A couple of points. Number one, when people stay silent 
about wage theft because they are intimidated, they justifiably 
fear retaliation, the results are fairly straightforward. They 
don't get paid the wages they law requires them to be paid. 
They live in poverty. They can't afford what they should be 
putting on the table or, you know, for their kids. They can't 
get their kids medical care. And it essentially keeps people in 
poverty.
    And we are talking about individuals who, in response, are 
often working two and three jobs. So that when people are not 
paid the wage they should be paid, and when, for various 
reasons, including the potential for retaliation, keep them 
silent, then it means that they and, by extension, oftentimes, 
the community they live in, are in poverty.
    I can think of one specific incidence of retaliation which 
had such widespread effects. There were immigrant laborers who 
were working on a public construction site in Washington, D.C., 
who should have been paid prevailing wage. Literally the day 
before that worksite was going to be subject to an 
investigation by the Wage and Hour Division, the employer went 
around the worksite handing out little slips of paper that had 
the figure $38 on it. And the individuals asked, ``What is 
that?'' and the employer said, ``That is the wage I want you to 
tell the investigators that you are earning,'' even though 
these individuals were earning between $18 and $20 an hour. 
They were being paid less than they should have been paid.
    So the employer had them essentially lie to Wage and Hour 
investigators, and then the laborers protested this and sought 
advice from a workers' rights clinic, the individual who first 
sought advice was fired. Not only was he fired, the employer 
called him up and said, ``Don't talk to anybody about this. We 
know where your family lives. And if you give us any more 
problems we are going to make sure you and your family are 
deported.''
    Okay. So that individual literally had to move away from 
his family in order to attempt to, you know, seek a remedy for 
the unpaid wages. The employer let it be known that that was 
the employer's position, and a number of the other employees on 
that worksite, who had originally sought legal assistance, you 
know, to remedy these unpaid wages, then sort of withdrew their 
complaints and did not pursue their unpaid wages.
    Ms. DeLauro. Ms. Huizar, and then I will get you.
    Ms. Huizar. Yes. Thank you.
    I think when it comes to the issue of retaliation it is 
important to recognize that it is a sort of foundational issue 
when it comes to wage theft, because if workers cannot come 
forward in a system that depends on them to bring complaints 
and that depends on them to collaborate with investigators, we 
can't hope to actually enforce the law or to make our minimum 
wage a reality for workers.
    We also know--and I think as Mr. Katz's stories, accounts 
tell us--retaliation can be incredibly subtle, it can come in 
different forms, and what agencies at the State, local, and 
Federal level need to do is recognize that it stands as a 
barrier to everything else that they are doing, and they must 
not only fast-track complaints that come in alleging 
retaliation but they must also proactively look for retaliation 
in cases, hold employers accountable with harsh penalties, in 
order to put them on notice that this is not going to be 
tolerated conduct and that it cannot possibly shape employees' 
decisions whether or not to come forward.
    And I will also just say, on the joint employer issue, if I 
may, I think going back to that for a second, it is a standard 
that has been around for decades, and I think a key thing to 
remember is that the Fair Labor Standards Act uses the term 
``suffer or permit to work'' in order to figure out who is an 
employer, and that is markedly different from the common law. 
It is a standard that has been developed mostly in the 
subcontracting and contracting context, and it is only 
recently, with sort of an outlier case in the McDonald's sort 
of franchise context, that the standard has become as 
controversial as it has been. But we have decades of case law 
and precedent showing us that it is a crucial or necessary 
standard and that we are capable, both as enforcement agencies, 
lawyers, advocates in employing it adequately.
    Ms. DeLauro. I am going to allow Mr. DeCamp to respond.
    Mr. DeCamp. Just very quickly. Thank you, Madam Chairwoman.
    Ms. DeLauro. Sure.
    Mr. DeCamp. I am not familiar with the specific 
circumstances that Mr. Katz described with regard to 
retaliation, but assuming those facts to be true, an employer 
that did those things would seem to be guilty of multiple 
Federal felonies. And so I think there are already existing 
robust remedies to deal with an employer that directs employees 
not to speak with Federal investigators or to lie to Federal 
investigators in the course of a Federal investigation or to 
threaten deportation in that process. There is already a 
structure to deal with that.
    Ms. DeLauro. I understand that and I appreciate the comment 
very, very much. But when you are someone who is fearful of 
your livelihood, when you are fearful that you and your family 
may be deported, it doesn't make any difference, and that you 
don't know what is on the books and what your rights are. You 
just know that if you keep your mouth shut you are going to be 
all right, and if you don't, you and your family are going to 
suffer. So that is a reality that we know today. Thank you.
    Congressman Cole.
    Mr. Cole. Thank you very much, Madam Chair. I am going to 
give all of you a rare privilege. I am going to let you--I had 
the good fortune to sit where my friend, the chair, sits now, 
and she is going to have to mark up a bill pretty soon, and she 
is going to have a lot of difficult tradeoffs. We are not going 
to make you make any of the tradeoffs.
    But it is interesting to me, as I look at this, the 
administration has actually requested a very modest increase in 
funding here. I would suspect that at least a number of you 
would propose more. And we spend about $228-, $229,000,000 a 
year now, and they are asking for a $4,000,000 increase.
    You know, if you wanted to take a ballpark figure, what 
would be appropriate? Because we all agree this is an important 
area of enforcement. You have all agreed that this is an area 
where more money would be a good thing. So, you know, if you 
had to make the decision that my poor friend has to make, what 
would you recommend?
    Mr. Katz. For the amount of money for enforcement?
    Mr. Cole. No. Just the overall budget. And I say that 
because, look, our allocation, probably, for this subcommittee, 
will be higher than the Administration has requested. So there 
will be extra money available. The problem here is always the 
competing priorities you have over a vast jurisdiction. I mean, 
this is $228,000,000 piece of a $180,000,000,000-plus budget, 
so it is not a big item here.
    So the real thing is, what would be enough to make a 
difference, to do the good that you all say can be done here? I 
am just curious. How would you ballpark this? How would you 
size this? And, frankly, you know, when you make these 
considerations, I can tell you, having been a chairman, you are 
sometimes thinking multiple years too, because you recognize 
you can give them more than they can spend or staff up to, so 
sometimes you lay out a path going forward. My friend and I 
have done that at the NIH and other agencies before.
    So I am just curious what your professional opinion is. 
What would be right-sizing this department, if you will, or 
division?
    Mr. Katz. I must admit, Congressman, I sort of do not have 
enough understanding of the broad parts of the budgetary 
process. The one point I think I would offer is that we have 
heard that the number of Wage and Hour investigators in the 
Wage and Hour Division is the same as existed in 1948, and our 
workforce is approximately seven times larger now. So I would 
propose a budget that essentially says we need as many 
investigators now as we had in 1948, so let's take the budget 
specifically for those investigators and multiply it by seven.
    Mr. Cole. Mr. DeCamp.
    Mr. DeCamp. I wouldn't go quite that far, but I would 
suggest that increasing the number of investigators by about 25 
or 30 percent over a five- or six-year period would be 
appropriate and in line with where the agency has been 
historically. It is important not to grow too fast, too soon, 
or else you risk quality control, in terms of intake and 
training. But graduated increases in staffing levels would be 
appropriate and beneficial.
    Mr. Cole. Thank you. General Raoul.
    Mr. Raoul. Congressman, I honestly have to sort of punt on 
this.
    Mr. Cole. That is fair enough. It is a very unfair 
question.
    Mr. Raoul. You know, all I can say is that the U.S. 
Department of Labor has been an important partner to us at the 
State level, and just appropriately resourcing it could be 
helpful to us, in terms of State and Federal.
    Ms. Huizar. Thank you. I do think we have a long way to go 
before we are back at 1948 levels, and, you know, barring being 
able to invest seven times more into the budget I think 25 
percent of an increase to the Wage and Hour Division's budget 
over two years would go a long way to helping the agency do the 
most that it can with the resources that it has.
    Mr. Cole. These are tricky questions because, I will tell 
you, you know, we do not need an army seven times bigger than 
it was in 1948. There are lots of tools, lots of other things 
that you have to factor in here. But it is just one of the 
tough things that you can see. But we clearly have a consensus 
that there is a need for an increase here, and you even have it 
from the Administration at some level. So that is helpful, I 
think, for all of us to know as we make tough decisions.
    I don't have anything else. I will yield back, Madam Chair.
    Ms. DeLauro. Congressman Harris.
    Mr. Harris. Thanks. Just very briefly, just to follow up on 
that, you know, my understanding is, you know, 29 states and 
the District of Columbia have a higher minimum wage than the 
U.S. If a state enacts a higher minimum wage, why shouldn't it 
assume more responsibility for policing that minimum wage? I 
mean, you all come here and say, ``Well, you know, the Federal 
Government should be policing it,'' but, in fact, states, and 
Attorney General Raoul, I am pretty sure Illinois has a higher 
minimum wage--Maryland has a higher minimum wage. When the 
legislature takes that action, why doesn't it preempt the 
Federal Government from actually enforcing that higher minimum 
wage? Because you mentioned, you know, we partner with you, 
but, in fact, you know, if a state is going to say, ``Look, we 
want to be avant garde here. We want to be ahead of everyone 
else,'' why shouldn't more of the enforcement fall on the 
state? And I am interested on minimum wage. Obviously there are 
other things the Wage and Hour Division does.
    Mr. Raoul. Certainly. I don't dispute you on that, and as I 
indicated in my opening remarks that there are a few state 
attorneys general who are actually active in this space at all. 
So to the extent that we are active, and I have asked of my 
State legislature appropriations to allow me to at least have 
an investigator, and a few more attorneys to do just that. But 
other states, who may have minimum wages that may mirror the 
Federal minimum wage, may not even have an active attorney 
general in this space whatsoever. So I don't dispute you.
    Mr. Harris. And I think that would be appropriate. I mean, 
if you are not going to say that we are going to pay a higher 
minimum wage, then the Federal Government should be enforcing 
the minimum wage in that state, but it just--again, it is just 
puzzling to me. And I am glad you are quite honest about it, 
you know, that the state should undertake some of the 
responsibility.
    Mr. Raoul. I would say, Congressman, the example that I 
gave in my opening remarks involved a Chinese-style buffet 
restaurant that was paying less than the Federal minimum wage, 
and that was a state-enforced action.
    Mr. Harris. Good for you. Thank you very much. I yield 
back, Madam Chair.
    Ms. DeLauro. Thank you. Just a point to my colleague, and 
one specific to minimum wage. But Georgia, Alabama, Florida, 
Louisiana, and Mississippi, there is no state-level 
enforcement, claims, whether it is wage theft, need to be filed 
directly with the U.S. Department of Labor. So there are a 
number of states who do not have this capacity that Illinois 
has had.
    Mr. Harris. If the chair would just yield, but do they have 
a higher minimum wage than the Federal Government?
    Ms. DeLauro. That is not something I know, but I think that 
we have places where there is little----
    Mr. Harris. Again, you know----
    Ms. DeLauro. I tend to look at----
    Mr. Harris. You know my point on this.
    Ms. DeLauro [continuing]. No, yeah, I do know your point.
    Mr. Harris. Having served on a legislature, you know, if we 
are going to raise the minimum wage we should actually take 
some responsibility for enforcing it.
    Ms. DeLauro. Always. Let's do it. Let's go to $15 an hour 
and take the responsibility.
    Congressman Cole, just wrapping it up.
    Mr. Cole. I don't want any remarks I made to be confused 
with agreeing to that particular proposal.
    But I want to sincerely thank the chair for this hearing. 
It has been, I think, a very, very good hearing. And I want to 
thank each and every one of you. I found your testimony, you 
know, really educational to me, as a legislator. I found the 
interchange good. And when you leave this place please go tell 
other people that we don't always fight up here, that we 
actually do occasionally look for common solutions, and this is 
an area where we clearly need to do a little bit better than we 
have been doing. You all agree on that. And, as I said, even 
the Administration, at some level, thinks so as well.
    So I think this has been, Madam Chair, very helpful to all 
of us, to sort of sit down and think through some of these 
issues, and I thank you very, very much for taking your time, 
providing your expertise and your perspectives to the 
subcommittee.
    Thank you, Madam Chair.
    Ms. DeLauro. Thank you very, very much, and thank you again 
to our panelists. This has been a very unbelievably rich 
hearing, rich in the information, and also the bi-play and 
different points of view, which, in some instances, are maybe 
not as far apart as sometimes even, you know, political people 
would like to make them, but they are not.
    I think there was overall a basic--there is a magnitude, 
that the problem is widespread. It is nationwide. And whether 
or not, in my views, what I said in my opening remarks, we need 
to call it what it is when we are looking at infringement of 
the act, and to be able to address that.
    But also I think that--and I would mention that because the 
increases that you talk about, or the way that we can deal with 
this--in this budget we are looking at, you know, a $3,500,000, 
$3,600,000--$3,800,000 increase, most of which has been 
relegated to information technology. And, you know, it would 
seem that that is not where the gaps are at Wage and Hour, that 
there are much more serious gaps that we can address from this 
subcommittee.
    And I would talk about--and I want to place into the 
record--with unanimous consent I ask for placing into the 
record the piece by the former Wage and Hour Division Director, 
``Creating a Strategic Enforcement Approach to Address Wage 
Theft: One Academic's Journey in Organizational Change.''
    I think that this is a document that can provide and help 
us with a roadmap of how we go about looking at a place where 
we can't provide all of the resources that the agency needs of 
all of a sudden, or, you know, but how you do deal with a 
creative way in which to address an issue that has an 
unbelievable impact on the lives of workers today, millions of 
workers today, whether or not they are fearful of the 
retaliation or whether or not they are willing to speak up, and 
look for a way to be made whole.
    We have always said, in this country, we want to pay people 
a fair day's work--a fair wage for a fair day's work. That is 
what the premise is underlying here. That is what the law 
states.
    So that you have been enormously helpful in shining a light 
at ways in which we might address the issue. And I would just 
ask--I know we are asking a lot--if there are ways, other than 
in your testimony--and we will scour the testimony for looking 
at recommendations--but if there are other recommendations that 
you can make to us, as we are putting this piece of legislation 
together, not unlike what the ranking member asked in terms of 
where increases are. There are other areas, please get that to 
us so that we can help Wage and Hour, but we can help the 
workers, which they are there to protect.
    Thank you very, very much, and the hearing is closed. Thank 
you.
    [Material submitted for inclusion in the record follows:]

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