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




    FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR 2020

_______________________________________________________________________
_______________________________________________________________________

                                 HEARINGS

                                 BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SIXTEENTH CONGRESS

                              FIRST SESSION

                                _________

        SUBCOMMITTEE ON FINANCIAL SERVICES AND GENERAL GOVERNMENT

                     MIKE QUIGLEY, Illinois, Chairman

  JOSE E. SERRANO, New York
  MATT CARTWRIGHT, Pennsylvania
  SANFORD D. BISHOP, Jr., Georgia
  NORMA J. TORRES, California
  CHARLIE CRIST, Florida
  ANN KIRKPATRICK, Arizona

  TOM GRAVES, Georgia
  MARK E. AMODEI, Nevada
  CHRIS STEWART, Utah
  DAVID P. JOYCE, Ohio

  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.

               Lisa Molyneaux, Laura Cylke, Elliot Doomes,
          Aalok Mehta, Marybeth Nassif, and Parker Van de Water
                            Subcommittee Staff

                                 ________

                                  PART 5

                                                                   Page
  Oversight of Financial Services.......
                                                                      1
  Election Security: Ensuring the 
Integrity of U.S. Election Systems......
                                                                     27
  Supreme Court of the United States....
                                                                     75
  Treasury's Role in Combating Financial 
Crimes..................................
                                                                    103
  Government Services Administration 
Oversight...............................
                                                                    139
  Office of Management and Budget.......
                                                                    199
  Members' Day..........................
                                                                    239
  Testimony of Interested Individuals 
and Organizations.......................
                                                                    255
  Federal Communications Commission.....
                                                                    331
  Department of the Treasury............
                                                                    389

 
              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                ________

          Printed for the use of the Committee on Appropriations


                     U.S. GOVERNMENT PUBLISHING OFFICE
                
38-124                        WASHINGTON: 2019







                      COMMITTEE ON APPROPRIATIONS

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


  MARCY KAPTUR, Ohio
  PETER J. VISCLOSKY, Indiana
  JOSE E. SERRANO, New York
  ROSA L. DeLAURO, Connecticut
  DAVID E. PRICE, North Carolina
  LUCILLE ROYBAL-ALLARD, California
  SANFORD D. BISHOP, Jr., Georgia
  BARBARA LEE, California
  BETTY McCOLLUM, Minnesota
  TIM RYAN, Ohio
  C. A. DUTCH RUPPERSBERGER, Maryland
  DEBBIE WASSERMAN SCHULTZ, Florida
  HENRY CUELLAR, Texas
  CHELLIE PINGREE, Maine
  MIKE QUIGLEY, Illinois
  DEREK KILMER, Washington
  MATT CARTWRIGHT, Pennsylvania
  GRACE MENG, New York
  MARK POCAN, Wisconsin
  KATHERINE M. CLARK, Massachusetts
  PETE AGUILAR, California
  LOIS FRANKEL, Florida
  CHERI BUSTOS, Illinois
  BONNIE WATSON COLEMAN, New Jersey
  BRENDA L. LAWRENCE, Michigan
  NORMA J. TORRES, California
  CHARLIE CRIST, Florida
  ANN KIRKPATRICK, Arizona
  ED CASE, Hawaii

  KAY GRANGER, Texas
  HAROLD ROGERS, Kentucky
  ROBERT B. ADERHOLT, Alabama
  MICHAEL K. SIMPSON, Idaho
  JOHN R. CARTER, Texas
  KEN CALVERT, California
  TOM COLE, Oklahoma
  MARIO DIAZ-BALART, Florida
  TOM GRAVES, Georgia
  STEVE WOMACK, Arkansas
  JEFF FORTENBERRY, Nebraska
  CHUCK FLEISCHMANN, Tennessee
  JAIME HERRERA BEUTLER, Washington
  DAVID P. JOYCE, Ohio
  ANDY HARRIS, Maryland
  MARTHA ROBY, Alabama
  MARK E. AMODEI, Nevada
  CHRIS STEWART, Utah
  STEVEN M. PALAZZO, Mississippi
  DAN NEWHOUSE, Washington
  JOHN R. MOOLENAAR, Michigan
  JOHN H. RUTHERFORD, Florida
  WILL HURD, Texas

                 Shalanda Young, Clerk and Staff Director

                                   (ii)



 
   FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR 2020

                              ----------                              

                                        Tuesday, February 26, 2019.

                 OVERSIGHT HEARING--FINANCIAL SERVICES

                               WITNESSES

ANNIE DONOVAN, SENIOR FELLOW, CENTER FOR COMMUNITY INVESTMENT
GRACE FRICKS, PRESIDENT AND CEO, ACCESS TO CAPITAL FOR ENTREPRENEURS, 
    INC.
BOB JONES, PRESIDENT AND CEO, UNITED BANK
JOE NERI, CEO, IFF
    Mr. Quigley. Good morning. The hearing will come to order. 
This is the subcommittee's first hearing in the 116th Congress 
and my first ever as chairman. So what do I do with this? 
[Laughter.]
    It has been 8 years.
    Before getting started, I would like to acknowledge my 
friend, Mr. Graves from Georgia, and thank him for his service 
to this subcommittee and for his leadership as chairman in the 
previous Congress. And I hope to be as accommodating, as 
gracious, as he was.
    And I also want to acknowledge that we have several more 
returning FSGG veterans, including the chairman of the 
Commerce, Justice, and Science Subcommittee and the previous 
distinguished chairman of the subcommittee, Mr. Serrano. 
Chairman Serrano will also serve as vice chairman of FSGG in 
this Congress, and I am grateful for him for assuming that 
role.
    Also returning is Congressman Bishop, the distinguished 
chairman of the Agriculture Subcommittee; Congressman 
Cartwright, Congressman Amodei of Nevada, Congressman Stewart 
of Utah; and finally we have four new members of the 
subcommittee, Representative Norma Torres, Representative Ann 
Kirkpatrick, Representative David Joyce, and Representative 
Charlie Crist. I look forward to working with each of you on 
the priorities of your constituents and finding bipartisan 
consensus whenever it is possible.
    There is much work to be done on behalf of the American 
people and I, for one, am looking forward to a productive 
Congress where we can conduct oversight of the agencies under 
our jurisdiction and work to find common ground as we set 
funding priorities for the Federal Government.
    As a matter of housekeeping, we will follow the 5-minute 
rule for opening remarks, questions, and comments. Members will 
be recognized in order of seniority based on who is seated at 
the beginning of the hearing, going back and forth between the 
parties. Latecomers will be recognized in the order of their 
arrival, going back and forth between the parties.
    And at this time I want to welcome our four witnesses to 
the subcommittee. With us today we have Ms. Annie Donovan, 
Senior Fellow at the Center for Community Investment; Mr. Joe 
Neri, CEO of IFF; Mr. Bob Jones, CEO and president of United 
Bank; and Ms. Grace Fricks, CEO and president of Access to 
Capital for Entrepreneurs.
    I appreciate you all taking the time to be with us this 
morning, and I am excited to get this hearing underway to 
discuss how Community Development Financial Institutions, or 
CDFIs, benefit the underserved and low-income communities in 
every State as well as the District of Columbia, Guam, and 
Puerto Rico. I know my colleague, Mr. Serrano, is always happy 
when we hear about programs that support the territories.
    I will keep my opening statement brief, but want to remind 
my colleagues that for the past two years, the Trump 
administration has attempted to eliminate the CDFI Fund by 
slashing its funding to a mere $14 million. This is $236 
million reduction, which translates to fewer resources to spur 
economic growth and revitalization in our most underserved and 
neglected communities.
    If Congress did not step in to restore funding in both 2018 
and 2019, CDFI grant programs would cease to exist in the 
future. There would be no funds to create new CDFIs nor 
continue CDFI grant awards for financial and technical 
assistance, Native Initiatives, increased investment in 
distressed communities, disability, and Healthy Food Financing 
Initiative programs.
    These programs provide access to capital for communities 
who otherwise might not be able to create small businesses, 
local jobs, affordable housing, community facilities, and 
financial education opportunities.
    I have a strong suspicion that the current administration 
will propose yet again to slash the funding for the coming 
fiscal year, and once again it will be up to Congress to weigh 
the funding options for this bipartisan program that plays such 
an important role in generating economic growth and opportunity 
in some of our Nation's most distressed communities.
    My colleagues on the other side of the dais know the 
importance and value of the CDFI Fund. Indeed, the CDFI Fund 
has ranked as one of the top four member-requested programs in 
the bill. In fiscal year 2019, the program received 291 
requests for increased CDFI funding or report language, and 19 
percent of the requests were from my colleagues across the 
aisle. I think we all agree on the value of the CDFI Fund.
    In fiscal year 2018 alone, the program awardees financed 
more than 17,900 businesses and microenterprise loans, financed 
nearly 33,600 affordable housing units, and served more than 
343,000 individuals with financial literacy or training. I am 
hoping that we can all work together this Congress to improve 
lives and strengthen communities that are not progressing at 
the same pace with other parts of the country.
    I look forward to hearing firsthand about each of your 
successes and contributions to building stronger communities 
and growing jobs across the United States and our territories.
    That said, thank you all again for taking time to meet with 
us today, and I look forward to hearing your testimony this 
morning.
    Let me turn now to the ranking member, Mr. Graves, for his 
comments.
    Mr. Graves. Thank you, Mr. Chairman, and congratulations on 
your new role. And I guess might I add, maybe I will be as 
accommodating a ranking member as you were. I have learned from 
you. You were great to work with. And I look forward to the 
many hearings and robust discussions we will have in the days 
ahead.
    And always good to be with my friend, Mr. Bishop from 
Georgia, as well, and have him on this committee. A great 
mentor of mine.
    Welcome. We are excited to have you. You are before a 
really fun committee here. This committee has got a really 
diverse jurisdiction that includes funding sanctions 
enforcement, tax administration, the White House, Federal 
courts, and many regulatory agencies. And it is under this 
committee's jurisdiction and leadership, quite frankly, Mr. 
Chairman, that we will have the opportunity to help more 
families and businesses achieve their dreams. And I think that 
is what this conversation is about here today.
    But I look forward to working with each and every person on 
the committee, and welcome the many new members to the 
committee on the majority side. I look forward to working with 
everyone there. And then we also have a new member on our side, 
Mr. Joyce; he will be a great addition as well.
    I want to welcome our witnesses. This is good to have a 
hearing such as this today to start off this hearing. I 
appreciate each of you. I know it is a commitment of time to 
come and be before us. But you are here to educate this 
committee on your work, and also those that are watching and 
those that are participating online.
    But what you do is very important. It is very important for 
our economy. It is important for our local communities. And you 
provide great opportunities for people living in a lot of 
communities throughout our districts.
    I want to recognize Ms. Donovan. I appreciate your good 
work. As was mentioned, you are a Senior Fellow at the Center 
for Community Investment, and you have served as director now 
for 4 years, I believe. It has been good to work with you in 
the past, and I look forward to working with you and your 
expertise in the future.
    And Ms. Fricks, good to have you as well. Always good to 
have folks from home join us. You are the founder and the CEO 
of the Access to Capital for Entrepreneurs; otherwise, as we 
call you in Georgia, ACE. And you have done a fantastic job 
there.
    Mr. Chairman, they serve 68 different communities and 
counties in the North Georgia and Atlanta community and areas 
since 2000, and have made more than $60 million in loans in 
that short 18-19 year span, and created and retained nearly 
8,000 jobs for folks in our communities; recently named as the 
Financial Services Champion of the Year by the Small Business 
Administration's Georgia office. So congratulations on that. 
Well-deserved. And I look forward to your testimony.
    I also want to recognize a good friend and colleague of Ms. 
Fricks who is with us in the audience today, and that is Ms. 
Thelma Johnson. Thanks for joining us all the way from 
Southwest Georgia; I think you are in Mr. Bishop's district. 
And good to have you with us as well. She is the president and 
CEO of the Albany Community Together, Incorporated, which has 
been since 2002. So really nice to have you. We appreciate your 
efforts and what you do in that part of our great State, and 
for joining us here today in this hearing.
    But with that, Mr. Chairman, that is all I have. I would be 
happy to yield back, and look forward to a great hearing today.
    Mr. Quigley. Thank you again. I appreciate that. And we 
love visiting down in Atlanta. It is a city anyone would want 
to live in if it could support a hockey team. [Laughter.]
    But you were so kind in discussing Ms. Donovan. We are 
going to let her kick things off. And I would remind everyone, 
please keep your opening statements to five minutes, which will 
allow time for as many questions as possible.
    Ms. Donovan. Chairman Quigley, Ranking Member Graves, and 
members of the subcommittee, thank you for the opportunity to 
speak with you today about the CDFI Fund. As you mentioned, for 
the past 4 years I had the honor as serving as the CDFI Fund 
director.
    CDFIs are private organizations that invest in markets that 
lack access to the kinds of safe and affordable financial 
services needed to pursue the American dream. CDFIs finance 
entrepreneurs; first-time homebuyers; affordable housing for 
rent-burdened families; community families such as schools, day 
care centers, and health centers; and they offer bank accounts 
to unbanked and underbanked people.
    In our market economy, capital flows to where it can secure 
the highest rate of return for the lowest risk. Communities 
that are deemed too risky or not profitable enough are often 
bypassed by traditional financial institutions.
    But CDFIs correct this market imperfection by using the 
tools offered by the CDFI Fund to leverage private sector 
investments in low-income communities. For example, for every 
$1 of federal investment in the CDFI program, CDFIs leverage 
$12 of other investments. In the Capital Magnet Fund, $20 of 
investment is leveraged for every $1 of federal funding, and 
even higher levels in the Bank Enterprise Award program.
    The unique way in which the CDFI Fund supports CDFIs is 
essential to their success. Most federal programs that target 
low-income communities either distribute funds to State and 
local governments according to population-based formulas, like 
Community Development Block Grants; or they fund on a project-
by-project basis, usually with stringent rules that make the 
funds hard to use at the local level.
    By contrast, the CDFI Fund programs are competitive and 
make funding available to build the capacity of organizations 
rather than investing in projects. The kinds of financial 
assistance awards made by the CDFI Fund enhance the financial 
strength of CDFIs' balance sheets, which in turn allow CDFIs to 
create innovative and flexible products that make hard-to-
finance transactions feasible.
    Financial assistance awards act like equity capital but do 
not demand high rates of return. This equity-like capital is 
rare. CDFIs blend equity-like capital from the CDFI Fund with 
conventional financing in ways that fill market gaps and 
restore market functionality in distressed places.
    As Chairman Quigley mentioned, the current administration 
has proposed to eliminate most of the CDFI Fund's programs. 
Their argument is that community development finance is now a 
mature industry, with ready access to the capital it needs.
    This argument does not hold up well under the facts. Though 
CDFIs have grown impressively and continue to punch above their 
weight, their total assets under management round up to a mere 
1 percent of total assets in the financial services sector.
    But size is not the only nor the most important way to 
measure the demand for CDFIs. For that, we should look at 
whether or not access to capital exists at the scale of the 
need in economically distressed places. The Urban Institute has 
compared capital flows in high poverty versus low poverty 
communities.
    In a study conducted in Baltimore, Urban found that 
investments were fragmented by race, income, and geography. Low 
poverty neighborhoods received one and a half times more 
investment than high poverty neighborhoods. Census tracts with 
more than 85 percent of residents are African American sought 
investments that were five times lower than census tracts where 
less than 50 percent of the residents are African American.
    Nationally, communities with poverty rates of 20 percent or 
higher received less than half the investment of communities 
with poverty rates of 20 percent or lower. This translates, 
according to Urban, into an investment gap of $156 billion 
annually. In 2018, total investments made by CDFIs totaled $11 
billion, filling only 7 percent of the gap.
    Regardless of where they live, all Americans want the same 
thing. They want access to good jobs, good schools, healthcare, 
affordable places to live, and safe places for their children 
to play. To thrive, all communities need access to capital, the 
lifeblood of any economy.
    As it stands, low-income communities experience wide 
disparities in access to capital. CDFIs are addressing the gap, 
though the resources available to them are far fewer than what 
is needed. If we are to be a Nation where opportunity is truly 
available to all, we need institutions like CDFIs.
    Chairman Quigley, Ranking Member Graves, and members of the 
subcommittee, that concludes my statement. I look forward to 
taking your questions.
    Mr. Quigley. Thank you, Ms. Donovan.
    I would now like to recognize Mr. Neri for his testimony.
    Mr. Neri. Chairman Quigley, Ranking Member Graves, IFF is a 
Midwest-focused nonprofit CDFI loan fund which helps nonprofits 
serving low-income communities to plan, finance, and build 
facilities they depend on to provide critical services 
essential to strong communities.
    My message today is simple. The CDFI Fund proves the old 
adage that Washington does not always know best. That is 
because the power of the CDFI Fund is that it is not a one-
size-fits-all Washington policy prescription.
    Instead, its flexible grants put capital into the hands of 
the local problem-solvers best equipped to find solutions to 
local challenges, allows them to use those resources to raise 
additional capital, and permits them to recycle and redeploy 
those funds to confront new challenges.
    IFF has been fortunate to be one of the first CDFIs to 
receive a grant in 1996 and since, multiple other program 
grants in Healthy Foods financing, Capital Magnet and 
disability funds, as well as New Markets Tax Credits. For every 
$1 we receive from the fund, we borrow an additional $4 from 
banks to make loans to nonprofit, helping them to finance 
projects that leverage, on the average, an additional $3 in 
overall investment.
    The result is that every dollar invested in IFF leverages 
about $12 in total public-private investment. Moreover, these 
dollars remain on our balance sheet permanently. As loans 
repay, the dollars are recycled and re-lent, generating capital 
into perpetuity.
    These grants have been essential to IFF's ability to grow 
its balance sheet and expand outside of Illinois--we were the 
Illinois Facilities Fund--to serve the entire Midwest, where 
today 60 percent of the $350 million loan portfolio now 
resides.
    The CDFI Fund is the only consistent source of equity 
capital available to nonprofit CDFIs to grow. With the fund's 
support, IFF has grown its impact substantially. Since 1988, we 
have made over 1,700 loans totaling more than $900 million, 
which has developed 26 million square feet of nonprofit 
facilities, 75,000 jobs, and leveraged $2.9 billion in total 
investment.
    Now, a fair question might be, given the growth and success 
of CDFIs, why should we continue to invest in them? But I think 
that IFF's experience in the Midwest exemplifies that there is 
still a fundamental need for the financing work that CDFIs do.
    Demand for our loans has never been greater. Poverty is 
rising and concentrating in suburbs that have limited human 
services infrastructure where investment it greatly needed, and 
we have so much work to do in our Midwestern rural and urban 
communities where real estate values remain depressed and 
population losses have continued.
    While the fund has promoted the leveraging of bank capital, 
the truth is that we have only scratched the surface of deeper 
public-private partnerships. We need to deploy beyond simple 
leverage and develop much deeper partnerships between banks and 
CDFIs and new impact investors and CDFIs.
    Finally, there is a huge, lasting public policy benefit to 
the vibrant network of CDFIs that the fund has seeded and 
grown. I believe that this is one of the fund's most important 
accomplishments. Yes, we have invested in CDFIs to make more 
loans and serve more communities.
    But we have also created a cohort of robust, nimble 
financial institutions with strong balance sheets that they can 
leverage to raise substantial capital from the private sector, 
inject that capital into neglected markets, better manage 
risks, and have greater social impact.
    This network of CDFIs remains deeply rooted in communities, 
and as a result have developed significant on-the-ground 
expertise in education, health and human services, healthy food 
financing, affordable housing, small business lending, and 
other issues.
    Local, State, and the Federal Government, along with 
philanthropy, consistently partner with us to address critical 
public policy issues, which is why the State of Illinois turned 
to IFF to create the Illinois Fresh Foods Financing Fund to end 
food deserts in our State, and the Kresge and Kellogg 
Foundations asked IFF to design the Hope Starts Here early 
childhood education program to increase quality of Detroit's 
early ed sector.
    As I continuously remind my staff, we do not just make 
loans. We align capital with justice through a powerful toolbox 
of capital, data, policy knowledge, partnerships, and local 
execution ability.
    Thank you for this opportunity, and I look forward to your 
questions.
    Mr. Quigley. I would now like to recognize Mr. Jones for 
his testimony.
    Mr. Jones. Chairman Quigley, Ranking Member Graves, and 
members of the subcommittee, good morning. Thank you for 
inviting me to discuss the important work of community 
development financial institutions. My name is Robert Jones. 
I'm the CEO and president of United Bank, based in Atmore, 
Alabama, and chairman of UB Community Development, the bank's 
CDFI affiliate.
    I also serve as chairman of the board of the Community 
Development Bankers Association. CDBA is a national trade 
association of the banks that are certified as CDFIs. Today 
there are 134 certified banks nationwide.
    First, I thank the members of this subcommittee for their 
longstanding support of the CDFI Fund. We thank you for 
maintained $250 million for the fund in fiscal year 2019.
    Founded in 1904, United Bank is a $631 million FDIC-insured 
bank that was certified as a CDFI in 2010. Our 18 brands 
primarily serve counties in Southwest Alabama and Northwest 
Florida. Our affiliate, UB Community Development, delivers 
credit services across Alabama and the Florida Panhandle.
    The region we serve looks much like most of the rural 
South. The key drivers of our local economies are 
manufacturing, agricultural, and small business. While the cost 
of living is lower than other areas in the country, poverty 
rates are higher. Alabama ranks sixth in the Nation in poverty, 
with a rate of 18.8 percent.
    Thanks to the Bank Enterprise Award Fund, United is able to 
issue responsible credit and financial services to underserved 
customers. A recent analysis found that 90 percent of all BEA 
monies go to the lowest income census tracts.
    The program helps banks work with financially underserved 
customers, but the funding does not come easily and 
institutions have to prove that the money generate positive 
externalities in the communities we serve. To qualify for our 
2018 award, United Bank had to demonstrate that it increased 
its total lending in distressed census tracts by $21.1 million 
between 2016 and 2017.
    BEA is critical for offsetting the cost of running a small-
dollar loan program. Several years ago we used our BEA award to 
create our Credit Advantage program, a small-dollar program for 
customers with credit scores below 650 or no credit. Borrowers 
receive half of the loan amount, and the other half goes into a 
savings account that pays a market rate of interest. These 
loans encourage saving habits, and they come with financial 
literacy training.
    Without Credit Advantage, we would not have been able to 
help Cassie, a single mother of five who worked two jobs but 
still struggled to make ends meet. When Cassie came to United, 
she had four payday loans, one of which had an interest rate of 
425 percent. We helped her consolidate her payday loans into 
one low-interest, small-dollar loan. Today, Cassie is a 
homeowner who proudly teaches her children about financial 
literacy.
    BEA has also enabled United Bank to support small 
businesses. In 2018 we provided $70.2 million in small business 
lending, and counseled 94 small businesses on planning, 
budgeting, and cash management. We have also used the BEA award 
to create the Church Street Incubator, an open-format shared 
workspace that offers technical assistance to small business 
startups.
    In fiscal year 2018, banks participating in BEA increased 
their investment into high poverty census tracts by nearly $578 
million. Last year BEA recipients deployed $3.4 million into 
persistent poverty counties, exceeding the CDFI Fund's 
congressional mandate.
    CDFI programs like BEA meet critical needs in rural and 
low-income communities, but demand for these programs far 
exceeds funding. I ask that the members of the subcommittee 
provide at least $300 million to the CDFI Fund in fiscal year 
2020, including at least $35 million for the BEA program.
    I thank you for the opportunity to visit with you today, 
and look forward to your questions.
    Mr. Quigley. Thank you, Mr. Jones.
    And last but not least, I would now like to recognize Ms. 
Fricks for her testimony. I believe, Mr. Graves, it was your 
crack staff that allowed her to get through in a timely basis. 
Thank you for that.
    Ms. Fricks. Thank you, Chairman Quigley, Ranking Member 
Graves, and committee members, for the opportunity to testify 
today about CDFIs. I am the founder of Access to Capital for 
Entrepreneurs, or ACE. ACE is a CDFI loan fund that specializes 
in growing small businesses in metropolitan Atlanta and in 
North Georgia, where the beginning of the Southern Appalachian 
mountain range begins.
    We combine capital with coaching and connections so that 
underserved business owners can be successful in creating jobs, 
caring for their families, and contributing to their 
communities. In 19 years we have loans $60 million to 900 
businesses who created or saved 8,000 jobs.
    We started quite small, in the back of my house, with a 
$50,000 investment from the Appalachian Regional Commission for 
a loan pool to help unbanked technical college graduates start 
businesses like welding, HVAC, automotive repair. We have been 
humbled and I have been humbled to witness ACE grow from a 
founder's dream with $50,000 to a critical local resource with 
a loan capital pool of $29.6 million in private capital.
    I would like to emphasize that CDFIs are public-private 
partnerships that, over time, utilize more private capital than 
public backing. The CDFI Fund is the number one method to build 
a balance sheet so that an organization like ours can leverage 
private investment, thus making our organization more self-
reliant.
    I want to share two examples of our clients and impact. The 
first is in Dahlonega, which is in Lumpkin County. Lumpkin is a 
rural mountain county with 33,000 residents. The county seat, 
Dahloniga, is home to 7,000 residents. Median income in 
Dahlonega is just $33,000, and 30 percent of its residents live 
in poverty.
    Tourism provides one of the very few economic opportunities 
for the area. The reason tourists come there is because of the 
original gold rush. You see, Dahlonega is actually derived from 
the Cherokee word ``tahlonteca,'' which means ``yellow stone,'' 
or gold.
    In just the last three years, ACE has invested more than 
$1.5 million in 11 businesses in Dahlonega. These businesses 
include boutique restaurants, a day spa, specialty toy store, 
dry cleaner, a wedding venue. Those businesses could not obtain 
capital elsewhere and business development services to support 
them. We have helped these entrepreneurs capitalize on their 
best option for making a living, building successful 
businesses, and turning their little town into a destination 
spot.
    The second example is the Marchen Sagen Academy in Atlanta, 
Decatur, Georgia. Shortly after leaving the Navy, Couleen LaGon 
found himself homeless and sleeping in a friend's studio. He 
used his love of music and production skills to work with a 
developing artist, and found himself in a music deal with CeeLo 
Green.
    A few years later he was inspired to create the academy to 
teach children music and production skills. We helped Mr. LaGon 
purchase mixing equipment and provided working capital. That 
academy has 43 students enrolled and employs 1.5 FTEs plus two 
interns.
    Today, 85 percent of our lending is in metropolitan 
Atlanta. Forty-eight percent of our loans are to African 
American business owners, 8 percent to Hispanics, and 48 
percent to women.
    Nationwide, CDFIs like ACE are investing in some of the 
poorest communities in America. These communities are comprised 
of working families with extremely low incomes, high rates of 
poverty, and unemployment. They lack access to affordable 
financial services, and CDFIs step into that gap.
    I urge the subcommittee to provide $300 million in funding 
for the CDFI Fund. This increase of $50 million would leverage 
some $600 million, providing much-needed capital. We are making 
a tangible difference serving disinvested urban areas, rural 
areas, and areas of persistent poverty left outside the 
economic mainstream for decades.
    I appreciate the opportunity to share more of our work in 
Georgia, and I am happy to answer questions. Thank you so much.
    Mr. Quigley. Thank you, Ms. Fricks. I appreciate your 
thoughtful testimony, and all our witnesses. And I appreciate 
the derivative of the word ``yellow stone.'' Chicago actually 
comes from Native Americans who originally lived in the area, 
``Chicaqua,'' which means ``striped skunk.'' [Laughter.]
    So it is quite the same impact as yellow stone. The other 
definition might be a ``smelly onion.'' Really. [Laughter.]
    And there is an election there today, and the Windy City 
actually does not come from meteorological conditions. Believe 
it or not, it is because of our elected officials there. Who 
knew.
    And out of deference for time, I am going to begin the 
questions by deferring to Mr. Bishop. He has to run across the 
hall. We all have a lot of hearings scheduled across the 
Capitol today. Mr. Bishop?
    Mr. Bishop. Thank you very much, Mr. Chairman. I appreciate 
your deference and that of the committee in allowing me to go 
first. I do have another hearing. But I certainly wanted to be 
here to welcome our witnesses, Ms. Donovan, Ms. Fricks, Mr. 
Jones, Mr. Neri.
    I especially want to give a shout-out to Ms. Fricks, who 
brought along with her my friend of longstanding, a church 
member and fellow Albanian, Thelma Johnson, who is with Albany 
Community Together. Let me just welcome all of you, and we 
really appreciate your discussions on the value of the CDFI 
program.
    According to the Wall Street Journal, between 1995 and 2015 
the percent of rural areas and small towns without a local bank 
increased from about 12 percent to 32 percent. Ms. Donovan, Ms. 
Fricks, the great need of the financing that is provided by 
CDFIs for low-income and rural communities continues, as 
evidenced by the applicant demand in the fiscal year 2018 CDFI 
program round.
    The CDFI fund received 700 total applications requesting 
about $505 million for financial assistance and technical 
assistance awards, healthy food financing initiative awards, 
persistent poverty county awards, and disability funds 
financial assistance awards. In addition, 124 CDFIs applied for 
$218 million for the BEA program. How does this compare to the 
amount available in fiscal year 2018 and the demand in previous 
years?
    And I am going to ask my second question quickly because I 
am going to have to run, so you can take note. Ms. Fricks, can 
you discuss the impact that Access to Capital for Entrepreneurs 
has had in helping black-owned businesses in distressed areas 
of Georgia? And had Congress approved the President's fiscal 
year 2019 proposal for only $14 million for the CDFI fund, what 
impact would that have had in black entrepreneurship in Georgia 
and nationwide? And how would it have impacted the racial 
wealth disparity that currently exists in the United States?
    And let me just say that my district is 50/50 rural/urban. 
And as the chair of the agricultural, rural development, FDA 
subcommittee of the Appropriations Committee, I have a real 
passion for rural economic development and for improving the 
quality of life of Americans that live in rural areas.
    And so this CDFI Fund and the way that it can be and has in 
many instances been utilized to improve that quality of life 
and the opportunities there is very impressive. So can I get 
you to address those two questions for me, please?
    Ms. Donovan. Yes. Let me start with the big picture. I am 
pleased to say that CDFIs who are accessing resources from the 
CDFI Fund outperform with respect to the allocation of 
resources that go to rural areas. So about 15 percent or so of 
our population lives in rural areas, and over 20 percent of the 
activity with CDFI resources is directed to rural areas.
    When you look at persistent poverty, about 6 percent of 
America lives in persistent poverty communities, and 18 percent 
of CDFIs are headquartered in areas of persistent poverty, and 
one-fifth of CDFI investments are going into areas of 
persistent poverty.
    So I think this is great--this lets us know that the policy 
of the way that we certify CDFIs and require them to put at 
least 60 percent of their assets in low- and moderate-income 
communities and in targeted communities, and the way that we 
run the competitions at the CDFI fund, is effective at 
targeting resources to the places that need it the most.
    I think our biggest problem is, again, back to the scale of 
the CDFI sector and the need to grow to a bigger scale.
    Mr. Bishop. Ms. Fricks? What impact would the fiscal year 
2019 proposal from the administration have had on what you do 
and what CDFIs do?
    Ms. Fricks. I think I might still be sitting here because 
our program, after the recession, also began serving 
metropolitan Atlanta. I do not think Dr. Adams-Johnson, 
Thelma's, program would be sitting here. There is just an 
extreme difference in serving the rural market and serving a 
metropolitan market.
    When I said that right now, 48 percent of the small 
business owners we serve are African American business owners, 
that is because of us having offices in Atlanta also. And when 
I talked about the amount of private capital that we have been 
able to leverage, that is because of having that Atlanta market 
as part of ours, where the Albany area in the same amount of 
time has maybe done 8- or $9 million worth of loans. And that 
is because their less capital. There is less resources there.
    And I think you know that in the rural areas, there is an 
out-migration of banks. And then Georgia was the number one 
state in the country for closing community banks, and that 
impacted all of us. We have become, in rural areas, the go-to 
for lending. And what you are seeing is more people being 
vulnerable to predatory lending when there is no community bank 
or CDFI in their area.
    Mr. Quigley. Thank you, Ms. Fricks.
    Mr. Bishop. Thank you very much. My time is expired.
    Mr. Quigley. Thank you all.
    Mr. Graves.
    Mr. Graves. Just sort of a question that can inform all of 
us. And I will ask Ms. Fricks and Mr. Jones as well. And feel 
free to respond, too.
    But in the Federal Government, oftentimes it is trying to 
help communities. And there are a lot of different agencies and 
different programs that get established through multiple 
administrations or different majorities and such. And I guess 
for our perspective, and I know that the request would be--you 
mentioned $300 million, and the administration is at a 
different spot there.
    Can you share with us the difference it makes through the 
CDFI program versus the many other programs that are out there 
that you might interface with or have to work with, that can 
help us understand there is not a duplicative nature or that 
this is impactful, that it is needed, and that it is worth that 
investment?
    Because at some point we will have to make decisions, and 
they are tough decisions. It will be, do we put more in this 
bucket, this bucket, or this bucket? And so I think that would 
help this committee a little bit as we try to make decisions in 
the future about I guess spreading out the different finances 
we have.
    So we can just start, Ms. Fricks, with you. And just help 
us understand that a little bit.
    Ms. Fricks. I mean, logically, just like you are thinking, 
there should be--I think it is what BB&T and SunTrust have 
called, in their merger or buyout, synergies, which are really 
efficiencies from combining departments.
    I think in the best of all possible worlds, that makes some 
sense, to do some of that. I can tell you that the CDFI Fund is 
the only one--its purpose is to help build balance sheets so 
that we can do more using private capital. And some of the 
other programs, they have their purpose. USDA is strictly 
rural. It is difficult. It is difficult for you.
    Mr. Graves. Well, you have given some great success 
numbers, statistics here that are fantastic, and I do not know 
that we hear those from all agencies or other areas that come 
before us. So that is very helpful.
    Mr. Jones. Yes.
    Mr. Jones. Thank you, Mr. Graves. I probably would speak 
specifically to the Bank Enterprise Award, which is unique to 
insured depositories. And the beauty of that program is it 
gives institutions like ours the flexibility to create products 
and deliver unique services into the communities we serve.
    The flexibility of the program has not been talked about, 
the local delivery with people that are committed and invested 
to the local community, identifying specific needs. There is 
high accountability to the use of those funds. We have to prove 
that we are using them appropriately.
    It is unique. It is the only Federal program that is for 
for-profit banks. And as Ms. Fricks mentioned, there is a 
continuing challenge around the country for a presence of 
community banks. In 600 counties in this country, if there were 
not a community bank, there would be no financial services 
provider there.
    And as has been pointed out many times over, to operate 
efficiently in this economy, you have to be a part of the 
financial mainstream. And the gateway to that is most times 
through a community bank by basic financial services, checking 
and savings accounts, and as I indicated in the story I told, 
how we assist people with no credit experience at all to build 
some resiliency. The BEA allows us to do that.
    There are unique challenges as an insured depository that 
oftentimes--the confluence of regulatory pressures with the 
economic pressures that banks experience. The BEA gives us the 
latitude to be innovative, to create unique products that 
otherwise would not exist, that are really tailored to the most 
distressed members of our communities.
    The flexibility is important, and that is why we are 
advocating for continued support of BEA and increase in its 
funding.
    Mr. Graves. Thank you.
    Mr. Neri. I would like to add that 1 is 12, so $1 of CDFI 
Federal dollars becomes $12. So when you make an investment, 
when you make those choices around where dollars should go, 
remember that if you cut 1, you cut 12. So if you add 1, you 
are adding 12. I think the leveraging that CDFIs do in the 
marketplace is a really powerful tool.
    I think the second piece here is that many of the 
challenges that all of the Federal departments work on are 
complex. They are interrelated. CDFIs are part of helping 
implement those public policy decisions and make those other 
programs more efficient and effective, again because they 
leverage the private sector to deal with the capital side.
    So if you are looking at early education, if you are 
looking at fresh foods, if you are looking at the social 
determinants of health, there are many factors that go into 
working on those challenges and the funding of Federal 
programs. CDFIs are the capital fuel to working on those public 
policies.
    Mr. Quigley. Ms. Donovan, I will start with you. In your 
assessment, what is the scale of need that exists for credit 
and capital in these distressed communities? What amount are we 
missing, if you can assess it?
    Ms. Donovan. Yes. Well, the research that is--there is not 
a whole lot of research out there. But the research that has 
been done by the Urban Institute, I think for the first time, 
quantifies the neighborhood of that gap. And their numbers show 
$156 billion. And that is the difference between capital that 
flows to communities that have poverty rates of 20 percent or 
greater versus ones that have poverty rates of 20 percent or 
lower.
    And the growth in terms of investments that CDFIs are 
making in low-income communities is impressive. Even over my 
time, over my 4 years at the CDFI Fund, it went from roughly $5 
billion to $11 billion. And still, against a gap of $156 
billion, that is not much.
    So when I hear my colleagues arguing for $300 million, I 
would like us to go much higher than that because, again, you 
have to look at the scale of the problem. CDFIs are addressing 
7 percent of the problem, and doing amazing work, very 
effective work. But there is so much more to be done.
    And I would just also say that it is not just a matter of 
the money, either. CDFIs offer development services alongside 
the financing. They partner with local organizations. They 
partner with national organizations. They are magnets for 
bringing resources, bringing them together, and structuring 
them in ways that can be absorbed by the local community that 
needs them.
    Mr. Quigley. Yes. My second question dealt with that. And 
that is, aside from budgetary resources, what else can CDFIS--
what can the fund do to help build the capacity of CDFIs?
    Ms. Donovan. Yes. This is very much needed. At the Center 
for Community Investment, where I am serving as a Senior Fellow 
right now, we refer to this as the capital absorption capacity 
of places. So some places, even if you have capital swirling 
around, it has to be able to land.
    And to do that, you need people on the ground who are able 
to do the kinds of work that CDFIs do to organize the demand 
side of capital, to make sure that communities can responsibly 
take the capital in and use it well. And to do that requires 
capacity-building.
    And I know during my time as CDFI fund director, we would 
get the question about, is it the most effective way to invest 
in capacity-building? Because we want the dollars to go 
directly into communities. And I think it is important that the 
predominance of the funding go directly to CDFIs.
    But small and medium-sized CDFIs, and CDFIs in hard-to-
reach places, will tell you that they need the capacity-
building that CDFI Fund offers through the capacity-building 
initiative. And 1 to 2 percent of the budget I think is 
sufficient to provide that kind of capacity-building.
    Mr. Quigley. Do others want to weigh on that? Mr. Jones.
    Mr. Jones. I would just echo what Annie was saying. I think 
that resources are scarce, obviously, as we have already talked 
about. I think that the effective deployment of and one of the 
real strengths that the BEA program has, or some of the other 
CDFI funds, it puts the money in the hands of local 
organizations that have the capacity, the resiliency, and the 
connections to make a meaningful impact in those communities in 
a way that--just a general allocation of dollars, there is an 
accountability.
    In the BEA, we must have at least 30 percent in areas of 
poverty and 1.5 times the national unemployment rate. So by 
definition, those monies are going to the most severely 
distressed. So when we look at the types of alliances and 
partnerships that have been talked about--one quick example: In 
our organization, we have our staff volunteering in the VITA 
program, which is a volunteer income tax assistance program.
    Since we have been a part of that, we have done 585 tax 
returns totaling $670,000 in refunds, of which $218,000 was in 
earned income tax credits. In the year 2017 alone, we saved 
individuals over $20,000 in tax preparation fees. Those are 
hard dollars that have gone directly in the hands of distressed 
families in a community that, otherwise, those monies would 
have been allocated elsewhere.
    That alignment and the ability to use those funds to 
provide those programs make a real difference in communities 
and families who, frankly, are living paycheck to paycheck. So 
it is effective.
    Mr. Quigley. I want to go ahead to Mr. Amodei.
    Mr. Amodei. Thank you, Mr. Chairman.
    I don't think that, just speaking for myself, when I hear 
things like 12 to 1 leverage and stuff like that, I don't know 
that in my mind, anyhow, that it is like, well is this a good 
program or is it a bad program? Obviously, if it had more 
resources I would assume that you would continue to leverage 
those and grow those and do good things.
    But I am a guy who comes from a State that has had about 
eight of these programs awarded or whatever, and I am sitting 
there looking at that, comparing it to other States with 
similar population or whatever--not that it is apples and 
apples--that have been much more successful.
    So I guess my question to this panel, as people who have a 
lot of experience in this: Is it financial infrastructure? In 
other words, do I need to go to the State bankers association 
and say, hey, how come--God forbid I say the words ``credit 
union'' in here, but them, too, or whatever.
    But anyhow, is it like, listen, is there no infrastructure 
in the State promoting this? Or is the quality of applications 
defective? Or is it just we are not applying? I mean, because I 
started to get off on the urban/rural thing, and it sounds like 
you guys know how to say and spell rural pretty good.
    And so, I mean, help me a little bit in terms of saying, 
hey, it is a good program, sounds like it is doing good work. 
But what are the indices of that in terms of making that a 
tool? Because I have got communities with populations like you 
have talked about where the county sheriff is also the 
dispatcher and the patrol person.
    So that tells you about the health of the community. And by 
the way, I think we have got two community banks left in the 
whole State, which the bankers tell me they are good things. We 
want to preserve them.
    So anyhow, whoever feels like taking a whack at it, go 
ahead.
    Mr. Jones. Sounds like it is right in my wheelhouse. Let me 
tell you a quick story; maybe it can speak to exactly what you 
are talking about.
    Our bank has been around since 1904, so we are not new off 
the street. We were certified in 2010. During my career, I 
served as the president of the State Bankers Association and 
served on the board of the American Bankers Association. I have 
been involved in the industry for basically almost 30 years.
    I really didn't know about the CDFI Fund or the initiatives 
here until we had an opportunity to get certified in 2010. Our 
journey since that certification has been one of discovery, and 
we have been an ambassador to other financial institutions 
because it is a little-understood and not widely-known segment 
of the industry. There are 134 banks that are CDFIs.
    I think disproportionately, the impact that those 
institutions make are significant in the communities they 
serve. I can't really speak to why it has not been more widely 
known. Annie and I have talked about that. In previous times, I 
think that what we are doing in our State--we were amongst the 
first to get certified.
    We were the first and only to receive New Market tax 
credits. We were the first to get a Capital Magnet Fund award. 
We were the first to get a USDA Community Facilities grant. 
There is more conversation because of the work we are doing, 
and I think the more mature this industry becomes--and it is 
very new, and particularly in the rural areas. Very early on, 
most of these programs were urban-centric. I don't know that, 
nationally or otherwise, there was a true understanding of the 
challenges in rural America that only now has become a topic of 
conversation.
    So I would say it is too early to make that determination. 
I am optimistic that we will see an expansion of that. That is 
part of the mission we have with the CDBA. I think the 
performance that we are having and the impact that we are 
making--as I visit with members of our delegation, they are 
intimately aware of how we are deploying these dollars. We are 
accountable to them to report the programs that we are 
administering.
    So it is making a difference. The State is beginning to 
recognize it. So I would say don't judge it too soon. The work 
that we do continues to make an impact. And I think the story 
grows from there.
    Mr. Amodei. Well, and I appreciate it. I am not judging it 
too soon. I am just waiting for the day when there is somebody 
on the panel from Nevada, which, by the way, does not stand for 
some kind of skunk or----
    [Laughter.]
    Mr. Amodei [continuing]. Some way to say gold without 
saying gold. But anyhow, it looks like a tool that is a 
legitimate tool.
    Ms. Donovan. Yes.
    Mr. Amodei. And so----
    Ms. Donovan. And so, really, the reason why the CDFI Fund 
is as successful as it is in our market economy is because it 
takes the principles of the market economy. It is market-
driven. But it presumes that there is a capacity, there is a 
baseline level of capacity, at the local leave. And so it 
requires that kind of capacity-building.
    So the communities that have strong philanthropy, 
communities that have a banking sector, that are dedicated to 
place and have strong partnerships, that is where--and it is 
probably not due to bad applications. It is probably the 
capacity at the local level, which is why it is important to 
take just a little bit of the budget and put it toward a 
capacity-building initiative.
    Mr. Amodei. Thank you.
    Mr. Jones. And if I can include, just one complementary 
comment on that. I would be glad to come to Nevada and talk to 
some bankers and help see if we could not get more capacity. I 
think one of the issues that regulated institutions have, and 
this is something I would encourage the committee to give some 
consideration to, regulatorily there are challenges for an 
insured depository operating in this challenged space.
    So at times, the purposes are at odds with each other. An 
alignment between the regulatory structure and the community 
development structure can make a meaningful difference in terms 
of broader application in deployment of these funds.
    Mr. Amodei. Thank you, Mr. Chairman. Thank you. I yield 
back.
    Mr. Quigley. Thank you. Preliminary research says Nevada 
means ``covered in snow.'' So I will take the skunk. 
[Laughter.]
    Mr. Quigley. Mr. Crist.
    Mr. Amodei. Thank you for doing that. [Laughter.]
    Mr. Crist. Thank you, Mr. Chairman. I am from Florida. We 
are known as the Sunshine State, for the record.
    I want to thank you, Mr. Chairman, and thank the witnesses 
for being here today. We appreciate your testimony and 
educating us further on CDFIs.
    I grew up in South St. Petersburg, Florida, a vibrant, 
economically developing, majority black neighborhood I am now 
humbled to represent here in the United States Congress. 
Minority-owned businesses are the bedrock of that community, 
businesses like Chief's Creole Cafe on 22nd Street, known as 
the Deuces. Carolyn and Elihu Brayboy run that restaurant. It 
is all about spicy jambalaya and second chances, second chances 
for a neighborhood returning to greatness, and second chances 
for the ex-offenders that they employ.
    But this great American story would not be possible without 
the Community Development Financial Institutions Fund. It was a 
CDFI lender that finally said yes when every other traditional 
lender would say no. So Ms. Donovan, when it comes to issues 
like sustainable development, eliminating food deserts, and 
restoring communities, can you quantify what a CDFI would mean 
for places like South St. Pete?
    Ms. Donovan. Well, that is a challenging question.
    Mr. Crist. It is not meant to be.
    Ms. Donovan. So for communities like South St. Pete, 
absolutely having a CDFI, as you mentioned, there to--like Ms. 
Fricks mentioned, in terms of what they are able to do in the 
communities that they serve. They were probably able to make 
that loan because of the way that their balance sheet is 
structured, back to having resources from the CDFI Fund that 
allow them to be flexible and to take the risk, and to take the 
risk that banks wouldn't take or, I want to add, would not take 
a loan.
    Because a lot of the power of what CDFIs are doing is 
bringing their own resources to the table in a way that allows 
the bank to say yes. There very well may have been some bank 
resources in that loan that was organized and managed by the 
CDFI in order to make that access to capital available.
    Mr. Crist. Thank you. On the issue of access to capital, I 
am sure that all the panelists agree that when a black 
barbershop needs a quick loan to replace a broken chair, the 
owner should not have to go to a payday lender. No one else 
will say yes. You all agree that that is wrong, I assume?
    [Panelists nod affirmatively.]
    Mr. Crist. I do, too. And that is why I brought together 
lenders and women and minority business owners for an access to 
capital fair that we had in my district. We invited lenders of 
all shapes and sizes to come and meet entrepreneurs at various 
stages of their business development.
    Out of all the lenders who showed up, fully half were 
CDFIS--Florida Community Loan Fund, Black Business Investment 
Fund, Suncoast Credit Union, and the Tampa Bay Black Business 
Investment Corporation, to name a few of them.
    Mr. Jones, why are CDFIs so excited to provide access to 
capital to the women- and minority-owned small businesses that 
traditional lenders do not?
    Mr. Jones. Well, I think we clearly understand the 
importance of small businesses and the impact they can have in 
a community. Part of the mission that we have in our CDFI 
role--because the challenges in communities are so multi-
faceted that none of us singularly can solve of them. But we 
can focus on the parts that we can make the most impact on.
    Our experience has been in job creation. As I mentioned in 
my opening statement, we operate a small business incubator. 
And perhaps the best way to describe how we have helped that 
segment that you are most sensitive to is we had a lady that 
came to us that had an idea to be a home healthcare provider. 
This is not nursing care, but assisted care so someone can 
remain in their home.
    She had the idea, but did not have a business plan and had 
not had the experience to do it. We invited her into our 
business incubator, which immediately gave her credibility with 
clients that she had an office space and someplace they could 
come meet with her. Today she has operated that business and 
now has nine employees that are working for her as a result of 
us working with her, helping her with some credit startup, and 
providing a space, which is critical for credibility for a 
small business.
    Another story: We had a minority young lady who wanted to 
be in the photography and wedding planning business. She had a 
great idea and needed the help to get started. We brought her 
into the incubator, helped her with a business plan. She is now 
operating out of a standalone space downtown and is adding to 
her capacity.
    So I think there is an opportunity to do that. And the 
CDFIs operating in these communities are developing a network, 
and within certain communities it is word of mouth more than 
anything else that you do. You walk the walk rather than just 
say you are going to do these things. And they become the 
ambassadors, and I think that opens doors for future 
opportunities and changing, in these two cases, the resiliency 
of two ladies that now have an operating business.
    Mr. Crist. Thank you, sir. Thank you, Mr. Chairman. I yield 
back.
    Mr. Quigley. Thank you.
    Mr. Ranking Member, do you have another question?
    Mr. Graves. Just a follow-up. Yes. It is funny. I was 
sitting here thinking, Mr. Chairman, that you referenced hockey 
in Georgia. But I think Mr. Jones and I and maybe Ms. Fricks, 
we appreciate a different Saturday sport in the fall----
    [Laughter.]
    Mr. Graves [continuing]. That maybe you don't have quite 
the same understanding of in your State. SEC football is 
amazing. Yes. It is always good to have somebody from the SEC 
here as well.
    But a quick question. I wanted to drill in just a little 
bit on something you were saying a minute ago, Mr. Jones. You 
have a community bank that is a full-service community bank, 
but also operating a CDFI component as well. And I really don't 
know the answers to these questions, so help me walk through 
it.
    Is there the possibility that the rules and the regulations 
are so challenging in the banking industry today--is it 
possible that there is a customer that could come to you and 
seek a loan in a traditional format, and maybe not qualify it 
or not be able to get it or maybe it is too cumbersome or too 
expensive, that then they can go to a different office in your 
same facility, your same building or branch, and receive the 
loan under a CDFI concept?
    Mr. Jones. That is an excellent question.
    Mr. Graves. And if so, why is that, and how do you smooth 
that out?
    Mr. Jones. Well, we could spend the rest of today talking 
about all the reasons behind it. But let me touch on some very 
high-level issues.
    True story: Years ago we had a finance company that the 
bank operated, and it operated to provide that option that you 
just described to people that otherwise could not perhaps meet 
the regulatory requirements for a bank loan. There was a rule 
change within the regulations which told us that within the 
finance company, we had to treat them like bank loans. We had 
to close the finance company as a result of that change in 
guidance from the regulators. As soon as we closed the finance 
company, the payday lenders moved into the void.
    As we have gotten into the CDFI space--this is a 
conversation that we have openly--we use many other programs to 
provide enhancements to those opportunities that might need an 
SBA guarantee or an SSBCI. We have a rule in our bank that no 
one officer can decline a loan. It takes two. One officer can 
make a loan, but they cannot decline a loan.
    And we do that for the very purpose of taking a second look 
to see if there is something maybe we did not see in the first 
application. In the small-dollar program that I mentioned in my 
opening comments, our rate of loss is 10 percent, compared to 
consumer loans that run around 2 percent.
    The BEA allowed us to present those opportunities and 
continuation to make those loans to help people build credit 
because we all understand, and particularly the members of the 
committee, that until you get a credit score and you get into 
the mainstream financial system, you are operating off the 
grid. And that is a place that is not sustainable to take 
advantage of all the opportunities we offer in this country for 
homeownership or upward mobility.
    So we see that as something critical to what we do. We have 
a nonprofit side in our company as well that we fund. We are 
beginning to operate and will set up loan funds to provide that 
tier of financing to small business or other types of entities 
through the nonprofit space as well.
    Specific to the community development subsidiary you 
mentioned, we set that up as we were successful in winning 
awards in the New Markets and other areas to create the ability 
to deliver those across the State of Alabama. We have received 
two New Markets awards as a result of those applications, $120 
million; to date, that has created $165 million worth of 
capital investment, and it has sustained or created 3,000 jobs. 
And we continue to expand that.
    We operating our Capital Magnets, our online tech program, 
out of there, which is providing 730 housing units across the 
State as well in 14 developments. So it has allowed us to move 
from just a traditional community bank, which we still operate 
in our traditional counties, to becoming a statewide entity to 
move into these census tracts that are most in need in a State 
like ours.
    So the creation and the opportunity to be a CDFI is 
changing many of the communities that we participate in. So I 
think it takes a willingness to do it. As I mentioned in my 
comments, the regulations often are at odds. And to be able to 
navigate that--we often have to educate the regulators to what 
it means to be a CDFI. But that is becoming more accommodating.
    Mr. Graves. So it is possible that a potential customer 
could come in and seek a loan in a traditional format and not 
quality, and be redirected?
    Mr. Jones. Yes. And we provide some other safety nets in 
terms of unsecured lines to our checking accounts, which 
provide a $500 safety net if they need that short-term 
availability. So absolutely.
    Mr. Graves. Has there ever been any concerns--this will be 
my last thought on this, Mr. Chairman--of institutions in 
essence cherry-picking customers and saying, okay, we will keep 
the ones that are more qualified or have a better potential to 
pay back, and redirect those others to the CDFI-type program? 
Do you ever sense that throughout the community, or a bad 
actor, so to speak, taking advantage of that?
    Mr. Jones. We often see people seeking the path of least 
resistance or available credit, which are not on the most 
favorable terms. But I have to tell you, as a banker, some of 
the best things you can do for people sometimes is tell them 
no. And to just grant credit without an reasonable expectation 
of managing it does more harm than good.
    But we also provide financial counseling so that if we 
can't do it, then we sit down and tell them what they need to 
do to improve their situation. And many times that experience 
of being told no, then coming back and say, ``Okay, I did this; 
now what, and how can I improve my situation?'' And we will put 
them into a reloadable prepaid card and help them manage that, 
or get them into a checking account, or offer them a small 
secured credit card. Now they are beginning to build a 
capacity.
    Frankly, our country does an abysmal job in training people 
how to manage their personal finances. And I see that as a 
foundational failing, that until we help people be better 
consumers and wiser consumers of credit, this is self-
perpetuating. We will always be fighting this problem.
    So the root cause is very, very problematic. So we make a 
difference, one person at a time, and that is all that you can 
do. And I think that is all every one of us at the table do, is 
small steps. But that is how we approach it.
    Mr. Graves. Okay, Mr. Chairman. That is great. Thanks.
    Mr. Quigley. Thank you.
    Mr. Neri, in 2017 CDFI Fund received specific funds to 
support programs and projects aimed at assisting individuals 
with disabilities. It is relatively new, and congratulations to 
IFF for receiving an award to assist individuals with 
disabilities.
    Can you explain to the subcommittee how IFF is using these 
funds, has used these funds, and how you are going to measure 
the impact of the funding? And if more CDFI funding were 
available, how would you use it?
    Mr. Neri. So IFF was actually really incredibly honored to 
receive that award, partly because lending to nonprofits 
serving people with disabilities began at our inception in 
1988. And since then, we have lent over $50 million to 
nonprofits serving those persons with disabilities.
    We are also one of the founding members of the CDFI 
Disabilities Coalition. For us, this work has obviously been 
very important, and we concentrate the funding that we have 
received from the fund and in the past in two specific areas--
although again, we lend broadly to nonprofits working in that 
space--but two focus areas, which are employment for persons 
with disabilities--the unemployment rate amongst people with 
disabilities is the highest in the Nation--as well as 
independent living or housing for persons with disabilities.
    Unfortunately, Congressman, we live in a State which does a 
horrendous job of creating housing outside of institutions for 
people with disabilities. Some examples of our projects like 
the loan to Hope Homes Foundation, which is in Representative 
Joyce's district, where we help stabilize mortgages for that 
organization to do small, community-integrated group homes for 
people with developmental disabilities, or our loan to 
Paraquad, which is a center for independent living in St. 
Louis, where they used our loan to create the only fully 
accessible gymnasium and workout center for people with 
disabilities in St. Louis, in addition to a restaurant called 
Bloom, which employs persons with disabilities, that has 
become, actually, a pretty popular spot in St. Louis.
    It is also why IFF partnered with Access Living, which is a 
center for independent living in Chicago, to create a 
subsidiary called Home First which finances, develops, and owns 
housing for persons with disabilities coming out of 
institutions. And to date, we have about 200-some units at 
scattered sites throughout the city, county, and downstate 
Illinois that serve persons that were formally in nursing homes 
or other types of institutions.
    So we are obviously very excited that this fund has allowed 
a focus on what is possible in providing capital specifically 
in this space, and hope it encourages other nonprofits to begin 
to think about how that capital can then advance the issues for 
persons with disabilities.
    Mr. Quigley. Ms. Donovan and whomever else, 425 percent 
interest on a loan--anything else we can do? Can this be used 
to create alternatives to payday lending? And recognizing that 
it is not a complete evil for many; without payday lending, 
they are not going to get their water heater fixed or their car 
fixed. So what else can we do to help?
    Ms. Donovan. Well, in I believe it was the 2017 budget, the 
previous administration put forward a proposal to invest $10 
million in the small-dollar loan program, which is authorized 
through the Dodd-Frank Act. And I think funding that program 
would--in the same way that other programs have shined a light 
on activities like disability or healthy food financing, would 
allow more resources to be available to fund the work that Mr. 
Jones talked about he is doing in his community.
    There is a much greater need for that. And so I think 
funding that program and directing resources in that way would 
increase the amount of activity.
    Mr. Quigley. Anyone else?
    Mr. Jones. I would like to just expand on it just a minute. 
I am aware of the proposal that came out of the Obama 
administration with the $10 million request. It was part of 
Section 1206 of the Dodd-Frank. And I certainly agree with the 
premise that we need to help customers. I mean, it goes without 
question. That is exactly what we do.
    But I think the $10 million should not be taken out of the 
existing funding. It should be in addition to anything else 
that the committee considers so that we are looking at an 
allocation of those dollars. But I think one of the things that 
also has to accompany that, other than just dollars, is like I 
mentioned in my previous comments: I would encourage the CDFI 
Fund to work in conjunction, particularly for those of us in 
the insured depository space with our prudential regulators--I 
think the partnership between the alignment of giving 
institutions such as CDFI is the flexibility to create products 
that can solve this problem, and not run afoul of unintended 
consequences of some regulations that are not designed to speak 
to the unique needs of this specific community.
    Banks are very sensitive to their reputation risk. And in 
these types of loans, you can inadvertently do something that 
could create an adverse outcome. And you do not want to do that 
because you are trying to do good work. So I think an alignment 
between the fund and the prudential regulators could create an 
opportunity for helping to address the problems that you are 
addressing, Mr. Chairman.
    The money is important; I think it would be helpful. But 
without that collaboration, I am not convinced it would be as 
efficient or as effective as it possibly could be. We have to 
align the interests because I think we are all wanting to do 
the same thing, serve the communities.
    And there are unintended consequences. It is like the old 
expression, no good deed goes unpunished. And you cannot afford 
to do that. And that is why I think sometimes we see a void 
created because of that.
    Mr. Quigley. Thank you. I want to thank all of you. And 
before we conclude, I want to ask unanimous consent to add a 
letter from the Credit Union National Association addressed to 
myself and the ranking member to the record. No objection. 
Thank you.
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    Mr. Quigley. I want to thank the Members who participated, 
the staff who helped put this together, and of course our 
participants. You were extraordinary. This has been very, very 
helpful. We look forward to working with you again in the 
future.
    Anything else, Mr. Ranking Member?
    Mr. Graves. No.
    Mr. Quigley. Thank you all very much. Have a good day.

                                      Wednesday, February 27, 2019.

 OVERSIGHT--ELECTION SECURITY: ENSURING THE INTEGRITY OF U.S. ELECTION 
                                SYSTEMS

                               WITNESSES

DR. J. ALEX HALDERMAN, PROFESSOR OF COMPUTER SCIENCE AND ENGINEERING 
    AND DIRECTOR OF THE CENTER FOR COMPUTER SECURITY AND SOCIETY, 
    UNIVERSITY OF MICHIGAN
HON. ERIC ROSENBACH, CO-DIRECTOR, BELFER CENTER FOR SCIENCE AND 
    INTERNATIONAL AFFAIRS, HARVARD KENNEDY SCHOOL
STEVEN SANDVOSS, EXECUTIVE DIRECTOR, ILLINOIS STATE BOARD OF ELECTIONS
    Mr. Quigley. Good morning. Today's hearing is called to 
order. This morning we are here to discuss an issue I feel very 
passionate about, and hopefully others here today as well, and 
that is protecting our election systems.
    For the past two years, I have done my best with others to 
sound the alarm about the vulnerabilities of our election 
system. We know that in the lead-up to the 2016 elections, the 
Russians targeted at least 21 State election systems. We also 
know, through confirmation of all 17 intel agencies, that 
Russia successfully hacked our democratic process to encourage 
voters to elect the President.
    But it did not stop in 2016. The Director of National 
Intelligence, Dan Coats, warned us that lights were still 
blinking red. And sure enough, in 2018 the intel committee saw 
similar attempts by Russia and other foreign countries, 
including China and Iran, to influence our election process and 
promote their strategic interest.
    We can be sure that they intend to interfere in the 2020 
presidential election. Yet many of the vulnerabilities that 
existed in 2016 continue to persist across the country. Our 
election infrastructure remains outdated, low tech, and nowhere 
near where it needs to be to prevent future intrusions.
    In the 2018 elections, 41 States used voting machines that 
were over a decade old and susceptible to cyber intrusions and 
system crashes. Thirteen States used voting machines that fail 
to produce a paper ballot or record, leaving them unable to 
conduct meaningful post-election audits.
    Thirty-four States used electronic poll boxes in at least 
some polling locations, including six States that used them 
statewide, which are vulnerable to hackers who can alter or 
delete voter registration data. Some of these States are taking 
steps to replace their outdated systems, but they lack the 
necessary tools and funding. We need to give State and local 
election officials the tools they need to adequately defend the 
security of our election system.
    After an 8-year gap in Federal funding, the fiscal year 
2018 Financial Services and General Government Appropriations 
Act included $380 million for grants to help States fortify and 
protect election systems, and we saw an overwhelming demand for 
assistance. Every single State and eligible territory requested 
grant funding. And the Election Assistance Commission, EAC, has 
disbursed every single dollar of the $380 million.
    The EAC is still analyzing how much money the States spent 
in the first nine months. But based on initial plans submitted 
by the States, we know the States plan to spend more than one-
third of the grant funding on cybersecurity efforts, and more 
than one-quarter of the was tagged for new voting equipment.
    While a critical first step, it is important to emphasize 
that this funding was just a down payment. It represents only a 
fraction of the total need across the country to replace 
outdated voting equipment and implement cybersecurity and other 
protections at the State and local level to ensure our election 
system can withstand future attempts of foreign interference.
    The last time our electoral process was put into question 
post Bush-Gore, this government spent over $3.5 billion to 
upgrade our election systems because we treasured the integrity 
of our democracy. I hope we still do. I look forward to hearing 
from our panel of expert witnesses this morning who can help us 
understand the challenges and threats we face and what steps we 
should be taking to address them.
    Before I turn to our witnesses for their statements, I 
would like to recognize ranking member Mr. Graves for his 
opening remarks.
    Mr. Graves. Thank you, Mr. Chairman. Good morning, 
everyone. Good to be with you today.
    When we show up to vote on Election Day, Mr. Chairman, I 
think we both can agree that we should have the confidence and 
guarantee that our votes and our voices are going to be heard. 
That means a fair count by local officials and volunteers and 
an election that is free from outside influences that aim to 
harm our systems.
    Maintaining the integrity of our country's elections is 
fundamental to our democracy. We should all be on the side of 
secure elections. This is not a partisan issue in any way. I 
appreciate the chairman holding this hearing today. I think 
this is a really important topic for us to discuss.
    Now, there are many aspects to election security such as 
voter registration systems, voting machines, absentee 
balloting, and ensuring that our polling places are safe. In 
fact, earlier this month I was pleased that the Department of 
Homeland Security, the Office of the Director of National 
Intelligence, and the Department of Justice shared that there 
was no material impact from foreign interference in our 
Nation's elections infrastructure in the recent, 2018 midterm 
elections. This is a significant accomplishment.
    General Nakasone, the Commander of United States Cyber 
Command and the Director of the National Security Agency, 
recently testified about efforts to defend the integrity of our 
midterm elections. Cyber Command created a persistent presence 
in cyberspace to monitor and to disrupt adversaries. They 
shared information through DHS with State election officials to 
help identify weak spots in our system and to improve threat 
warning. I hope these partnerships between the Federal 
Government and State and local elections officials continue to 
grow.
    But it is important that we leave election administering 
and oversight responsibilities to the States. What I do not 
want to see from this committee or from Congress is a heavy 
hand of Federal Government dictating to State and local 
officials how to administer their own elections or what 
equipment should be used.
    Nor do I want to see the Federal Government be the 
responsible party for funding States' elections. That is a role 
and a responsibility of the State governments, to fund the cost 
of voting machines and their administering of their own 
elections.
    Mr. Chairman, again thank you for holding a hearing on this 
important topic, and I look forward to a robust discussion 
today.
    Mr. Quigley. Thank you, Mr. Graves.
    Let me now introduce our distinguished panel that is here 
this morning. The Honorable Eric Rosenbach is the co-director 
of the Harvard Kennedy School Belfer Center for Science and 
International Affairs. Mr. Rosenbach previously served as the 
chief of staff for the Pentagon from 2015 to 2017, and 
Assistant Secretary of Defense for Global Security, where he 
was responsible for leading all aspects of Department's cyber 
strategy, policy, and operations.
    Dr. J. Alex Halderman is a professor of computer science 
and engineering at the University of Michigan, and director of 
Michigan's Center for Computer Security and Society. He 
conducts research on computer security and privacy, with an 
emphasis on problems that broadly impact society and public 
policy, including electronic voting, and has conducted multiple 
demonstrations on the vulnerability of these systems to 
hacking.
    Mr. Steven Sandvoss is the executive director of the 
Illinois State Board of Elections, where he has served in that 
capacity since 2015. He has been with the State Board of 
Elections for more than 30 years, so he brings a wealth of 
firsthand experience to his testimony today.
    I want to thank you all for being here today, and look 
forward to your testimony. Without objection, your written 
statements will be entered into the record.
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    Mr. Quigley. With that in mind, we would like to ask you to 
please summarize your opening statement in three minutes.
    Mr. Rosenbach, you are now recognized for three minutes for 
your opening statement.
    Mr. Rosenbach. Thank you, Chairman Quigley, Ranking Member 
Graves, for the invitation to join your subcommittee today. It 
is an honor to be here to speak to you about our Nation's 
cybersecurity and the integrity of our election systems.
    Also I would like to thank you for your service, and thank 
you for being with such good witnesses, Mr. Sandvoss in 
particular. State election officials are on the front lines of 
defending democracy, and it has been a pleasure to work with 
them over the past several years.
    Imagine, if you can, that we discovered during the Cold War 
that Soviet intelligence operatives had gained access to 
polling places and vote counting machines, and attempted to 
change the outcome of our Nation's election. Imagine if Soviet 
spies had infiltrated our Nation's newspapers and television 
stations and tricked them into publishing false content, and 
divided Americans and inflamed political tensions. Would 
President Reagan have stood by and debated the threat or would 
he have acted?
    This should not be a partisan issue, as Congressman Graves 
said. Our democracy has been attacked and continues to be 
attacked. Now is the time for the country to unify and come 
together and act, not after we watch the Russians or the 
Iranians or the North Koreans try to disrupt the 2020 
presidential election.
    As you mentioned, Mr. Chairman, the worldwide threat 
assessment highlighted the persistent threat of foreign 
interference in the elections in 2020. The assessment assures 
us, and I agree, that our adversaries are already planning how 
to disrupt the 2020 elections.
    With this in mind, I have three areas in which I believe 
Congress should focus. And of the three, I will focus on the 
first: bolstering domestic defenses and resilience, developing 
precise and legal offensive cyber operations, and adopting a 
clear public deterrence posture.
    First, Congress should authorize and appropriate regular 
ongoing federal funding focused on improving the security of 
our elections. The $380 million approved by Congress last year 
was an extremely important first step. However, the States need 
a dependable source of funding to support the cybersecurity and 
upkeep of paper-backed electronic voting systems. It should be 
very flexible but tied to the NIST framework.
    Second, Congress should pass a comprehensive privacy 
regulation law that protects Americans' personal data and 
information from abuse both by leading tech firms and nation-
state intelligence organizations from Russia and China.
    Finally, Congress should also immediately pass regulation 
to ensure that online platforms such as Facebook, Twitter, and 
YouTube, are not used as tools of foreign influence. Let's be 
honest: Facebook's disregard for America's privacy represents a 
significant national security vulnerability to our democracy. 
If they will not act, you must.
    Finally, the two other areas in which I think you should 
devote your attention are on developing precise legal options. 
As Congressman Graves mentioned, CYBERCOM in particular, if you 
read the Washington Post yesterday, has started a more 
aggressive posture, which I believe is very important. We 
cannot sit back and just take blows.
    Finally, the country needs a clear deterrent posture that 
shows our adversaries that we will not just be on the receiving 
end of these attacks, that we will be more assertive, and that 
we will unify as a country.
    Thank you, sir, very much.
    Mr. Quigley. Thank you, Mr. Rosenbach. You seem to have a 
very attentive fan in the audience.
    Dr. Halderman.
    Mr. Halderman. Chairman Quigley, Ranking Member Graves, and 
distinguished members, thank you for the opportunity to address 
this urgent matter of national security.
    Three years ago America's election infrastructure was 
attacked. Hackers targeted voter registration systems, and in 
some States had the ability to destroy registration data, which 
would have caused chaos at the polls. We were spared only 
because attackers chose not to pull the trigger. Next time 
things could be much worse because America's voting machines 
remain stunningly vulnerable.
    I and other computer scientists have found numerous ways 
that hackers could sabotage machines and alter election 
results, and sophisticated hackers can penetrate them even 
though they are not directly connected to the internet.
    Last fall Chairman Quigley and Representative Katko invited 
me to demonstrate a hack here on Capitol Hill in a mock 
election with a voting machine used in 18 States. I remotely 
hacked in, stole both Congressmen's votes, and changed who won. 
These capabilities are certainly within reach for America's 
enemies.
    Fortunately, we know how to better defend elections. Paper 
ballots, manual risk-limiting audits, and cybersecurity best 
practices are a prescription endorsed by the overwhelming 
majority of cybersecurity experts and by the national 
academies, and favored by a majority of election officials.
    Most States have started implementing these defenses using 
the $380 million that Congress appropriated last spring. But 
many are still struggling to afford replacing their vulnerable 
machines. For example, Georgia voted in November using the same 
machine that I hacked in front of Chairman Quigley, but it 
received only a tiny fraction of the cost to replace them. 
Forty-three States use machines that are no longer 
manufactured, and 12 States use paperless machines, which are 
impossible to secure. This puts the entire Nation at risk.
    States and local governments need further Federal 
assistance before attackers strike again. The highest priority 
should be to eliminate paperless voting and deploy hand-marked 
paper ballots, optical scanners, and assistive devices for the 
disabled. If provided under the Help America Vote Act, about 
$900 million is needed to ensure that all States receive at 
least half the necessary funds.
    States need this money now, even before stronger equipment 
standards are in place. But Congress can at least prohibit 
purchasing new machines that lack a robustly auditable paper 
ballot.
    With your leadership, elections in 2020 and beyond can be 
well-secured, and voters will have good reason for confidence. 
But if we delay, I fear it is only a matter of time until an 
election is disrupted or stolen in a cyber attack.
    Thank you, and I look forward to your questions.
    Mr. Quigley. Thank you.
    Mr. Sandvoss.
    Mr. Sandvoss. Good morning. My name is Steve Sandvoss and I 
am the executive director of the Illinois State Board of 
Elections. I would like to thank Chairman Quigley, Ranking 
Member Graves, and the distinguished members of the committee 
for giving me this opportunity to speak to you.
    As noted by Chairman Quigley and my colleague Dr. 
Halderman, in June of 2016 the Illinois State Board of 
Elections was a victim of a cyber attack, during which hackers 
gained unauthorized access into the voter registration database 
maintained by the State Board of Elections. In response to this 
attack, measures were immediately undertaken to eliminate the 
vulnerability, assess the damage, alert the victims, and beef 
up our own cyber defenses.
    Following this, the State Board of Elections undertook an 
unprecedented effort to secure its voter registration database 
as well as other IT-related applications. These efforts were 
assisted by the $380 million grant to the States by the EAC, of 
which Illinois received $13.2 million. Legislation was then 
passed in Illinois requiring the State to create a Cyber 
Navigator program.
    The Cyber Navigator program is a program that is required 
for the jurisdictions to participate in if they are to receive 
any Federal money. The first part of the program is the 
Illinois Sentry network, which is a State-managed network 
delivering network services to government agencies in Illinois.
    The goal of the network is to provide the election 
authorities with a cleaner and safer internet, and isolating 
this network to one under the complete control of the SBE and 
the Department of Innovation and Technology ensures that voter 
registration data and election authority management operations 
never actually flow over the internet. Additionally, this gives 
us the ability to provide additional security measures and 
monitoring.
    The second part is the Cybersecurity Information-Sharing 
Program, which in the SBE is overseeing partnership with the 
statewide Terrorism and Intelligence Center. The program 
involves the research and gathering of information related to 
cyber attacks and cyber resiliency, and sharing that 
information with both Federal and State stakeholders. Our goal 
is to consolidate numerous information sources and, with 
feedback from the election authorities, distill it into the 
most valuable, actionable information possible.
    The third element is Cyber Navigators themselves. Nine 
Cyber Navigators are currently on contract to assist the 
election authorities by performing onsite risk assessments and 
providing resources to ensure election security for 2020 and 
beyond.
    The Navigators will be offering additional services such as 
phishing assessments, penetration testing, and educational 
trainings. They will also be performing additional risk 
assessments on physical security and best practices in securing 
voting equipment.
    In addition to the Cyber Navigator program, the State Board 
of Elections worked in partnership with the Illinois National 
Guard cybersecurity team to provide cyber protection for both 
the State Board of Elections and the election authorities 
during the 2018 general election. Members of the Guard were 
stationed in all regions of the State, at the SBE office, at 
the statewide Terrorism Information Center, and at their own 
bases to be ready in the event of a cyber attack.
    Looking to the future, the State Board believes it is 
necessary to maintain this program indefinitely and to expand 
it to address the continuing needs of the election authorities. 
And in addition, as Dr. Halderman noted, the systems, the 
voting systems in the State, are ancient. They are outdated, 
need to be replaced. And that would, of course, entail funds to 
do so. Those are the immediate goals of the State Board of 
Elections and the election community in Illinois. I thank you 
for your time in allowing me to speak before you, and I will be 
happy to answer any questions you may have. Thank you.
    Mr. Quigley. Thank you all.
    Let me ask you, as succinctly as you can, we have to 
prioritize. Mr. Graves is fond of--and he is accurate in saying 
we do not have unlimited resources here. But we want to 
prioritize the needs that are out there to protect our election 
security.
    So I understand we are talking about training. We are 
talking about new equipment. We are talking about software. 
What exactly, if you could divide your time, do the States 
need? And if you could prioritize that to the extent possible, 
beginning with you, Mr. Sandvoss.
    Mr. Sandvoss. Certainly. I think if you were to ask the 
folks in Illinois who actually run the elections, I think they 
would all say that replacing the voting equipment is probably 
their number one concern and their most immediate need. 
Unfortunately, they all recognize that with the current budget 
situation, that money is probably not going to be forthcoming 
any time soon.
    Mr. Quigley. What is it going to cost? We could extrapolate 
out for States with equal, different populations. If you are 
going to replace all the equipment that needs it in Illinois, 
what would it cost?
    Mr. Sandvoss. I have been told roughly $175 million.
    Mr. Quigley. Okay.
    Mr. Bishop. Million or billion?
    Mr. Sandvoss. Million. [Laughter.]
    Mr. Quigley. Yes. Thank you for that.
    Mr. Sandvoss. Machines are expensive. They are not that 
expensive.
    But the other immediate need, and I think this is more from 
our standpoint, is cybersecurity. And I think with the Cyber 
Navigator program, we are going in the right direction with it. 
The tough part right now is getting all the election 
authorities to understand the threat, and I think most of them 
do. But again, it is a work in progress.
    But once we get them all participating in the program, then 
the next step is assessing their vulnerabilities, which is 
again a project of the Cyber Navigators, which they are doing 
as we speak. But once they come up with their assessments, my 
suspicion is that most of the jurisdictions in the State are 
going to need extensive improvements to their cyber posture, 
and that is going to cost money.
    Mr. Quigley. And the training that goes with it.
    Mr. Sandvoss. That is correct. Yes.
    Mr. Quigley. Okay. Let me move on.
    Dr. Halderman.
    Mr. Halderman. Thank you. I think the most important 
priority is to make sure we have paper ballots and strong 
audits in all States. But the biggest impediment to that is 
States that still have aging equipment, either that does not 
have paper ballots at all or that is very difficult to audit 
because of the way it is designed.
    Mr. Quigley. And is there a problem with the older 
equipment not being able to handle anti-hacking software?
    Mr. Halderman. Older equipment in general does not benefit 
from the last decade or two of security improvements. Things 
have gotten better in security in general. But we still do not 
know how to make a machine that is absolutely hack-proof. That 
is why we need this other layer of defense that comes from 
having a paper trail, paper ballots, and going back and spot-
checking them to make sure the result is right.
    Mr. Quigley. Now, you talk about hacking an individual 
voting machine. Now, there is a distinction Mr. Sandvoss and 
the State has talked to me about, and that is there are States 
that electronically communicate results. The machines are 
connected to the internet. And I do not believe that is true in 
Illinois. Is that correct?
    Mr. Sandvoss. The machines themselves are not connected to 
the internet, no.
    Mr. Quigley. But there are States that have that. Correct?
    Mr. Halderman. There are States that transmit results back 
over wireless links or over cellular modems that can go over 
the internet. But the bigger vulnerability, as I see it, is 
what happens before each election, when the machines have to be 
programmed with the ballot design from a centralized system.
    Mr. Quigley. I see. Okay. Let me move on, if I could.
    Mr. Rosenbach. Yes, sir. You said to prioritize. If you are 
going to prioritize, there is no way all of the technology 
catches up by 2020, which means, from my perspective, you have 
to focus on training and exercising to do holistic risk 
mitigation.
    So up at the Kennedy School, we have had State election 
officials several times come for Army-style training exercises 
in which we put them through an attack, have them respond, try 
to figure out how they can mitigate risk, and do all of those 
things.
    Mr. Quigley. How does this work? Putting this into 
perspective, there are, I have been told, 10,000 entities that 
are involved in a Federal election.
    Mr. Rosenbach. Yes.
    Mr. Quigley. Do we have the capabilities--as you say, the 
military-type training--to have those folks train all the way 
down the line?
    Mr. Rosenbach. Sir, it is a big challenge, but not as big a 
challenge as trying to completely replace technical 
infrastructure. And so you train the trainer. We have a 
training manual. We bring in people from States. They go back 
to the State. They run the exercise, train people how to do the 
exercise.
    It is not perfect. It is certainly not the silver bullet. 
But we are just trying to do something that can have the most 
immediate impact on trying to mitigate the threat which, 
remember, also is about info ops. There is a lot----
    Mr. Quigley. Sure.
    Mr. Rosenbach. Yes, sir.
    Mr. Quigley. And I do want to--and we will be equally fair 
with the ranking member in time. But what concerns me is that 
we sometimes forget that operating elections smoothly does not 
just involve the hostile actors. The fact is, we had recounts 
in States this time out that were not allowed to finish because 
the election equipment was broken.
    Mr. Rosenbach. Yes sir.
    Mr. Quigley. The whole democratic process, even if you do 
not have the problem of hostile actors, often hinges in trying 
to find out who really won an election with how old this 
equipment is.
    Mr. Rosenbach. Sir, totally correct.
    Mr. Quigley. Thank you.
    Mr. Graves.
    Mr. Graves. Thank you, Mr. Chairman.
    Let's get back to the topic here. I think we all have 
concerns about election outcomes and results. And even outside 
of elections, I think we all have concerns about cyber 
vulnerabilities. There is no question about that, Mr. Chairman.
    Mr. Rosenbach, are you aware of any impact or change of an 
election result from the 2016 or 2018 elections as a result of 
any kind of cyber attack?
    Mr. Rosenbach. No, sir.
    Mr. Graves. And so as we have this conversation, let's all 
know that there has been no altering of an election outcome. 
There is no evidence of that. Mr. Chairman, I know you are part 
of another committee that has gone into great detail and depth 
on this topic.
    But I think the broader conversation is: Do we as a 
committee step in and provide States Federal money and tell 
States how to spend their money? Or do we provide them guidance 
and good counsel and training? I think that is where we are.
    We are at the end of an authorization period where it was 
just about $4 billion was authorized 10 years ago. We just 
provided the $380 million in funding to the States. To the 
question about Illinois and their election systems and the 
cost, you are spot on, $175 million, because in fact, yesterday 
Georgia just passed a budget that included $150 million of 
State dollars to change out and upgrade elections equipment. So 
States can do it, Mr. Chairman, and I am proud that Mr. Bishop 
and I come from a State that is willing to step up and do that.
    But as we look ahead, the question I have for everybody 
here is: What is the role of the Federal Government in this? 
Are we to spend another $4 billion to get 10 years down the 
road to find out that we modernized things that we want to 
unmodernize again? That is where we are.
    It is funny to hear this conversation. We want to go back 
to the way things used to be because we spent a lot of money to 
get things in a spot to address where we think there might be a 
problem, but there have been no problems. So I will leave it 
with each of you on that, and we can just start down the table.
    I appreciate your three-prong approach there on addressing 
some of those problems.
    Mr. Rosenbach. Yes, sir. Thank you. So the first point is--
and the role of the government, like I mentioned--is to defend 
the Nation. That is why it is not fair to State and local 
election officials that they are there just taking the punches 
from the Russian Intelligence Service and the GRU. That means 
CYBERCOM needs to do something more proactive, as I believe 
they have been. We did not do that during the Obama 
administration. That was a mistake.
    Second of all, I do think it is important for there to be 
Federal funding for the States because this is a nation-state 
actor. The States are not designed to have cybersecurity to 
defend against that threat. It seems fair, with that in mind, 
that you give them extra support for cybersecurity-type 
defenses.
    Sir, I agree with you that----
    Mr. Graves. For new equipment or just for assistance in 
training, protection, defense, those kinds of things?
    Mr. Rosenbach. Honestly, I would leave that to the States. 
You are right. It should be the States. Let them decide. There 
can be a general framework, but the States should decide what 
they need most. But they do need a little help for defending 
themselves.
    Mr. Graves. As does the rest of the country. All entities 
need that same cyber protection.
    Mr. Rosenbach. Yes, sir. Yes. That is right. Exactly. And 
then just the last point is that--I will leave it there. I do 
not want to use up too much time.
    Mr. Halderman. The role of government in elections, I 
think, is one of providing for the common defense. The problem 
we have here is that from an attacker's perspective, they do 
not necessarily care what State they are going to strike in so 
long as it is one that is going to be able to cause a 
difference in a national election outcome, or undermine 
confidence in a national outcome.
    And therefore, until we bring up the most weakly-protected 
States to an adequate level of security, the whole Nation is 
going to be at risk.
    Mr. Graves. What is the weakest State, in your mind? 
Because right now we have heard there is no evidence of an 
election result being changed or altered as a result of outside 
influences of a cyber attack.
    Mr. Halderman. We have been very lucky that our adversaries 
have not pulled the trigger. And I think it is excellent that 
Georgia is making progress towards replacing its systems. 
Georgia has in the past been among the most vulnerable States. 
But there are still about 11 States that do not have an 
auditable, robust paper trail in place so that if something 
happens to the machines, we can go back and check. And I think 
that is the most persistent vulnerability.
    Mr. Graves. That is preventing them from changing to a new 
system. So maybe it is that Congress should require some sort 
of auditing. And I think this goes back to your point--you had 
three points--that some sort of system that shows that there is 
an audit trail or a way to account for election results. Is 
that what you are suggesting?
    Mr. Halderman. Congressman, I think it would be excellent 
if we had a uniform national policy that elections should be 
rigorously audited. But I think that having an unfunded mandate 
that States purchase perhaps hundreds of millions of dollars in 
new equipment in order to comply with that is going to create 
problems for many States that are struggling to find the money.
    Mr. Quigley. Mr. Cartwright.
    Mr. Graves. The gentleman from Illinois might want to----
    Mr. Sandvoss. Okay. I will be brief. I just wanted to echo 
Mr. Rosenbach's thoughts on the role of the Federal Government 
in defending against these types of attacks. When I was on ``60 
Minutes,'' I was asked whether I thought it was a fair fight, 
Illinois versus the Russians, and especially an agency as small 
as ours. And I said it was basically bows and arrows against 
the lightning.
    We have a good IT department, and our resources have been 
well spent. But the fact is, it is just not enough. And I think 
that with adequate funding, we can secure our elections even 
more. And I think it is vital that we do so. And letting the 
States be the primary driver as to where that money goes, I 
think, is the most prudent approach. Thank you.
    Mr. Graves. Can I just have one quick follow-up? I know we 
are talking about elections, and I know you are specifically 
talking about voter registration files. That is something we 
should all be concerned about. But is the State of Illinois 
under cyber threats in any other aspect, any other citizen 
information that might be at risk? Any tax information? I know 
we are talking about voter information. But it should be a 
broader context. Right? And I do not hear that the State is 
asking for federal assistance to protect all the other files as 
well.
    Mr. Sandvoss. We are not aware of any specific systems that 
are currently under attack. I think it is more the unknown is 
what we are afraid of. We were not expecting a penetration into 
our voter database, and hopefully it will not happen again. But 
you are right. There are other systems out there that could 
very well be vulnerable. And I think it is our job to see that 
those are secured as well.
    Mr. Quigley. The gentleman is not suggesting that if they 
had hacked into the Medicaid files for the State of Illinois 
and done it in dozens of States that the States would not be 
asking for help from the feds.
    Mr. Graves. You never know.
    Mr. Quigley. Well, again, just appreciate the level of 
sophistication of some at the State and local level in 
protecting these vital lists. This is not just elections. I do 
think it is a new world, with nation-state attackers attacking 
the local levels. But I appreciate that.
    Mr. Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman. And thank you to 
our witnesses for appearing today.
    Dr. Halderman, I come from Pennsylvania, where to this day 
83 percent of voters are using the paperless direct recording 
electronic voting systems, or DREs, direct recording electronic 
voting systems. These machines have been called a clear and 
present danger by the blue ribbon commission on Pennsylvania's 
election security, as well as other experts in the field.
    Now, as you noted in your testimony, this is a matter of 
the highest priority, these unauditable election machines. You 
said there is a plan to move to paper ballots, but that the 
costs have slowed the process. I looked at some of your 
research, and I found, dating back even to 2011, you found 
similar types of paperless voting machines used in India as 
particularly vulnerable to hacking. And as you have said, you 
have actually come here and demonstrated personally how to hack 
these machines.
    Here is my question. In lay terms, can you walk us through, 
first, what is it that makes DREs particularly vulnerable? And 
then secondly, what are the steps somebody or a State actor 
would follow if they were intent on manipulating election 
results calculated by DREs, and how easy or difficult this 
might be to achieve?
    Mr. Halderman. I would be happy to, Congressman Cartwright. 
And I myself grew up in Pennsylvania, so----
    Mr. Cartwright. I knew I liked you despite the Michigan 
pedigree.
    Mr. Halderman [continuing]. All right. So DREs are 
particularly vulnerable because, well, like other kinds of 
voting machines, they are computers. And so they are based on 
software and hardware that could potentially be compromised in 
many different ways.
    They are actually much more complex computers than they 
look like. You would think they are just a simple touch screen, 
but it could be a million lines of computer software that is 
powering those machines in the back office systems.
    I have studied DREs, including DREs used in Pennsylvania, 
since 2006. And for every machine that I have looked at, there 
have been ways that an attacker could craft malicious software, 
spread it into the machines, and use that to subvert all of the 
digital records of the vote the machine stores.
    And with a DRE, the entire record, or at least the primary 
record of the ballot, is simply a file in a computer's memory. 
So if an attacker can tamper with the software, they can change 
that file. They can change all the records of the vote and make 
the machine produce whatever totals the attacker wants.
    And it is not just attacking a single machine in isolation. 
Before every election, the DREs have to be programmed with the 
ballot design, the rules for counting, et cetera. And that is 
produced on a back office system somewhere by the election 
vendor or by the county or the State.
    If an attacker can hack into those back office systems, 
they can spread malicious software to all the DREs programmed 
from them. And in the most concentrated, centralized case, 
there is one vendor that programs DREs in 2,000 jurisdictions 
across 34 States from a central facility.
    So that is the risk, that an attacker can get into these 
systems, compromise voting machines on a massive scale, and 
just disrupt elections or even change results potentially on a 
wide enough scale to affect a national result.
    Mr. Cartwright. Staying with the paper trail issue for the 
moment, do you think that all voting machines having a 
verifiable paper trail is enough of a solution to the scenario 
you just described? Or is there more than Congress, States, or 
local election officials could or should be doing right now to 
make sure this never happens?
    Mr. Halderman. Well, briefly, it is not enough just to have 
a paper trail. We also need to make sure that voters are 
checking that paper trail to make sure that it is right and 
that election officials are auditing that paper trail to a high 
enough level of confidence that we know the election outcome 
produced by the computers is not fraudulent.
    Mr. Cartwright. If you were advising the State of 
Pennsylvania on what to do today to make our election process 
more secure, where are the top three things you would recommend 
be done immediately to ensure the confidence in our elections?
    Mr. Halderman. I would recommend that Pennsylvania, as soon 
as possible, replace its out-of-date and paperless machines 
with paper ballots and optical scanners, and that Pennsylvania 
implement what are called risk limiting audits, which are 
random sample-based tests at the end of the election, where 
officials look at enough of the ballots to know that the 
computer results are right.
    Then further improvements to cybersecurity best practices 
in the form of things like training, better testing of 
equipment, et cetera, would go the rest of the way to ensuring 
that elections cannot be sabotaged and results cannot be 
disrupted or changed.
    Mr. Cartwright. Thank you, sir. I yield back.
    Mr. Quigley. Thank you.
    Mr. Stewart.
    Mr. Stewart. Thank you, Chairman, and to the witnesses. It 
has been very informative so far. And I am going to hit on some 
things really quickly and kind of go down the line here, if 
include.
    Mr. Sandvoss, I want to start with you. And this is a 
tiny--well, not a tiny thing, but it is a small thing. But 
sometimes I think we hear things in here that perhaps witnesses 
say, ``Well, I did not say that exactly the way I meant,'' 
because there is a written record. I want to ask you, and I 
think you might clarify.
    You said you are not aware of other systems under attack. 
We know that they are and you surely know they are. I just want 
to give you a chance to say, yes, it is not just the electoral 
process or systems under attack. Virtually everything is under 
attack by some type of cyber warfare.
    Would you agree with that?
    Mr. Sandvoss. Yes, I would. And I did not mean to suggest 
that all the systems are secured and impregnable.
    Mr. Stewart. And I knew you did not. That is why I wanted 
to give you a chance to add some clarity to that part of our 
conversation.
    I was in Moscow in 2016 just before the election. I came 
home and I said, ``They are going to mess with our elections.'' 
I did dozens of interviews. No one really cared. They genuinely 
did not care. But I was often asked, ``Well, what are they 
trying to do? Do they favor one candidate? Do they want''--and 
I said, ``What they want to do is break down our faith in 
institutions. They want to break down our faith in democracy.''
    And there is no more greater catastrophe that we could 
endure than if people actually believed, for legitimate 
reasons, that an election, a national election, had been stolen 
and that it had been in some way altered by some foreign 
entity.
    And whoever put this together at FSB or what other 
intelligence organization in Russia to do surely got a 
promotion out of this because I think it exceeded their wildest 
expectations. I do not think they thought that we would be 
talking about this three years later and on.
    Mr. Quigley and I both sit on the House Permanent Select 
Community on Intelligence. We looked at this deeply. We had, 
about a year ago, a list of recommendations that I have 22 of 
them here that I am going to refer to in just a moment. The 
deal with this is something that I think all of us take 
seriously. So I want to again go very quickly. And for clarity, 
I want to hit this and allow all of you to have a chance to 
answer because Mr. Rosenbach, have, but others have not.
    I want us to assure the American people of this one thing. 
This is an enormous problem. We have to be aggressive in 
dealing with it. But I also want them to understand, because 
some of them do not, that we do not have evidence of them 
altering the outcome of any election. And I want you to say yes 
or no, you agree with that.
    Mr. Rosenbach, you already have. You said you agree with 
that. Mr. Halderman?
    Mr. Halderman. Yes. I agree with that.
    Mr. Stewart. Okay. And Mr. Sandvoss?
    Mr. Sandvoss. I also agree with that, yes.
    Mr. Stewart. Okay. Thank you. It is just for clarity.
    One other thing that I think is important for people to 
recognize, this is not new. This did not just start in 2016 or 
2018. We have examples of, for example, Russia interfering with 
a Ukranian election where they actually had a news release 
predicting the outcome because they manipulated the numbers, 
and then they were able to stop it.
    And I think it is again important for us to see this is not 
something that was just created. In fact, in the fall of the 
Berlin Wall, Russian people looked at us as, these Americans 
could be our friends, but I do not think Russian leaders did. I 
think they always kept the hybrid warfare and all of the 
options on the table, and they were active in that.
    So now coming to the point, if I could, I think, Mr. 
Halderman, you are the one who has been making it. So I was 
fascinated with your conversation about your ability to 
demonstrate hacking of a system, and did so apparently pretty 
easy. If it is that easy, A, why have they not done it? And the 
second question is, how can we dissuade them?
    Because that is something I have been advocating for for a 
long time, not just in the electoral process, but just 
dissuading these cyber attacks with more aggressive 
repercussions from it. Thoughts on that?
    Mr. Halderman. I do not want to give the misimpression that 
it is something so easy that anyone could do. But I do think 
that manipulating election results at scale is something that 
is well within the reach of sophisticated nation-states like 
Russia.
    Why have they not done it yet? I think they have not done 
it yet because they have not seen it as in their interest yet 
to cause a disruption that severe to our electoral process. And 
that is what scares me, that it is not the technology that is 
preventing them or deterring them from causing wider-scale 
manipulation. It is that there are limits to their interest.
    Mr. Stewart. A political calculation?
    Mr. Halderman. I believe so.
    Mr. Stewart. So if there are those of us who have been 
advocating for a long time that we should have greater 
repercussions for some of their cyber intrusions--again, Mr. 
Rosenbach, I think you had suggested this in your opening 
statement--what would you suggest that might be? And do you 
think it would be effective?
    Mr. Rosenbach. Yes, sir. I think we are on a path to doing 
that with taking more assertive actions, as reported in the 
Washington Post yesterday, that CYBERCOM cut off internet 
access for the organization that was responsible for this. I 
think there needs to be clear attribution, and people at the 
most senior levels of government need to say that this type of 
activity has happened, that there will be repercussions and 
sanctions, military action, and other things.
    The one thing that I think is different is the manipulation 
of social media is something on a scale and a depth that would 
not be able to take place before because of the technology. And 
the technology changing has made their ability to influence 
much different than it was in the past.
    Mr. Stewart. Well, thank you. And to the chairman, I wish I 
had another hour, but that would be unkind of me. But it is an 
important conversation.
    Mr. Quigley. Thank you.
    Mr. Bishop.
    Mr. Bishop. Thank you very much. And thank you so very much 
for all of the work that you do.
    I have read all of your testimony, and I am very impressed 
with the work that you have done and the questions that my 
colleagues have already asked.
    I would like to talk about, or ask you to talk about, not 
just the voting machines, which I think that you have 
adequately discussed that, but the relationship between the 
voter registration systems and voting on Election Day so that 
the vulnerabilities of poll workers and polling places to 
verify that voters are actually registered or not registered, 
or registered at a particular precinct or not registered, 
which, if certain demographic groups are eliminated or are 
wiped from the record, would be prevented from voting when they 
appear, and particularly if they are voters who have to rush 
back to work who do not have time to do the added verification 
for provisional ballots.
    What is the implication in terms of the vulnerabilities of 
our voter registration systems? I think in Georgia the 
Secretary of State's office has a database with all of the 
eligible registered voters and the local counties, county 
election boards have access to that through--I am not sure if 
it is internet, but there is an election connection there.
    I think in Illinois your department, your Illinois State 
Board of Elections, has a separate pipeline so that you do not 
run your data, election data, through the internet. You have 
developed a separate system, which makes it more secure. But 
most States do not do that.
    So can you talk about how we secure that, and the impact on 
national elections? The weakest link in that whole thing could 
very well determine the outcome in a close election. Can you 
just discuss that, the three of you?
    Mr. Sandvoss. I will try to address the importance of the 
link between voter registration systems and the actual voting 
on Election Day. And I think it is a critical link.
    Obviously, maintaining an accurate list of the registered 
voters is paramount to an efficient, well-run election. I think 
where the problem could occur is if a malicious actor were to 
mess with the database, whether it is wiping it out or 
manipulating it. It could cause catastrophic problems on 
Election Day.
    Mr. Bishop. So, I mean, the research that you have done, 
does it indicate that there are vulnerabilities for doing just 
that?
    Mr. Sandvoss. Well, our system is an example of a 
vulnerability. Now, what the difference is, in Illinois we have 
a bottom-up system so that the voters are registered through 
the local election officials and then their information is 
transmitted up into our database. So theoretically they could 
wipe out our database, but elections would still go on because 
it is all done at the local level.
    If there was an intrusion into the local database, that is 
where you would have a problem. And I think this is where the 
vulnerability is more acute in Illinois because the defenses 
that the local election officials have--in some cases--very 
little defense; others, maybe larger counties, have perhaps a 
stronger defense--but I think there is where the vulnerability 
is.
    Now, in Illinois you have same-day registration and you 
have provisional voting so that, again hypothetically, if a 
county's system was compromised, people would still be able to 
vote because----
    Mr. Bishop. Let me ask Mr. Halderman if he could--you have 
done some looking at the Georgia system in terms of voter 
registration, how it relates. What is your observation there?
    Mr. Halderman. Yes. Well, Georgia is, I think, a good 
example. Potential vulnerabilities shortly before the November 
election. There were a number of problems detected with the 
Georgia online voter registration system including a simple 
attack whereby attackers could potentially manipulate voters' 
data.
    I think the key to securing voter registration is 
monitoring to make sure that attackers are not penetrating the 
database coupled with resilience, having mechanisms in place, 
especially at the polls, to make sure that if something goes 
wrong with the database or the e-poll books, that the election 
can continue, including having things like early voting take 
some pressure off of Election Day systems and could add to that 
resilience.
    Mr. Bishop. Again, thank you. My time is just about 
expired. I thank you.
    Mr. Quigley. Thank you.
    Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman.
    Out of the $380 million of the Help America Vote Act grants 
that were allocated in 2018, about one-third of the funds would 
be spent on cybersecurity, one-third would be spent on new 
voting equipment, and about one-third was supposed to be spent 
on voter registration systems and other State-specifies 
activities.
    Mr. Sandvoss, when it comes to purchasing new voting 
equipment and improving cybersecurity, how long would you say 
it takes to fully implement these measures?
    Mr. Sandvoss. Well, in Illinois we have a process where 
voting system vendors seek approval from the State Board of 
Elections to allow their machines to be in use in Illinois. And 
we put them through a rigorous test. They also have to go 
through Federal testing as well.
    Our testing probably takes--depending on the size of the 
election that is being tested, it could take a couple weeks. It 
could take over a month. My understanding is some of the 
problems happened with the vote testing at the Federal level, 
where there were some delays. It took a long time for voting 
machines to get the Federal approval necessary to even come to 
the State.
    It is hard to put an actual beginning and end point to 
implementing these systems, I guess, or these qualifications 
for the voting systems to actually be in use. Right now we are 
still waiting for the Voluntary Voting System Guidelines to be 
promulgated by the EAC; once that is done, then voting machine 
manufacturers need to test their systems to those standards.
    It is going to take a long time, and I cannot guarantee 
that it would be done by 2020.
    Mr. Joyce. Thank you. It is my understanding that each 
State has until 2023, and it will take most States at least 2 
to 3 years to use the majority of these funds. I also 
understand the first progress report was due to the Election 
Assistance Commission only two months ago.
    Mr. Chairman, it would seem to me that it would be more 
effective to see the financial and progress reports to 
determine the effectiveness of each State's approach before 
moving forward in allocating additional funds.
    Mr. Quigley. I appreciate your thoughts on that. If you 
want me to interject or ask questions related to that, that is 
certainly up to you. It is your time.
    Mr. Joyce. Well, I was just making that point of order.
    Mr. Quigley. No. I appreciate that. And if I might, and 
certainly giving you the time that you need. So the EAC is 
slowing the States down?
    Mr. Sandvoss. Well, it was just recently that the two new 
appointees were confirmed, and now the EAC has a quorum. So 
there was some delay, at least in getting the voting system 
standards out.
    Mr. Quigley. But your belief, and operating in these 
programs on a daily basis, is that training, equipment, 
software, and so forth is effective, and it protects your 
system. The fact that it may take longer than it should does 
not deter your interest?
    Mr. Sandvoss. Oh, not at all.
    Mr. Joyce. I reclaim my time, Mr. Chairman. With all due 
respect, in 2018 Ohio used Help America Vote Act grant funds to 
host regional tabletop exercises for election officials.
    Mr. Rosenbach, these exercises were modeled after the 
crisis simulation organized by the Defending Digital Democracy 
project. Can you provide more information on how these types of 
events prepare our election officials for our worst case 
scenarios?
    Mr. Rosenbach. Yes, sir. Thank you for asking about that. 
And thank you for having the Ohio folks there. They did a great 
job and are real professionals. That is the project that I lead 
up at Harvard.
    And what we do is we simulate a Russian cyber attack 
against the State and local election infrastructure and help 
them rehearse how to prepare for that in terms of risk 
mitigation steps technically and otherwise; how to respond to 
information attacks in the media and in the press, and via 
social media, which is what often would happen with the 
Russians.
    And the reason we do that is along the lines of what Mr. 
Sandvoss said--it can take time to get new technical things in 
place, and we may not have that time. So we just want to 
rehearse, do like you do in the Army where you exercise to 
failure, learn from that, then teach someone else to do it, and 
try to have all the election officials in Ohio do something and 
learn and get better.
    Mr. Joyce. What other proactive steps can local election 
officials take to ensure personnel are adequately prepared or 
trained for these type of scenarios?
    Mr. Rosenbach. Yes. These are surprisingly basic things 
when it comes to cybersecurity. So it is making sure that they 
use the right type of password, making sure that they use 
encryption and two-factor authentication, that they have a plan 
for what to do if a hack occurs in terms of being resilient.
    As many of you said, this is all about trust. And even if 
the bad guys attack us and we do go down, if we are able to 
demonstrate to the public that we went down and we came back 
up, the vote is still viable, you can trust in it, then it also 
diminishes the Russians' or the Iranians' desire to try to 
attack if they know it is not going to have any impact.
    Mr. Joyce. During my time as a county prosecutor, I used to 
represent a board of elections. We went to this electronic 
system, or the ``egg,'' we called it the egg like an old grade 
school test. And you would put it in. We created a back door in 
the system so that the coy, in case there was an issue, could 
come back into it. Correct?
    Mr. Rosenbach. That will happen often. Back doors are not 
good cybersecurity practice for encryption or anything else.
    Mr. Joyce. Going forward, is there a way to eliminate that 
and still allow the system to be operable or have somebody be 
able to repair a malfunction without allowing something in?
    Mr. Rosenbach. In my experience, there is nothing 
electronic that will not have a vulnerability. And that is 20 
years working in the intelligence community as a former NSA 
person in cyber. But that is why you build in all these other 
risk mitigation factors into it and why you do try to update 
technology, update software, address vulnerabilities, so that 
you make it a lot harder.
    Mr. Joyce. And I do not mean to go too far over my time--I 
am taking back some of the time that Mr. Chairman had used--but 
you really cannot have a back door. You cannot allow the 
manufacturer to be able to work on this equipment remotely 
without creating an opening for----
    Mr. Rosenbach. No, sir. I think back doors are a big 
cybersecurity vulnerability. If it were up to me, there would 
be no closed proprietary software used on election voting 
systems, and we would have a national project in which we 
worked on an open source system that would be much cheaper for 
the States, much more transparent, and have far fewer 
vulnerabilities.
    Mr. Joyce. Did HAVA address any of those things?
    Mr. Rosenbach. How would it address that?
    Mr. Joyce. No. HAVA, or Help America Vote Act.
    Mr. Rosenbach. HAVA addresses it right now because it is 
replacing and updating old technology which is full of holes 
that the bad guys can attack.
    Mr. Joyce. But it is true----
    Mr. Rosenbach. I do think that is important. But I think we 
could find a more----
    Mr. Joyce. That problem is--that is 50 separate programs, 
though. Correct?
    Mr. Rosenbach. Yes, sir. We could find a more innovative 
and more cybersecurity-based way to do that that would not be 
based on the current vendor-based system right now.
    Mr. Joyce. I get it. Thank you, sir. I yield back my time.
    Mr. Quigley. No. I understand. And Mr. Joyce raises 
interesting points, and important ones. We are just talking 
about the States and locals. But the attack that we were 
talking about in Illinois was through a vendor. Correct?
    Mr. Sandvoss. Actually, the attack in Illinois was not 
through a vendor. It was a direct attack into our system using 
the online voter registration website portal. It was an SQL 
injection.
    Mr. Quigley. But there was somebody related to the issue as 
it relates to a vendor who had supplied this or something. Is 
that--some accurate point? I mean, there has to be--because we 
are using vendors toward these points, is that not creating the 
vulnerabilities that we may not necessarily be alerted to?
    Mr. Sandvoss. That must have been one of the jurisdictions 
in Illinois----
    Mr. Quigley. Right.
    Mr. Sandvoss [continuing]. That involved a vendor, maybe 
storing information on the cloud or something to that effect. I 
do recall that. But that did not impact our--that was not the 
case in the attack on Illinois.
    Mr. Quigley. And we are going to get Mrs. Kirkpatrick in a 
second. But I will let the other two gentlemen discuss that 
issue, if they could.
    Mr. Sandvoss. Well, attacks on vendor systems or on 
vendors' customers lists, or attacks on vendors' supply chains, 
could also compromise equipment used by States throughout the 
election process. So the vendors are part of the problem. They 
can be part of a solution, too, because somebody does need to 
manufacture and service voting equipment. But we need better 
standards.
    Mr. Rosenbach. I would just say very quickly, the Russians 
or other national intel sources regularly try to get in through 
vendors to attack the United States Government, Department of 
Defense, and would do it in the election system.
    Cybersecurity is a cost, a cost center in the private 
sector. That means there are not huge incentives for vendors to 
devote a lot of investment in the cybersecurity of their 
machines and technology unless forced to do so by a contract or 
otherwise.
    Mr. Quigley. I see.
    Mrs. Kirkpatrick.
    Mrs. Kirkpatrick. Thank you, Mr. Chairman and Ranking 
Member Graves, for having this hearing. I agree with what 
Congressman Stewart said, that election security is so 
important to our democracy. We have all talked with voters who 
believe their vote does not count, and we have seen voter 
turnout decrease as a result of that.
    In Arizona, we have early voting and we have vote by mail. 
And so my question to the panel is: Is that a better system? Is 
that a more secure system, voting by mail and having early 
voting? And what kind of risks do you see in that system?
    Mr. Halderman. Early voting can reduce pressure on Election 
Day. That is very positive. It does complicate some of the 
technology, but we have ways administratively of dealing with 
those complications. One of the most important things is to 
make sure that early voting as well is based on a paper ballot 
the voter can verify that gets audited after the election.
    Vote by mail has pros and cons. On the pro side, it is on a 
paper ballot that can, at least in theory, be audited after the 
election. On the con side, unfortunately, voters are no longer 
voting within the safety of a polling place. And particularly 
for the weakest people in society, they could be at risk of 
being coerced or having their votes bought or stolen through 
the vote by mail process. So there are important tradeoffs 
involved.
    Mr. Rosenbach. Yes, ma'am. I would just say very quickly, I 
am a strong proponent of vote by mail and early voting. What 
Dr. Halderman said notwithstanding, if you just look at 
participation rates in States like Oregon and Washington State, 
they are significantly higher. That is good for democracy. And 
there are a lot of people who would not otherwise vote that 
will. From a cybersecurity perspective, also clear advantages.
    Mr. Sandvoss. I would have to agree with both of my 
colleagues on the points that they raised, especially the pros 
and cons. I think with mail-in voting, the obvious pro would be 
convenience for the voter and perhaps make it easier to do a 
random audit, a risk-limiting audit.
    On the flip side, we get complaints quite often of people 
who get sent applications and then they said they did not 
request them, although that is perfectly legal in Illinois. But 
it contributes to that general sense of distrust.
    It is also possible that without the security of voting in 
a polling place, there is no way to ensure that the voter is 
voting independently, without coercion. Sometimes a vote by 
mail can--or I should say offsite voting--it is a problem in 
nursing homes in Illinois, where you get an overzealous 
precinct captain who might collect all the ballots and have 
improper influence on the way they vote.
    So there are negatives, too. But I can certainly see the 
positives from an economic standpoint and a convenience 
standpoint.
    Mrs. Kirkpatrick. Same-day registration is becoming more 
and more popular. We do not have it yet in Arizona. But I would 
like each of your opinions on same-day registration. Is that a 
more secure way to register and vote?
    Mr. Sandvoss. I would say that, again, with same-day 
registration, it is more like a fail-safe, that if--as Mr. 
Bishop had brought up, the point about manipulation of the 
voter registration rolls, if such a situation were to occur, 
same-day registration would at least allow the person to vote, 
which to me is the most important thing, and then you can 
straighten out what happened afterwards.
    As far as security is concerned, I do not see necessarily, 
from a technical standpoint, that being an issue. There may be 
an issue, though, related to verifying who the person is. Are 
they who they say they are? Because once they cast the ballot, 
then that is it. You cannot take it back.
    Mrs. Kirkpatrick. Other panelists comments?
    Mr. Halderman. Same-day registration can take some of the 
pressure off of the polling place operations and the poll books 
once again. It can add resilience. It does also require more 
technical plumbing to make sure that that process can work. And 
it is important that we apply good cybersecurity thinking 
there.
    But I think the broader point is that election 
cybersecurity in general is a problem where we can make a lot 
of progress. And things like same-day registration can feed 
into improving that.
    But I think unlike so many other cyber challenges, 
Representative Kirkpatrick, this is a problem where we can 
actually solve the problem. It is going to take a little bit of 
money, but it is not going to be decades of research. It is not 
going to be billions of dollars. We have an opportunity for a 
cybersecurity win in election security.
    Mrs. Kirkpatrick. Anyone disagree with that?
    [No response.]
    Mrs. Kirkpatrick. Thank you. I yield back.
    Mr. Quigley. Mr. Graves.
    Mr. Graves. Mr. Chairman, this is really a great 
discussion. I think it is a good opportunity to compliment the 
States in navigating a very difficult and challenging process, 
and keeping the integrity of the process because there are a 
lot of moving parts. I think every State is very, very 
different. And there is a lot of--I think we all know from our 
own elections--there is a lot of energy in the elections 
process from a constituent base and candidate base.
    You could probably take this conversation broader, whether 
it was the IRS commissioner here or OPM or Treasury, or an SEC 
chairman sitting before us. We would probably have a very 
similar concern and conversation about what would we do with 
the cyber threats out there.
    And I think you have brought up something that is 
fascinating, probably generally from the gentleman from 
Illinois. And that is, what do you do when you are a State that 
is being attacked? How do you respond to that? Who do you call? 
Who is going to be there to help? And that is the biggest 
question to answer, really, quite frankly. How do we provide 
that support?
    Something I have been a strong advocate for and have 
introduced legislation to address, is to allow for active cyber 
defense. We are a very passive Nation when it comes to 
cybersecurity, meaning we have to be impacted first and then we 
can respond.
    Mr. Rosenbach, I think you have hinted at that, and the 
Federal Government is stepping into that role a little bit. I 
think we should enable States to do more of that, and the 
private sector as well, whether we are talking the IRS 
commissioner or States. Our largest business in our district, 
to the smallest business, to the family, who do they call when 
they are being impacted or how can they respond? And the answer 
is, everybody is vulnerable and left vulnerable.
    So Mr. Chairman, as we go forward, I hope we can have a 
conversation, you and I and Mr. Stewart and others about how we 
can equip Americans and provide tools to be available to not 
only States or agencies or the private sector but others, to 
actively defend themselves in the cyber realm because this is a 
new threat and concern for everybody.
    This is a fascinating and great conversation, and I 
appreciate all three panelists here.
    Mr. Quigley. And I want to give anyone a chance to ask a 
second round of questions. And I appreciate that, and I hope 
that as a committee we can talk about how HAVA was created. And 
Mr. Joyce, you were alluding to that, how this funding works 
right now.
    The formula allows for consideration of voting age 
population. And one of the questions I want to get to is: Is 
there a better way to do that based on need or some sort of 
competitive analysis on this? And analyzing how well it works, 
too, to your point. So I appreciate that, Mr. Ranking Member.
    And I guess we go back to the Democrats to a second round 
and go to Mr. Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman.
    One thing that we have heard multiple times today is this 
question: Are you aware of any outcome that was changed in any 
American election because of outside interference or hacking or 
things like that? And that is a little different from the 
question I would ask.
    The question I would ask would be: Has any American 
election result been changed, whether we are aware of it or 
not? And so you think, well, we have been going back and forth 
about this lack of audit trails. How do we know? I mean, there 
are a lot of close elections that we do not have audit trails 
for. Do we know for sure, Mr. Rosenbach?
    Mr. Rosenbach. We may not know for sure, but this is, my 
gut tells me, working on this stuff for 20 years, watching the 
Russians, doing a lot of intel stuff, doing intel oversight, 
is: What the Russians did is probably a very small part that we 
know of. What we know of is a very small part of what they 
actually did.
    Any time the Russians have hacked something, including the 
Department of Defense, we find one small thing and only later 
unravel the greater part. So while we do not know that 
definitively, and that is important to say, I do not think we 
should solace in that as a fact.
    They are very good, they are very aggressive, and they are 
probably doing something right now, and may even be in the 
infrastructure we have just like they are in the energy grid 
and parts of the financial structure as well.
    Mr. Cartwright. Well, along those lines, yes, the Russians 
are smart and they are aggressive. And they are also really 
subtle. So they know if they are going to bollix up one of our 
elections in a big way, it is going to cause a big uproar in 
this country and really attune everybody that this is an attack 
on our national sovereignty by a foreign power.
    They are not that dumb. They are going to do subtle things. 
What is your take, Dr. Halderman?
    Mr. Halderman. I agree with you that they are going to 
strike when it is in their interests to strike. And 
unfortunately, our technology is not yet there to stop them. I 
think 2020 is going to be the bigger prize. It is not 
surprising that 2018 was relatively quiet because, as you say, 
the attackers do not want to induce an immune response, almost, 
that is going to make it harder for them to strike when they 
really want to later.
    But the unfortunate truth is that although there is no 
evidence that votes have been changed through a cyber attack in 
this country, there are many places that just are not being 
checked because there are not audits in place. There is not a 
paper trail in place.
    And if you go and ask DHS, for instance, how many voting 
machines they brought into a laboratory and did forensics on to 
make sure that there was no malicious software inside, I am 
pretty sure the answer is going to be zero. So there is a lot 
more that we could be doing to look for evidence of an attack.
    Mr. Cartwright. Mr. Sandvoss?
    Mr. Sandvoss. As far as the question of, has there been an 
election that the results have changed and we did not know 
about it, obviously we do not have any evidence that here in 
Illinois--I am not saying that it is not possible; it certainly 
is.
    We do have procedures in place to try to prevent that. We 
have a pre-election test, a public test, a post-election test. 
Our agency selects at random jurisdictions to be tested. The 
voting equipment is tested. So there is some assurance that we 
could give that the election results are legitimate.
    But there are other factors that are beyond our control, 
and that is, what at least there is some evidence of is 
manipulation through platforms such as social media, which one 
could argue the extent that it affects an election. But when 
you have fake accounts hitting on hot-button issues that might 
influence somebody whether to vote or not, that could have a 
subtle effect on an election. And those are harder to defend 
against.
    And the State Board of Elections cannot order or establish 
security procedures by the major social media companies. That 
probably would take some sort of Federal legislation.
    Mr. Cartwright. Well, I thank you for all of your testimony 
today. I yield back, Mr. Chairman.
    Mr. Quigley. Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman. And the point I was 
trying to make initially was that we are creating 50 separate 
units and we have yet to hear from the last grants that were 
issued what the solutions were, or potential solutions. So 
before we--I am all for us admitting there is a problem.
    But before we advocate for more money, we should certainly 
make sure that we are addressing the programs that exist. And 
to that extent, in 2016, as I understand, one of the problems 
we had was the open lines of communication were lacking between 
the Department of Homeland Security and State election 
officials.
    As a result, they were unprepared to respond to detected 
suspicious activity in a timely manner. And I open this up to 
all of you. What efforts were made leading into the 2018 
election to improve visibility and open lines of communication 
to State and local officials?
    Mr. Rosenbach. I will just say very briefly I think in 2016 
there clearly was a problem of communication between DHS and 
the States on this issue. And I have to give credit to the 
Department of Homeland Security. In the last several years, it 
really has done a good job to double down on that effort, open 
lines of communication, pass information, give Secretaries of 
State security clearances.
    I think all those things are very positive. And it is that 
role that the Department of Homeland Security should have that 
has gotten much better, too. But I think Mr. Sandvoss can give 
a better answer on that part, too.
    Mr. Sandvoss. I would say that the Department of Homeland 
Security, by its own admission, came up a little short prior to 
the 2016 elections with respect to communication. I think since 
then--maybe it was a wakeup call; I do not know--but I think 
their efforts have certainly improved.
    I have been a part of two security briefings that I thought 
were worthwhile. They offer all sorts of assistance, free 
assistance, to jurisdictions that they need to take advantage 
of. I guess if there is one area that we would like perhaps to 
see a little more, it would be on-the-ground recovery 
assistance in the event of a cyber instance. Have boots on the 
ground, so to speak, to respond immediately.
    I know there are 50 States that are probably going to be 
wanting that kind of assistance, so I could see that being 
problematic. But----
    Mr. Joyce. In that light, what should the EAC be doing to 
prepare for the 2020 election when you are back to a 
presidential year and you will have a larger volume of voters?
    Mr. Sandvoss. Well, I think one of the things they might 
consider doing is kind of what we did in Illinois with our 
Cyber Navigator program, have actual Cyber Navigators ready to 
go to respond to cyber instances. Have a team assigned to each 
State. Just a suggestion.
    But I know that we have requested help, and they are very 
good at offering assistance. But a lot of times they will 
evaluate that, and we are expecting a CERT team to come in, and 
they will say, ``Well, it probably could be better handled by 
you folks in Illinois,'' as opposed to sending in a Federal 
team of Cyber Navigators to address a problem.
    And it could be just lack of resources. It could be other 
things that I do not know about. I am just--my IT department 
tells me that that is probably the one area that they could use 
a little more assistance--not that the DHS is not doing a good 
job. I think they are, and they have come a long way. But we 
all can improve.
    Mr. Joyce. I see Dr. Halderman is champing at the bit to 
address this, so----
    Mr. Halderman. Well, let me just briefly say that I think 
DHS has been a big help in providing advice and guidance to 
States. They have come a long way since 2016. But I just want 
to emphasize that in States that do not yet have equipment with 
a paper trail in place, there is no amount of DHS assistance 
that is going to bring those States up to a reasonable level of 
security. You are just putting lipstick on a pig.
    Mr. Joyce. Well, that is a very good point. Then why have 
them? Unless we have a secondary trail to audit, why have them?
    Mr. Halderman. Why have--excuse me?
    Mr. Joyce. Why have a single system? If you do not have a 
paper trail, you do not have something to have your check and 
balance on, then why would you have a one-source system like 
that?
    Mr. Halderman. A one-source system? Well, there are States 
that have not replaced out-of-date systems that do not have a 
paper trail. And there is no good reason today, in 2019, to 
have a system that does not use paper ballots.
    Mr. Joyce. Well, the optical scanners we use with the old 
circle egg thing, at least at the end of the day you have the 
machine and you have a paper ballot to match again. I mean, I 
do not know why we would invest any money or allow a State to 
invest money in a system that just does not work.
    You are saying that they have not been upgraded from the 
beginning?
    Mr. Halderman. That is right. There are States that have 
not upgraded those machines from the beginning. Years ago we 
did not understand, or at least the broader community around 
elections did not have the standards or the data or the 
experience to understand how risky it would be to use paperless 
voting systems.
    But now with nation-state attacks being something you read 
about in the newspaper every week, well, we know better than 
that. But States need resources. They need to act to replace 
that equipment.
    Mr. Joyce. Thank you. Go ahead. You were leaning forward. 
We will take it. All right.
    Thank you, Mr. Chairman. I yield back.
    Mr. Quigley. Mr. Bishop.
    Mr. Bishop. Thank you very much. I am still concerned about 
a national standard. It seems to me that if every--you got 50 
States deciding to use whatever system they deem appropriate. 
And if there are some vulnerabilities, as perhaps in Georgia in 
2016 or 2018, where there was some indication from Homeland 
Security and FBI that our systems were being targeted.
    But the elections officials rejected the scrutiny so that 
we really do not know if it occurred. And the help from a 
robust backup system from the Federal Government was rebuffed, 
so we really do not know.
    Do you not think that we need to have a national system 
that is standardized in spite of the fact there might be some 
concerns about overreach so that, for example, if every State 
had a system similar to what Illinois has employed--and as I 
understand it, you are not completely--you have not done that 
with all of your election authorities.
    You really experimented with it. You have done only 
partial, what, a third, maybe half of them?
    Mr. Sandvoss. Actually, currently we have 94 out of our 108 
are participating in the program.
    Mr. Bishop. Which means that would--and let me ask all 
three of you. If every State had a system similar to the one 
implemented in Illinois, would that make for a more secure--a 
better outcome for our Nation as a whole, particularly with our 
national elections?
    Mr. Halderman. If every State had a system that had hand-
marked paper ballots, optical scanners, and manual risk-
limiting audits, we would be quite well-protected. And I think 
voters could have confidence that any attack on the voting and 
tabulation process would be detected and correctable.
    I think we do need stronger minimum standards for election 
technology and election auditing, just to make sure that we can 
bring up the States that are most weakly protected to a 
reasonable level. But at the same time we have to acknowledge 
and bear in mind that there are important differences between 
States and that being overly prescriptive just is not going to 
work.
    But that core outline of a recipe, having paper ballots and 
having audits to a high level of confidence, is something that 
every State can do. And making sure that States have the 
resources to do it is the new challenge.
    Mr. Bishop. Do you think Congress should mandate those 
minimum standards?
    Mr. Halderman. I do. I think it is important to make sure 
that the most weakly protected States are not going to cause a 
risk for the entire Nation.
    Mr. Bishop. Mr. Rosenbach.
    Mr. Rosenbach. Yes, sir. I, in my experience, have found it 
very difficult for Congress to mandate certain types of minimum 
standards. I think in general in cybersecurity, those standards 
tend to change pretty quickly, and it will be more often 
effective if you have a risk framework that they should follow 
that may be tied to funding so that they move forward that way.
    Mr. Bishop. Is a risk framework still the minimum standard?
    Mr. Rosenbach. I think that is a very basic place--yes, 
that is a very basic place to start. That, I think, would be 
appropriate. In terms of the specific system, and maybe I am 
misunderstanding you, that could be more difficult because, as 
you know, in the history of the--it is very hard for the 
government to pick winners.
    What I think would be a different approach is that we have 
a national project to develop an open source software platform 
that is transparent and results in a paper-based audit that is 
not based on profit. I am all for people making money, but----
    Mr. Bishop. Could we mandate that?
    Mr. Rosenbach. I think you could mandate the development of 
something like that. You probably could mandate, and then it 
would be to the States to figure out how to implement and how 
to use as it should be. It should be State-led.
    Mr. Bishop. Mr. Sandvoss.
    Mr. Sandvoss. Could Congress mandate it? Absolutely. As 
director of the election board in Illinois, I am always a 
little leery of Federal mandates, especially when they do not 
come with Federal funds.
    Mr. Bishop. And they are not funded.
    Mr. Sandvoss. Exactly, yes.
    Mr. Bishop. Because we are in a position to provide the 
funds.
    Mr. Sandvoss. And believe me, that is one of the reasons I 
am here, is to----
    [Laughter.]
    Mr. Sandvoss [continuing]. To request that. But----
    Mr. Bishop. That is what we are supposed to be doing.
    Mr. Sandvoss. I agree.
    Mr. Bishop. But we want to make sure that the funds that we 
provide will be effectively used to get the desired results.
    Mr. Sandvoss. Yes. And I think the verdict is still out on 
that. I strongly believe that our Cyber Navigator program, if 
funded, is going to be successful. I guess we will know better 
after the 2020 elections. I am crossing my fingers that we do 
not suffer any incidents.
    Mr. Halderman. If I may just say, in the absence of 
stronger Federal standards, if there are more funds provided, I 
think it is really important to make sure that they are not 
wasted. And I note that many States do not have any rules that 
say counties and localities cannot turn around and use those 
Federal dollars to buy more obsolete and vulnerable machines.
    That would just be a setback. So absence of greater 
standards. Just saying, you have got to have a paper ballot.
    Mr. Bishop. So you have got to have standards.
    Mr. Graves. Mr. Bishop could you yield just for a moment? 
Just for a follow-up?
    Mr. Bishop. I will yield, yes.
    Mr. Graves. Thank you. My understanding is the Election 
Assistance Commission has guidelines. Would you consider those 
the types of mandates or guidelines that the gentleman is 
requesting? And if so, I understand they are behind a little 
bit and the money is available. How do you match up with 
guidelines that have not been developed yet? And maybe that 
will address what he is asking.
    Mr. Bishop. Reclaiming my time, also, are those guidelines 
adequate?
    Mr. Halderman. Yes. So the EAC does create, under HAVA, 
what are known as the Voluntary Voting Systems Guidelines. And 
those are in the process of being updated and modernized. They 
have not yet been updated and modernized, unfortunately.
    In any case, they are voluntary on the States and 
relatively weak in their scope. They will not cover processes 
like post-election audits that are a critical component of 
running a holistically secured election system.
    So we need to do more to develop those standards. But in 
the meantime, just the high-level bullet in any kind of 
standard is going to be: You have got to have a paper ballot 
that we can go back and audit.
    Mr. Quigley. Let's move on. Thank you, sir.
    Mr. Crist.
    Mr. Crist. Thank you, Mr. Chairman. And thank you, 
witnesses, for being here today.
    As a Floridian and a former governor, I know a little bit 
about contested elections. [Laughter.]
    In fact, as governor, I made sure that all ballots did in 
fact have a paper trail so that we had something to verify 
against what we are being told by the electronic machines. I 
applaud and support any and all efforts to shore up our 
election security, especially through Help America Vote grants. 
And Mr. Sandvoss, I would inquire.
    My home State of Florida was awarded $19 million in 
election security grants. The State then added an additional 
mandate that any funds unspent by supervisors of elections at 
the end of the 2018 cycle were to be returned to the Florida 
Department of State. Basically use it or lose it, if you will.
    Do you know of any other States that made such an addendum? 
And would you recommend it?
    Mr. Sandvoss. I am not aware of any other States that have 
made that. And no, I would not recommend that. In Illinois, for 
instance, the grant is over a five-year period. And to force 
the State through its local officials to spend it quickly as 
opposed to wisely, I think, would be the wrong way to go.
    We are going to spend probably about $1.2 million of our 
grant. But again, we want to keep our Cyber Navigator program 
running. And we need funds also to be available; depending on 
what they discover through their audits and their assessments, 
that takes time. So that would be my opinion on that.
    Mr. Crist. Thank you. Can you think of a reason why a State 
would add on such a mandate?
    Mr. Sandvoss. Offhand, I cannot.
    Mr. Crist. Neither can I.
    To any of you, what do you think is the greatest security 
threat to the 2020 election cycle?
    Mr. Rosenbach. I will start, sir. I think the cyber aspect 
is very important. But honestly, I am more concerned about a 
disinformation campaign via the social media platforms that 
undermines trust and confidence in the elections when maybe 
there has not even been a successful cyber attack.
    And that is where there still is a huge vulnerability. The 
social media companies have very grudgingly made very little 
progress on addressing threats to their platforms. And just the 
idea that the Russian GRU could spread ``disinfo'' about a hack 
in State that had not even occurred, a polling place being 
closed--those type of things could lead to distrust in our 
country that could be, I think, very undermining of trust.
    Mr. Crist. So inappropriate propaganda?
    Mr. Rosenbach. Yes, sir. All kinds of propaganda--highly 
targeted, just like they started to do in the past, continued 
to do, and certainly will do.
    Mr. Halderman. I agree with Mr. Rosenbach that social media 
and disinformation is a big worry. And it is a worry that is 
compounded because the social media companies have yet to make 
much of their data available to researchers on the outside who 
are trying to study cybersecurity and make things stronger.
    But again, what keeps me up at night is not the things that 
we are going to see, like attacks in social media, but the 
things that might happen that we probably will not see if they 
happen, which could include attacks that tamper with election 
results.
    It is one thing for voters to lose confidence because 
people are telling them lies. But in fact we cannot tell voters 
that we are confident that no votes will be changed in future 
elections until we have the election infrastructure secured to 
a level where it has resilience and auditability.
    Mr. Crist. What is required to do that?
    Mr. Halderman. New equipment that is going to be using 
hand-marked paper ballots and optical scanning, and rigorous 
post-election audits implemented by the States. We are starting 
to make some progress there, but there is a long way to do.
    Mr. Crist. Thank you.
    Mr. Sandvoss. And I would just have to say that I agree 
with both of my colleagues as to the threat that was outlined. 
Misinformation is out there, and I think it does have a 
negative effect on voter attitudes. And it does or could have 
the potential for influencing an election.
    And by the same token, I think that the voting equipment 
vulnerabilities that were mentioned earlier, that is a 
legitimate concern as well. And it might not necessarily just 
be a situation of a hacker. It could be the machines themselves 
are old and they malfunction.
    And if it happens on Election Day, a series of machines go 
down and you do not have anything to replace it, then you got 
problems.
    Mr. Crist. Thank you. Thank you, Mr. Chairman. I yield 
back.
    Mr. Quigley. Thank you.
    Ms. Torres.
    Ms. Torres. Thank you, Mr. Chairman, and thank you to our 
panel for being here today.
    Lessons learned from the 2016--obviously, you have talked 
extensively about that. Unfortunately, I was not here for some 
of that testimony, so I apologize in advance if I ask some of 
the same questions.
    I agree the Federal Government has to have minimum 
standards. And we have to have a basic recipe that our States 
should follow. In 2016, I know that several States refused 
Federal assistance just to simply scan systems for checks, to 
check if they had been compromised in any way. My State of 
California did not. They welcomed the Federal Government and 
allowed them to scrub and do some of that.
    How can we work together, understanding that while the 
State of California is this big, other States may not be that 
big. So the requirements for them may not be the same. The 
threshold that they should be meeting may not be the same. But 
we have to have minimum standards and we have to have funding, 
I agree, to go with that to avoid potential issues that come 
across.
    I know that in California, the database was looked at. 
There were questions whether if your voter registration was 
changed. But I could go online and check if I am still a 
Democrat. And I am still a Democrat, so I was happy about that. 
I was still registered in my own home. But that was another 
concern.
    So how do we ensure that not just we are protecting the 
vote, but we are also protecting the registration?
    Mr. Sandvoss. Well, I can speak for my State. And we 
invited the DHS to come in and perform a risk and vulnerability 
assessment. I think it was worthwhile. How do States know if 
they have vulnerability if it has never been tested? That makes 
perfect sense to me.
    As far as the cooperation that you spoke of, again I think 
that there has been a great improvement in the communication 
between the States and the Federal agencies--the EAC, the DHS. 
And I would like to obviously see that continue.
    As far as having mandatory standards, I can see merit in 
that, especially with regard to basic security and perhaps some 
sort of auditing requirement as well. I would like to give that 
a little bit more thought, and I do not want to speak on behalf 
of my board on something like that because they probably have 
some ideas as well.
    But the standards, I guess the devil is in the details--
what exactly those standards would be. What would be the 
consequences for not following them? Would it be incentive-
based or would it be just a flat mandate? Those are questions 
that probably need to be asked before going forward.
    Ms. Torres. I prefer incentive-based, but I would also like 
to see what do those minimum standards look like. What should 
they look like?
    Mr. Sandvoss. Yes. And that is probably beyond my capacity 
because I am not a tech person. So I could not give you a 
specific example of what those minimum standards should be. I 
just know, just in general, the systems need to be as protected 
against manipulation as possible.
    And if it involves the risk-limiting audit that Dr. 
Halderman here is advocating, maybe that is the way to go. I 
have heard a lot of merit to that suggestion. I know in 
Illinois we would have to have legislation to implement it, and 
we might see that.
    Mr. Halderman. So standards can accomplish a lot of things. 
And one of the things that they might accomplish is greater 
normalization between States that have some of the better 
election practices and States that are a little bit farther 
behind.
    I just want to offer one example of that. Representative 
Torres, in 2007 your State, California, brought in election 
experts and cybersecurity experts from across the country to do 
a thorough review of the computer code for all of the voting 
machines used in the State. And I took part in that.
    And we documented about a thousand pages of severe 
vulnerabilities. And that is all published on the Secretary of 
State's website. Even today there are many States that use the 
same voting equipment that have not updated the software since 
before California's study.
    So nation-state attackers do not have to invent new 
vulnerabilities. They just have to go read about them on the 
California website in order to figure out where to strike. And 
that is why there is a role for the Federal Government, to make 
sure that we bring up the bottom of the playing field here and 
keep everyone protected.
    Ms. Torres. Thank you. My time is up so I yield back.
    Mr. Quigley. And I appreciate that.
    Mr. Graves, anything else?
    Mr. Graves. No, sir.
    Mr. Quigley. I want to thank those who have participated. 
That was excellent. We have a lot of work to do. We appreciate 
your assistance today and the work that you will do on an 
ongoing basis, and we look forward to working with you as we 
move forward.
    So thanks to everyone. This meeting is adjourned.

                                           Thursday, March 7, 2019.

                   SUPREME COURT OF THE UNITED STATES

                               WITNESSES

HON. SAMUEL ALITO, ASSOCIATE JUSTICE, SUPREME COURT OF THE UNITED 
    STATES
HON. ELENA KAGAN, ASSOCIATE JUSTICE, SUPREME COURT OF THE UNITED STATES
    Mr. Quigley. Good afternoon. This hearing will come to 
order.
    I sincerely want to thank Justice Alito and Justice Kagan 
for taking time out of their busy schedules to join us. I know 
it is not every day that I can compare myself to two Supreme 
Court Justices, but today both Justices and I have something in 
common: This is my first Supreme Court hearing as chairman of 
this subcommittee, and I know for both of you, this is the 
first time you are testifying before this subcommittee. So I 
want to welcome you both.
    Additionally, this is the first Supreme Court public 
hearing since 2015, and as chairman of this subcommittee, it is 
my intent to hold a hearing with the Supreme Court more often 
to discuss the resources needed for the highest court and hear 
your thoughts regarding America's court system. I think 
hearings such as this one are a great way for the public to get 
more exposure to our third branch.
    Today's hearing provides us with an opportunity to exchange 
ideas, discuss pertinent issues, and get a better insight into 
the judicial branch. The exchanges between our two branches are 
important as each branch plays a distinct role in our 
government. While we must collaborate with one another, we must 
also preserve appropriate autonomy in judiciary governance, 
management, and decisionmaking. Our two branches walk a 
delicate line in that we must work together, but remain 
separate in order for our democracy to uphold the intentions of 
our Founding Fathers.
    I would like to thank the Justices for their recent budget 
request. I am always impressed with the Court's dedication to 
cost containment and desire to save taxpayer dollars, which has 
been demonstrated through the Supreme Court's consolidation of 
payroll, financial, and HR services, as well as their efforts 
to use in-house staff to manage IT projects when possible. This 
does not go unnoticed by the subcommittee and is appreciated.
    Your mission is critical to the pillars of our Nation, and 
we thank you for your judicious and very effective use of the 
taxpayers' dollars.
    The Supreme Court's fiscal year 2020 request includes 
funding for the Supreme Court Justices, employees, as well as 
rent, travel, and other expenses. This represents a modest 3.5 
percent increase over the fiscal year 2019 budget. I look 
forward to hearing from you on what you hope to accomplish in 
fiscal year 2020 with this funding.
    Taking a step back, Congress provided an increase of $5.6 
million for 34 new positions to address security needs. This 
was a critical request, and I am pleased that Congress was able 
to fund it. The safety of the Justices, as well as those who 
work and visit the Supreme Court, should not be at risk. Let's 
continue to keep this dialogue on the ongoing security upgrades 
and additional resources needed to maintain a secure and 
welcoming Supreme Court environment.
    I also want to briefly speak about an issue I care strongly 
about in providing the American people with more access to the 
Supreme Court. As Justice Brandeis famously wrote, ``Sunlight 
is said to be the best of disinfectants.''
    That statement, while almost cliche now, still rings true. 
Whether you are here in Washington or in the comfort of your 
home, you can watch Congress and the executive branch in action 
on C-SPAN. That is an important part of making our Nation's 
legislative and executive branch open and transparent to all 
people.
    But one government institution remains closed to the public 
eye, and that is the Supreme Court. Decisions on major cases, 
from Brown v. Board of Education to Bush v. Gore, have 
significantly shaped American society and changed history. 
Unfortunately, due to practices and policies, we have no video 
record of those historic decisions. In 2019, with so much new 
and innovative technology at our fingertips, it is time we 
should use every tool available to preserve America's judicial 
history.
    Beyond cameras in the Court, most Americans have no idea 
how Supreme Court proceedings even work. I had the opportunity 
to be one of the few who got to sit in on the Court proceedings 
when I attended oral arguments in the case concerning Chicago's 
handgun ban. This is an opportunity that should be available to 
all Americans.
    In the past, arguments on marriage equality have drawn 
substantive crowds, causing people to line up in advance in 
order to gain access to the court. It is not unreasonable for 
the American people to have an opportunity to hear firsthand 
the arguments and opinions that will shape our society for 
years to come.
    The decision to release same-day audio from certain cases 
only highlights the fact that the Supreme Court has the 
technological capability to share audio of its proceedings with 
the American public.
    Lastly, as I said earlier, I think it is important for our 
two branches to keep an open dialogue and discuss issues when 
necessary and not only once a year or so at a hearing such as 
this. So please know we are always happy to meet with you and 
discuss your concerns.
    So, Justices, we look forward to hearing from you about the 
resources that you need to carry out your constitutional 
responsibility and we look forward to working with you in 
Congress.
    Before I turn to our witnesses for their statements, I 
would like to recognize the ranking member, Mr. Graves, for his 
opening remarks.
    Mr. Graves. Thank you, Chairman Quigley.
    And welcome, Justices Alito and Kagan. It is good to have 
you with us today.
    An independent judiciary entrusted to interpret the laws 
made by Congress and enforced by the executive branch is 
fundamental to fulfilling the Founding Fathers' vision for this 
country. Our system of checks and balances ensures government 
by and for the people, and we are so thankful for your role in 
that system.
    As a co-equal branch, it is valuable for each of us to hear 
from you today. Outside of the confirmation process, these 
hearings are one of the few instances that we get to interact 
with your branch of government and have the opportunity to 
directly ask questions.
    As we work together today to further examine the Court's 
needs and operations, I want to thank Chairman Quigley for 
assembling this hearing today.
    Though the Supreme Court's budget request is not large at 
all in comparison to many of the other Federal programs that 
this committee will hear about in the weeks ahead, I am pleased 
that you are both here to testify, and I also appreciate that 
the Court has limited its request for additional resources.
    As the Republican Leader of this subcommittee, I am 
committed to looking at all our Federal spending through a very 
fiscally conservative and thoughtful lens. With the Federal 
debt exceeding $22 trillion, it is especially important that we 
all work together to take steps to put our fiscal house back in 
order, and we are grateful for your effort in that as well.
    So keeping that in mind, we will certainly work to make 
sure that the Court has the necessary resources to fulfill your 
constitutional responsibilities.
    Justices Kennedy and Breyer appeared before this committee 
several times, and we always appreciated their conversation, 
their humor, their dialogue, and certainly the guidance that 
they shared with us. And just the same, we look forward to your 
testimony today and your insights on the operations of the 
Court and are grateful for your appearance before us.
    Thank you, Mr. Chairman.
    Mr. Quigley. Thank you, sir.
    I would like to recognize Ms. Granger, the ranking member 
of the full committee, for her testimony.
    Ms. Granger. I would like to thank Mr. Quigley and Mr. 
Graves for holding this hearing for financial services today on 
oversight of the highest court in the land, the U.S. Supreme 
Court.
    I would like to add my welcome to our witnesses, Justice 
Alito and Justice Kagan. It is an honor to have both of you 
appear before us.
    The Supreme Court is vital to our system of government and 
ensuring the survival of our Republic. This has been 
particularly evident in recent years as the Court has heard 
cases relating to religious liberty, healthcare, and the use of 
executive power.
    One of the responsibilities the Congress holds is the power 
of the purse, and that is why we are here today. I hope to 
learn more about the Supreme Court's operation and funding 
requirements for the fiscal year 2020. This is a rare and 
unique opportunity, as Mr. Graves said, and so we take it very 
seriously.
    Thank you again.
    Thank you, Mr. Chairman.
    Mr. Quigley. I want to thank you, Ms. Granger.
    I would now like to recognize Justice Alito for his 
testimony.
    Justice Alito. Chairman Quigley, Ranking Member Graves, and 
members of the subcommittee, thank you very much for giving 
Justice Kagan and me this opportunity to appear before your 
subcommittee to discuss the budget request for fiscal year 
2020.
    As was mentioned, Justices Kennedy and Breyer appeared here 
many times in the past. This is the first appearance for 
Justice Kagan and me. We are rookies. And I am sure when I get 
back to the Court, I will hear immediately from either Justice 
Kennedy or Justice Breyer or perhaps both of them that in all 
the times when they appeared here, they never broke any glass 
or spilled water. But as I said, we are rookies, so you have to 
indulge us a little bit.
    In any event, as in past years, our budget request consists 
of two parts. We will present the first part of the request 
today. This part addresses salaries and expenses of the Court. 
The Architect of the Capitol will submit a separate written 
statement on the second part of the request, which concerns the 
care of the building and the grounds.
    Before presenting our fiscal year 2020 request, we would 
like to express our appreciation for Congress' approval of our 
funding request for fiscal year 2019. We recognize that 
Congress and this subcommittee face a difficult task in 
allocating a limited amount of available money to fund a wide 
range of government activities.
    The judiciary's entire budget request is small compared to 
the overall Federal budget, representing less than two-tenths 
of 1 percent of Federal funding, and the Supreme Court's 
request, in turn, represents only about 1 percent of the 
judiciary's budget. But although our request is tiny in 
relation to the overall budget, we appreciate the value of 
every dollar of funding we receive.
    We are also grateful for the subcommittee's confidence in 
our ability to manage those funds efficiently. We remain fully 
committed to prudent fiscal practices.
    I should note that our fiscal year 2019 request, following 
guidance from the Office of Management and Budget, did not 
include funding for the cost of living adjustment for Federal 
employees enacted in the most recent appropriations 
legislation. That adjustment will likely cost the Court an 
additional $1 million annually.
    To accommodate that increase, the Court has reduced 
spending by revising existing contracts and cutting back on 
other discretionary spending. We hope that these cost-cutting 
measures will allow us to forgo requests for additional funding 
related to the cost of living adjustment.
    We do not have the capacity to reduce our mission or reduce 
our functions. We have no control, for example, over the number 
of petitions for review that are filed each year. Nevertheless, 
we continuously seek out ways to make our operations more 
efficient.
    We would also like to thank the members of the committee 
for providing the Court with a substantial amount of additional 
funding last year. That was for additional security purposes, 
and we are carefully and deliberately putting those funds to 
work based on a top-to-bottom review of our current practices 
by highly regarded and experienced security experts.
    The money you have provided will be used efficiently to 
expand and improve our physical security and our cybersecurity. 
If we find that additional money is necessary to ensure the 
safety of the Justices, Court staff, and many visitors received 
in our building every year, we will inform the subcommittee as 
soon as possible.
    I would be happy to refer members of the subcommittee and 
your staff following the hearing to appropriate Court staff if 
there is a desire to discuss those security issues in greater 
detail.
    For fiscal year 2020, the Court is requesting funding only 
to cover the continuation of existing activities. We are not 
requesting any new programmatic increases. The fiscal year 2020 
request is $90 million, consisting of $3 million in mandatory 
expenditures and $87 million in discretionary expenditures.
    The total request is $3 million higher than the amount 
provided in the last fiscal year. Half of this increase is due 
to an expected change in agency employer contributions to the 
Federal Employees Retirement System pursuant to guidance from 
the Office of Management and Budget.
    Most of the Court's budget is devoted to personnel costs. 
Approximately 80 percent of the total request is for 
compensation and benefits of current employees. We have not 
requested a new nonsecurity-related position over the last 10 
years. Instead, we have successfully utilized existing 
personnel to accommodate an increasing workload.
    For example, we recently implemented a new electronic case 
filing system using our existing budget. The system provides 
easy access to all of the Court's case documents, including 
briefs, orders, and opinions, without logging in or downloading 
additional software, and there is no charge associated with use 
of this facility. It has been publicly accessible since 2017 
through a link on the Court's website.
    By building and maintaining this system in-house with 
existing staff, the Court saved 2 million taxpayer dollars.
    In addition to accessing all case-related documents, the 
public may also use the website to access full transcripts of 
oral arguments on the same day they occur and audio of the 
arguments by the end of the week in which they take place.
    We have also recently revamped the Court's website to make 
it more user friendly and to highlight important information, 
like the current term calendar and upcoming cases.
    As a result, virtually every aspect of the Court's work is 
easily accessible to anyone with internet access. Last year, 19 
million people visited the Court's website, a 30 percent 
increase over the previous year.
    The Supreme Court building is also a popular attraction and 
forum for civics education here in Washington. The website's 
calendar lists the building's public hours and an online daily 
schedule of courtroom lectures in which our volunteer docents 
explain the history and the role of the Court. Last year, 
421,000 people visited the building, and nearly one-third of 
those visitors attended one of the free lectures or tours.
    Our 2020 request also includes $1.5 million of no-year 
funding for regular upgrades to our IT systems, many of which 
have multiyear upgrade cycles. The Court reduced the request 
for this annual funding in fiscal year 2018 by $500,000, and 
the fiscal year 2020 request maintains that reduction.
    The annual savings are a direct result of the Court's 
transition away from desktop computers to virtual work 
stations, which has reduced upgrade and maintenance costs. We 
will continue to monitor the no-year fund balance to ensure it 
is adequate to meet our long-term needs.
    When the public interacts with our judicial system they see 
the substantial resources that Congress provides to the 
judiciary, whether it is courthouses, libraries, up-to-date 
information technology, or the thousands of staff who make the 
courts run smoothly and efficiently. The result is that these 
observers, along with many others around the world, see a 
tangible, powerful example of a Nation committed to the rule of 
law.
    On behalf of the Chief Justice and the other Associate 
Justices of the Court, we would like to extend our sincere 
thanks to the members of this subcommittee for your continued 
confidence and support.
    This concludes our brief summary of our request, and we 
would be pleased to respond to any budget-related questions 
that the members of the committee may have.
    [The information follows:]
    
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Quigley. Thank you, Justice Alito. We appreciate it.
    You heard me mention in the opening the desire of many to 
have Supreme Court video. In the past we have had this debate, 
and I have come to the conclusion, clearly, it is your 
decision, and I believe in the independence and the autonomy of 
a separate branch.
    I just want you to know there are a lot of folks who, as 
you know, can't get into the Supreme Court to watch these 
arguments. In the case I mentioned and a few others, Brown v. 
Board of Education, there were historic, brilliant arguments 
made that only perhaps a few hundred people could watch in 
person.
    I know that there are valid reasons to not video Supreme 
Court cases, such as behavior change, editing, and so forth. We 
flub up a lot here, but we are on C-SPAN, and so our mistakes 
are live. And while in a democracy, the trains don't always run 
on time, we don't always look our best, and maybe it has a 
negative impact.
    The last time we had the discussion, it was the anniversary 
of the release of ``Mr. Smith Goes to Washington.'' The reason 
I bring that up is when that movie was released, it was 
screened before an audience which was largely the U.S. Senate, 
and they didn't like it. It didn't make us look good. The irony 
was it was also screened in Moscow and Berlin, and they made 
the decision not to show it in their countries because they 
thought it made us look too good. Beauty is in the eyes of the 
beholder.
    I would just like your thoughts on if there is an evolving 
sense within the Court of whether or not to expand to at least 
some limited video feeds of the arguments.
    Justice Alito. The first thing I think I should say is that 
all of my colleagues and I share your interest in making our 
proceedings and everything that the Court does as accessible to 
the public as we possibly can consistent with the performance 
of our paramount function, which is to decide cases in the best 
possible way.
    I was thinking about this issue of access before coming 
over here, and what I am going to say will date me, but what 
occurred to me was how much more accessible the Supreme Court 
is now than it was when I started out as a lawyer, and even 
before that, when I was interested in the work of the Supreme 
Court when I was in college and even in high school.
    If someone back in those pre-internet days wanted to read 
an opinion that was issued by the Court a few years ago, it 
wouldn't be that easy to find a library with reports of the 
Supreme Court. Certainly the little municipal library where I 
grew up didn't have that.
    So you would have to find a law library or a big library 
that had the U.S. reports or one of the commercial services. 
And then if you wanted to take a copy home and read it and 
study it, you would have to--you might be able to make what we 
called in those days a Xerox copy, by feeding money into a 
machine. Now every opinion that we issue is instantly available 
on our website.
    If you read an article in the paper about a decision that 
had just been handed down and you wanted to see exactly what 
the Court said, that would be even more difficult. You would 
have to find a law library with a subscription service called 
U.S. Law Week, and that was an expensive subscription service. 
And then you might get a little account of the argument if it 
was an important case, and you would be able within about a 
week to read the Court's opinion.
    Now, if you wanted a transcript, that would be 
extraordinarily difficult. You would have to find a very good 
law library, and you wouldn't be able to get that for years. If 
you wanted to read the parties' briefs, that would also be 
extremely difficult.
    Now all of that is available free of charge to anybody who 
has access to the internet. We issue a transcript of all of our 
oral arguments on the day when the argument takes place. It 
used to be a few years ago that the person, the Justice asking 
a question wasn't identified in the transcript. Now all the 
Justices are identified. So you can see exactly what was said, 
every single word. And we release the audio of all of our 
arguments by the end of the week.
    But then we get to the issue on which there is a lot of 
interest, and that is televising our arguments. And I recognize 
that most people think that our arguments should be televised. 
Most of the members of my family think that arguments should be 
televised. I used to think they should be televised.
    When I was on the Third Circuit, we had the opportunity to 
vote on whether we wanted to allow our arguments to be 
televised, and I voted in favor of it. But when I got to the 
Supreme Court, I saw things differently, and it wasn't because 
I was indoctrinated or pressured by my colleagues.
    But I came to see and I do believe that allowing the 
arguments to be televised would undermine their value to us as 
a step in the decisionmaking process. I think that lawyers 
would find it irresistible to try to put in a little sound bite 
in the hope of being that evening on CNN or FOX or MSNBC or one 
of the broadcast networks, and that would detract from the 
value of the arguments in the decisionmaking process.
    Mr. Quigley. That sort of thing never happens here.
    Justice Alito. I recognize times change, and I don't know 
what our successors years from now will think, or maybe even 
next year. It has been a while since the members of the Court 
collectively have discussed this issue, but it has been our 
consensus for a while that this would not be--although we want 
as much access as possible, we don't want access at the expense 
of damaging the decisionmaking process.
    Mr. Quigley. Justice Kagan, your thoughts?
    Justice Kagan. Thank you very much, Mr. Chairman. And if I 
could just thank all of you for the invitation to be here. We 
very much appreciate it, Justice Alito and I and the entire 
Court.
    As to this question, I find it a very difficult question, 
and like Justice Alito, my views on this question have somewhat 
evolved over time.
    And if you will agree to let me get to the place where I 
tell you about the cons of cameras, I will start by telling you 
about the pros and very much sympathizing with some of the 
things that you said, Chairman Quigley. Because I think more 
than just transparency for transparency's sake, the good of 
having cameras would be that people would see an institution at 
work, which I think does its work pretty well.
    When I was Solicitor General, one of the jobs of Solicitor 
General, in addition to arguing every month, is that you are 
always there when members of your office argue. And so the time 
I was Solicitor General, I probably sat as a spectator for 
about 75 percent of the Supreme Court's arguments, and I was 
constantly impressed by how the Court went about its business, 
that it was thoughtful and it was probing. And it was obvious 
that the Justices really wanted to get things right.
    And it is no small benefit if the American public were able 
to see that, because faith in institutions of governance is an 
incredibly important thing. And for me the greatest positive of 
having cameras would be that it would allow the public to see 
an institution working thoughtfully and deliberately and very 
much trying to get the right answers, all of us together.
    But having said that, I will wholeheartedly agree with 
Justice Alito that the most important thing is that the 
institution continue to function in that way, not that people 
see it. If seeing it came at the expense of the way the 
institution functioned, that would be a very bad bargain, and I 
do worry that cameras might come at that expense.
    You know, I think it is a principle of physics, I think, 
which is about how when you put the observer, when the observer 
comes in, the observed thing changes. And you commented on 
Congress, and if you all were given truth serum, I think some 
of you might agree that hearings change when cameras are there.
    Now, I have to say I think that they might change in the 
Court in subtle ways. I don't think all that many people would 
grandstand. I hope that my colleagues and I would not do that. 
But I think we would filter ourselves in ways that would be 
unfortunate.
    In other words, the first time you see something on the 
evening news which taken out of context suggests something that 
you never meant to suggest, suggests that you have an opinion 
on some issue that you, in fact, don't have, but that--you 
know, when I come into the courtroom, I play devil's advocate. 
I probe both sides hard, and I challenge people in ways that 
might sound as though I have views on things that I, in fact, 
do not, just because that is the best way of really 
understanding the pros and cons of a case. And I worry that 
that kind of questioning, which I think we all find very 
conducive to good decisionmaking, would be damaged if there 
were cameras.
    So I think, as Justice Alito expressed, I think this is a 
hard issue. I think that there are things to be said on both 
sides of it. And I do want to emphasize, as he emphasized, that 
we haven't spoken about this together as a conference since I 
have been at the Court. But I think that there is real value to 
being deliberate and to being careful and to not doing things 
that we would later regret in terms of how the institution 
operates.
    And I will say just one last point in addition to all the 
things that Justice Alito said about the ways in which we are 
transparent. I think that the most crucial way that we are 
transparent is that all of our decisions get made with reasons. 
In other words, you always know--or almost always--when we make 
decisions why we are making them and the views of the various 
Justices of the Court. That is the most important thing, far 
more important than the arguments, which, in fact, play a very 
limited role in our decisionmaking process.
    Mr. Quigley. Thank you so much.
    Mr. Graves. Mr. Joyce needs to go first.
    Mr. Quigley. All right.
    Mr. Joyce.
    Mr. Graves. He is the Republican leader on the Interior 
Committee and will need to leave here momentarily.
    Mr. Quigley. Thank you, sir.
    Mr. Joyce. Thank you very much for recognizing me out of 
turn. And when I am through asking my question and I get up and 
leave, it is no disrespect to you. Mr. Amodei is sitting down 
there holding court for me so I can get back to mine.
    As a former prosecutor and aging trial lawyer, this 
appearing before two lions of the Court is probably as good as 
it is ever going to get for me.
    But I certainly appreciate, Justice Alito, what you were 
talking about, the transparency issue, and I appreciate what 
you have been doing as far as making the workings of the Court 
available to them. But for those of us, the vast majority of us 
who will never appear before the Supreme Court, who are down in 
the inferior courts, the appellate courts, the bankruptcy 
courts, the trial courts, as you know, we are on the PACER 
system, and we have to pay money to get those things.
    What impact do you think the Supreme Court's making this 
available for free has had on the transparency of the Court, if 
you will, in allowing people to have some input or be able to 
see, without the use of cameras, be able to see into what you 
do?
    Justice Alito. Well, I hope that the electronic filing and 
the other measures that have been taken in recent years will 
increase understanding of the work of the Court. Other than 
hearing our voices immediately or seeing our faces with our 
lips moving, the public can see everything that goes on in the 
Court, from the filing of a petition for certiorari until we 
issue an opinion deciding a case.
    That is a tremendous development, and I think it is good 
that all of that is available to the public free of charge, 
because we do want the public to understand what we do to the 
greatest extent possible.
    We also receive a great many visits during the course of 
the year from students, ranging from sometimes even elementary 
school students to groups of law students, and I think my 
colleagues and I like the opportunity to speak to them and to 
explain to them what we do, because it is important in a 
democracy for the public to understand what all of the 
institutions do.
    Mr. Joyce. Justice Kagan.
    Justice Kagan. I agree with everything Justice Alito said 
on that. I mean, the electronic filing system that the Court 
has put into place in the last year or two has made, I think, 
an enormous difference for people who practice before the 
Court, but also people who are just interested in the Court. 
And we were able to do it with the appropriations that you gave 
us and a tremendous staff that put untold hours into that 
project. And so the Justices are very appreciative of that.
    Mr. Joyce. Well, I, for one, would disagree with the 
chairman in that I don't believe that more visibility and 
cameras in the courtroom would be any good. I agree with your 
assessment. Just in my limited time here in the House, people 
are changed beings when they get in front of the camera and not 
all for the good.
    But I am certainly interested in the transparency and the 
education of the public as to the collegiality of which the 
nine of you enjoy, and I think it gets ripped apart at times 
when people see 5-4 decisions. It is not an us-against-them 
game. It is the work and the hard work that you all put into 
it, asking those hard questions. And any way we can get the 
public to be able to visualize that without necessarily seeing 
it on camera I am all for, and I think the rest of this 
committee would be for, is helping you get that accomplished 
not only in the Supreme Court, but in the lower courts as well.
    Justice Kagan. You know, you put your finger on something, 
I think, that we find a little bit frustrating, because we are 
a very collegial institution. We like each other quite a lot. I 
think people think of the 5-4 decisions as sort of the only 
thing we do.
    In fact, Justice Alito and I agree with each other far more 
often than we disagree with each other. And one of the things I 
think as we talk to groups, whether in law schools or 
elsewhere, I think all of us try to emphasize this, the extent 
to which the Court really functions as a unit.
    Of course there are going to be cases in which our 
different views about how to do law, how to interpret the 
Constitution, put us in opposition to each other. But 40, 50 
percent of the time we are unanimous, which is sort of an 
amazing thing given that we only take the hardest cases, cases 
on which there are splits in the courts below. Another 30 or 35 
percent of the time we are split in all kinds of random and 
different ways.
    So I think it is one of the things that we would like to 
make clear to people is how much of what we do does not follow 
this stereotype of the perpetually divided Court.
    Mr. Joyce. Would you care to respond?
    Justice Alito. Well, I agree with what Justice Kagan said, 
and it is an aspect of our work that is overlooked, 
understandably, because the most controversial cases tend to be 
the ones where we are the most closely divided.
    We have developed a very open style of debating issues back 
and forth among the Justices when there is a majority opinion 
and a dissent. We argue the issues robustly, let me put it that 
way, and increasingly we don't pull any punches.
    And we don't take it personally. When one of my colleagues 
attacks my reasoning and says it doesn't make any sense, I 
don't take it personally, and I hope that the same is true when 
I reciprocate.
    But I think sometimes people who read what we write may get 
the wrong impression that we are at each other's throats in a 
personal sense, and that is certainly not true. And this is not 
just something that we say for public consumption. This is the 
complete truth.
    Mr. Joyce. I yield back my time, but I am all out, Mr. 
Chairman. Thank you very much, and thank you for the 
opportunity to be here today.
    Mr. Quigley. Thank you, sir.
    Mr. Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman.
    And thank you to our witnesses for appearing today, Justice 
Alito, Justice Kagan.
    Justice Alito, as the lone Pennsylvanian here on this 
panel, it is a pleasure to have a representative of the Third 
Circuit here.
    It is hard for us to understand those Second Circuit 
accents, but it is nice to have you here too, Justice Kagan.
    I know I speak for all of us here on the Appropriations 
Committee and all of us in Congress when I say that we honor 
and fight for the independence of the judiciary. And as part 
and parcel of that, we fight for the security of the judiciary, 
and I want to talk about that a little bit.
    Between fiscal years 2018 and 2019, the Congress approved 
$5.6 million for security upgrades and modernization, along 
with an additional 34 positions for the Supreme Court. I am 
pleased Congress was able to accommodate the request, and rest 
assured that we will continue to review and regard security 
requests coming from the Supreme Court as a top priority.
    The first question is, does the fiscal 2020 Supreme Court 
budget properly cover your security needs? Are you getting what 
you want?
    Justice Alito. We believe that it does. And we cannot 
express strongly enough our appreciation for the support that 
the committee has given us in the past.
    If it turns out that we have additional security needs, we 
will take the opportunity to let you know. But my understanding 
is that our security people and the outside experts they have 
consulted believe that we have the resources now that we need.
    Mr. Cartwright. And if you have a dissenting or concurring 
opinion, Justice Kagan, you let us know.
    Justice Kagan. I will let you know.
    Mr. Cartwright. Secondly, regarding the 34 new positions 
involving the increase in security funds, are you able to 
provide us a status update on those 34 new hires?
    Justice Alito. I think most of the positions have been 
filled.
    Am I correct?
    I am sorry. Eight have been hired as of last year. I stand 
corrected.
    Justice Kagan. We have been taking this quite deliberately. 
The Chief Justice hired some security consultants, and those 
consultants have been talking to everybody in the building with 
a view on these questions, to the police officers themselves, 
to the Justices, about how exactly it is we should change some 
of the security practices that we follow given that we will 
have greater resources. And so we wanted to let that review 
process go forward before hiring everybody.
    Mr. Cartwright. How long does it take to onboard one of 
these new hires, if you know?
    Justice Alito. I don't know personally.
    Mr. Cartwright. And this is not a pop quiz. You can get 
back to us.
    Justice Kagan. Many months, I am hearing from behind.
    Justice Alito. I should have introduced some of the members 
of our staff who came here with us. But this is our marshal, 
Pam Talkin, who is in charge of the police force.
    So she tells us that it takes many months, and that is 
certainly true. They go through standard Federal law 
enforcement training before they begin.
    Mr. Cartwright. Well, of course, one of the things driving 
my questions is this concern about the current political 
climate where we have seen a rise in public criticism of not 
only courts, but also specific judges. And it is deeply 
disturbing to me and I think to all of us to see specific 
judges questioned not on intellectual grounds, but on personal 
grounds.
    Most recently in the news, there was a photo posted online 
of District Judge Amy Berman Jackson with a target placed on 
her likeness. These are deeply disturbing things to us. And, of 
course, she is not a Supreme Court Justice.
    But here is the question. Do you believe Congress ought to 
consider increasing appropriations for the security needs of 
district and circuit court judges in the 2020 budget?
    Justice Alito. We are not, I think, fully cognizant of the 
security needs at this time of the lower courts. I believe when 
you receive testimony regarding the overall Federal judiciary 
budget that would be an opportunity for someone who is more 
knowledgeable to speak to that.
    But certainly, having been a lower court judge, a court of 
appeals judge for 15 years, I am very cognizant of the security 
needs of judges at those levels.
    In some respects there the security threats to them are 
more serious than they are to us because district judges, trial 
judges at all levels, have much greater contact with members of 
the public and are often involved in cases where emotions run 
very high. And so many of the instances of unfortunate attacks 
on judges have been on trial-level judges.
    Mr. Cartwright. I thank you. I yield back.
    Mr. Quigley. Thank you.
    Ms. Granger.
    Ms. Granger. Thank you.
    Each year between 6,000 and 8,000 cases are filed with the 
Supreme Court. The Court usually hears arguments for 70 to 90 
cases.
    So Justice Alito, I would ask you, can you tell us how the 
Court decides which cases to hear?
    Justice Alito. Yes. We have two main criteria, and we 
select our cases based on the application of those criteria.
    The first and the most important is, is there a 
disagreement about a significant legal issue among the lower 
courts? This can be a conflict in the decisions of the Federal 
courts of appeals or conflicts involving State supreme courts.
    What the Constitution means and what the statutes enacted 
by Congress mean should be the same everywhere in the country. 
The law should not mean one thing in one State or one judicial 
circuit and something else in another circuit. So that is the 
main thing that we look for.
    But we will also take cases that involve what we regard as 
an important issue of law that should be decided without any 
further delay, without waiting to see whether there will be a 
disagreement among the lower courts.
    And the best example of that is a situation in which a 
statute enacted by Congress is held to be unconstitutional. We 
will almost always review that, even if there is no conflict in 
the decisions of the lower courts.
    Now, there are some other cases that are also very 
important and we will take without a conflict. But those are 
the two main things that we look for.
    Ms. Granger. Thank you.
    Justice Kagan, would you say that there are additional 
worthy cases that you think should be reviewed?
    Justice Kagan. You know, I think all or most of us think 
that we probably could handle a few more cases than we 
currently do. And in the abstract, I think, we would say: Well, 
instead of that 70 cases, why not handle 90?
    But then it turns out that even though we all think that, 
we don't find 90 cases to take using the criteria that Justice 
Alito laid out. But using those criteria, that is about what we 
have been coming up with year by year.
    It used to be that it was much more. You know, I clerked on 
the Court about 30 years ago, and at that time the Court was 
handling 140 cases per year, which was too many. I don't think 
anybody would want to go back to that.
    But there has been a lot of ink spilled about why it is 
that the Court's docket has declined. I don't think it is 
because the Court has wanted to be at 70. I think, as I said, 
in the abstract, I think we all would like to have some more.
    But when we apply those criteria, which are the criteria--I 
think there is very wide acceptance on the Court that those are 
the criteria that we should be using, and when we apply those 
criteria, we have ended up, certainly since I have gotten to 
the Court, which is almost 10 years ago now, with about that 
many cases.
    Ms. Granger. Thank you. That is the only question.
    I just have one statement, going back to the discussion 
about your security. You are very important to us, to the 
Nation, the Supreme Court, and so if there is a need for 
additional security dollars, I am sure the subcommittee would 
be very much in favor of it.
    Thank you both for being here.
    Justice Kagan. Thank you.
    Justice Alito. Thank you.
    Mr. Quigley. Thank you.
    Mr. Bishop.
    Mr. Bishop. Thank you very much.
    And let me welcome our distinguished Justices.
    Let me ask two questions. I will ask them both, and perhaps 
I can expedite time.
    The first has to do with law clerk diversity. A fairly 
recent National Law Journal study examining Supreme Court 
clerks from 2005 to 2017 found that the composition of the 
Supreme Court clerks does not even remotely reflect the makeup 
of our country. Eighty-five percent of clerks during this 
period were White, 9 percent were Asian, 4.1 percent were 
Black, and 1.8 percent were Latino.
    Clerking on the Supreme Court allows these attorneys to 
participate in deliberations that directly influence the 
interpretation of our Nation's laws. These decisions impact 
hundreds of millions of people in the country and sometimes 
across the world. These clerks are often on a fast track to 
judgeships, positions in academia, high profile attorney 
positions, in and outside of government.
    Are you concerned about the potential impacts that can 
result from a Court that does not reflect the populace that it 
serves? And what, if anything, is the Court doing to address 
that issue?
    My second question has to do with attacks on the Court. 
Last November, Chief Justice Roberts stated that after a number 
of attacks on the judiciary by President Trump, quote: ``We do 
not have Obama judges or Trump judges, Bush judges or Clinton 
judges. We have what is an extraordinary group of dedicated 
judges doing their level best to do equal right to those 
appearing before them. That independent judiciary is something 
we should all be thankful for.''
    Do you believe that recent verbal attacks on the judiciary 
undermine the ability to interpret the Constitution and laws of 
the United States? Do you believe that the recent attacks 
undermine the stature, the reputation, and the respect for the 
Court, and the strength and the foundations, therefore, of our 
democratic system?
    Justice Kagan. Congressman Bishop, I will take your first 
question.
    This is an issue that I believe we take very seriously. 
Each of us hires individually, so there is an extent to which 
we can't talk for any of our colleagues. But I think that the 
Court as a whole certainly pays attention to this issue and 
cares about it.
    There are many different kinds of diversity. And before I 
get to the one that I think you are most concerned about, as I 
am, I will just say that we should keep all of them in mind, 
not just sort of racial, ethnic, and gender diversity, but 
there are criticisms of the Court with respect to its 
geographic diversity, with respect to its school diversity.
    When I wander around and go to law schools I hear more 
questions about the number of clerks that come from just a few 
schools than I do almost anything else. All of these are very 
important.
    With respect to race and gender, I think we are doing 
better. I know this. I referred before to the fact that I was a 
clerk on the Court a few decades ago, and if you want pathetic 
numbers, those were some pathetic numbers.
    The numbers are much higher now. I think for women now, 
this is our first year where a majority of clerks are women. 
And we are doing better on the front of racial diversity as 
well. But that is not to say that there isn't a great deal more 
to do.
    As with most of these issues, sort of the higher you go, 
these are real pipeline issues, and the higher you go, the 
stronger and firmer and more inclusive the pipeline has to be. 
And this is something that I know I thought about a lot when I 
was a law school dean. And, in part, to make the Court and its 
clerks more diverse, you need very diverse law schools.
    You need judges and law firms, because we take our clerks--
certainly they have to come from other appellate judges, 
sometimes district judges. More and more they come from law 
firms, so that the more inclusive and diverse those 
institutions are, the better that pipeline will serve us.
    Over time, I am confident that that pipeline will become 
more inclusive, more diverse, but that means that we all have 
to be working at it, every single one of us, the law firms, 
other judges, the law schools, and us.
    And maybe the most important thing is for us to use 
whatever bully pulpit we have to make clear that this is an 
important issue, that diversity in the legal profession is a 
matter of real significance, that the legal profession is made 
stronger by how diverse and inclusive it is, no profession 
fares well if you don't take advantage of the talents and the 
perspectives and the experiences of all kinds of different 
people, and for us to use this kind of setting and other sorts 
of settings to say exactly that and to say that this is an 
issue of deep concern.
    Mr. Bishop. Mr. Chairman, I think my time has expired 
unless the chair would give----
    Mr. Quigley. You are correct.
    Justice Kagan. Is that because I filibustered?
    Mr. Quigley. Well done. You have learned how these cameras 
work here.
    Mr. Justice, if you could answer Mr. Bishop's question in a 
succinct manner, I would appreciate that.
    Justice Kagan. As opposed to----
    Mr. Quigley. I apologize. I don't mean it that way. I know 
everybody wants to get a series of questions in, and I should 
have mentioned that at the beginning.
    Justice Alito. Yeah, certainly.
    Well, I won't add much to what Justice Kagan said about the 
first question, about law school, law clerk diversity. There is 
the funnel issue.
    All of our law clerks, because they serve with us for only 
a year and they have to hit the ground running--I will get to 
the second question in 1 second--come from a court of appeals 
clerkship at one point. They need that for the training.
    On the second issue, it is very important, and I do not 
want to talk about any particular incident, but in general 
terms, I will say this. I think it is extremely important for 
all of the members of all three branches of our government to 
be accurate and respectful when we are talking about members of 
the other branches.
    We all have important work to do. We all do our best. We 
all make mistakes. There are constitutional procedures for 
correcting the mistakes that are made by lower court judges. I 
think we all have to be careful, consistent with sort of the 
American way of robust public debate to be respectful and 
accurate in what we say.
    Mr. Bishop. Thank you very much.
    Mr. Quigley. Thank you, Mr. Bishop.
    Mr. Bishop. Thank you, Mr. Chairman.
    Mr. Quigley. Mr. Graves.
    Mr. Graves. Thank you, Mr. Chairman.
    I know you all are keenly aware of all the things that we 
are working on every day. I am sure you watch and monitor. And 
I say that jokingly.
    But there is one thing today that maybe you could comment 
on. We have been debating yesterday and today a bill that 
rewrites the election laws here in our country, and many would 
suggest is unconstitutional. And in some ways the bill itself 
admits that in its own criticism of Supreme Court decisions in 
the past justifying law changes today.
    I am not asking you to comment on the bill itself, but 
there is one provision that has a direct impact on the courts, 
and I wanted to get your opinion on it. It was added at the 
last minute in the Rules Committee without any committee 
hearing, but it requires that the Judicial Conference's Code of 
Conduct apply to the Supreme Court Justices. I am not sure why 
that was added, but is there something we should be concerned 
about in the Supreme Court? Is there a code of conduct issue?
    Justice Alito. Well, I will try to be succinct.
    I know I speak for all of my colleagues in saying that we 
take our ethical responsibilities very seriously. We are 
committed to behaving in an ethical manner and in a way that it 
appears to the public is fully ethical.
    We follow the code of conduct that applies to the lower 
courts, but we don't regard ourselves as being legally bound by 
it. And the reason for that can be found in the structure of 
Article III of the Constitution, which says that the judicial 
power shall be vested in one Supreme Court and in such inferior 
courts as Congress may create.
    Now, I was a judge on one of those inferior courts, using 
the 18th century terminology, for 15 years. They are not 
inferior in the sense of being less talented or less deserving 
of respect, but they are subordinate. And I think that it is 
inconsistent with the constitutional structure for lower court 
judges to be reviewing things done by Supreme Court Justices 
for compliance with ethical rules.
    So that is the concern about being formally bound by those 
ethics rules. And our situation is not exactly the same as that 
of the lower court judges, our working life is a little 
different.
    Mr. Graves. No known misconduct issues. There are only nine 
of you. And it is explicit. It is not about clerks or staff or 
anything else. It is only Justices. I am curious why somebody 
would add this at the last minute.
    Justice Kagan. Well, I will just emphasize again what 
Justice Alito said in his first remarks, which is we take our 
ethical obligations extremely seriously. And we do follow the 
code.
    The code does not itself answer all questions. Where we 
have questions about the code and how it applies, typically we 
have a very strong legal office that is well equipped to deal 
with issues like this. We consult with them. Maybe we will 
consult with our colleagues, or some of them, the Chief Justice 
in particular. But all of us take our responsibilities in this 
area extremely seriously.
    And I agree with Justice Alito about the sort of 
constitutional difference between the Supreme Court and the 
circuit and district courts. But one thing we are definitely 
not different, which is that we follow those guidelines to the 
very, very, very best of our ability.
    Mr. Graves. Thank you. I never questioned that at all. 
Apparently, though, somebody in the majority party does, and I 
don't know why. But thank you for answering that.
    A quick question on cybersecurity, a big, big concern this 
committee has addressed a lot with a lot of the other agencies. 
Clearly the Supreme Court has a lot of very important 
information that it must protect from cyber attacks.
    Is there anything you can speak to on that, just to give us 
a little bit of reassurance on the plan or proposal that you 
have in place?
    Justice Alito. I am very far from being a cyber expert. 
Maybe my colleague is. She is younger, and maybe she is more 
knowledgeable than I am.
    We have a very good IT staff, and they assure us that we 
are well protected, and I trust that that is true. But it is 
certainly a problem. We don't want individuals to hack into our 
system.
    Mr. Graves. You most likely have cybersecurity experts on 
staff, I would suppose, right?
    Justice Alito. We do have people on staff who work on this, 
and when they tell us the number of attempts that are made on a 
regular basis, it is kind of startling.
    Mr. Graves. Alarming? Yes, it is. Thank you.
    Thank you, Mr. Chairman.
    Mr. Quigley. Thank you.
    Mrs. Torres.
    Mrs. Torres. Thank you very much, Mr. Chairman, for holding 
this hearing.
    And thank you so much to our Justices for being here.
    Indeed, I agree with my colleagues that today is a special 
day when two branches of government can come together to talk 
about the issues that are pending and important to both of us. 
We want to make sure that you have the resources that you need 
to carry out your constitutional duties and apply the law 
fairly--justice, right, liberty and justice for all--as we 
discuss salaries and expenses for the Supreme Court.
    We have entered a new era where women are taking their 
place in the House of Congress, in the Senate, as clerks, and 
as you, yourself, have stated, that you have a large number of 
women now that you have hired on. It is important to me as a 
female Member of Congress to be able to answer that question 
that was asked earlier. How do we know, without an inspector 
general, how do we know how many cases of misconduct actually 
exist?
    And I am not probing as to relating to Justices. But as a 
whole, we all have peers, right, how do we know?
    Justice Alito. The Chief Justice and the Judicial 
Conference have taken this issue very seriously in the last 
couple of years, and a working group was formed to examine the 
practices of the entire Federal judiciary. And the working 
group delivered its report with some very substantive 
recommendations, and it is my understanding that those are 
being implemented.
    I am not aware of particular--of problems on the Supreme 
Court itself. But I certainly can assure you that all of the 
Justices are aware of this potential problem, and if it were to 
come to our attention that there were any problems along these 
lines regarding or involving anybody who works in the Supreme 
Court building, we would not sit back. We would take action 
that is appropriate.
    Mrs. Torres. Congress has taken this issue very serious as 
of lately because we have had some issues, and Congress has an 
Ethics Committee that is made up of Members of Congress. So 
while I understand that Chief Justice Roberts and Justice 
Breyer have argued in the past that there are two reasons why 
there is no process, public process that exists, they argue 
that essentially a code of conduct is impossible to enforce on 
Justices as there aren't judges that we could bring to the 
Supreme Court to replace Justices.
    That is what I am bringing out the issue of as with 
Congress where we have our own ethics group that is a check and 
balance on Members.
    Secondly, it was argued that the Code of Conduct created by 
the Judicial Conference with Chief Justice Roberts presides 
over is only an instrument of the lower courts, and I find 
these arguments unconvincing. I think there are messages that 
we send to our employees when we don't put forward transparent 
policies on how we are going to protect victims and how we are 
going to deal with whistleblowers and protect whistleblowers.
    I hope that at some point, without disclosing specific 
information, that we could have a conversation around this 
issue, because it is an important issue not only to our Nation, 
but to the world. Women all over the world are finding their 
voice, and it cannot stop at the Supreme Court.
    Justice Kagan. Well, I do believe that with respect to a 
code of judicial conduct, Justice Alito has suggested some of 
the reasons why we have reservations about following the same 
code that applies to lower court judges.
    But for that reason, the Chief Justice is studying the 
question of whether to have a code of judicial conduct that is 
applicable only to the United States Supreme Court. So that is 
something that we have not discussed as a conference yet, and 
that has pros and cons, I am sure, but it is something that is 
being thought very seriously about.
    And then with respect to the sexual assault issue in 
particular as it relates to the entire judicial branch, this is 
something which I think that the Chief Justice has been really 
proactive in getting a wonderful committee together of judges 
and circuit executives, court executives.
    And the final recommendations, I believe, are going to be 
voted on this spring, that the circuit conference is going to 
vote on a set of recommendations which do many of the things 
that you said, not just make clear what conduct is forbidden, 
but also protect against retaliation and make the processes for 
reporting very streamlined or much more streamlined than they 
have been.
    And of particular concern in the judicial branch, I think 
that people take seriously the sort of confidentiality of 
chambers, but making it quite clear that that confidentiality 
gives way when people are reporting sexual misconduct, and so 
taking that off the table with respect to these kinds of 
allegations.
    Mrs. Torres. Thank you very much. I am very interested in 
this subject, so if there is anything that I can do to help 
move forward, please let our office know.
    And I yield back.
    Mr. Quigley. Thank you.
    Mr. Stewart.
    Mr. Stewart. Thank you, Chairman.
    Justices, what an honor it is to have you here. I think it 
has been a helpful conversation. It is far less contentious 
than many of them. And we are grateful for the calm demeanor 
that you bring to us.
    Justice Kagan. We can start fighting if you want.
    Mr. Stewart. It will come.
    If you will allow me two very quick observations and a 
question. I am not an attorney. I actually was going to go to 
law school and very late decided to go in the military. But I 
come from a family of attorneys. One of my brothers is a 
district court judge and three of my sons are attorneys. One of 
them actually, Justice Kagan, is at Harvard and going to law 
school there. I am very proud of him. I wondered sometimes why 
they chose that career path, but I am, I say, proud of where 
they are.
    And the second thing is, I want to go back to our 
conversation regarding televised remarks. And I want you to 
know that I agree with your reservations about that. And I am 
someone who understands that the cameras and the openness is a 
very important part of Congress, this work that we do.
    Mr. Quigley and I both sit on the House Intelligence 
Committee. Most of our work is done in a basement without 
cameras and without people there that are observing. And I 
think we would both tell you that you do have a different 
experience when cameras are there, especially if it is an 
emotional topic--which, by the way, you all deal with all the 
time. Some of them are a little less so, but many of them are 
the most contentious issues facing our society right now, and I 
can imagine that that would maybe change your process.
    Now, if you could, I am going to ask you a question, and I 
don't know if you are going to bear with me and feel 
comfortable answering it, but I am going to try. And it kind of 
builds on what Chairwoman Granger said when she was indicating 
6,000 to 8,000 cases before you, of which you select a very 
small number, 70 or 80 or 90. And it seems like my concern 
would compel that to change and maybe force you to do more.
    But my concern is far broader than that, and it is this 
thing that we have seen in the recent past, the last half a 
generation maybe, of nationwide injunctions that are imposed by 
a single district court judge at various locations around our 
Nation. They bar the Federal Government from enforcing law or 
policy far more reaching than even their own district, and as I 
said, by definition it extends to everywhere in the United 
States.
    And as I was thinking about this and doing a little reading 
on it, I mean, you all know this, I didn't, but the first time 
it happened was in 1963, 200 years to get to where we had this 
kind of precedent, but in the last year alone we have had 22 of 
these. And it seems to be an explosive trajectory for our 
Federal courts to impose these nationwide injunctions. And I 
suppose that compels you to look at many more cases because 
those have to be examined.
    Could you share your thoughts on that? It concerns me. Does 
it concern you? Does it concern the Court? Is this a good thing 
for our country? And is there a way to correct it?
    Justice Alito. Well, I appreciate your remarks, and this is 
an important issue. Some of my colleagues, I believe, have 
written on it a little bit in recent years. It is an issue that 
is being discussed increasingly in scholarship, and it is an 
issue that may come before the Court in the near future.
    So I don't think I can say more about that, and certainly 
can't suggest how I think we should decide the issue, and 
wouldn't be in a position to be able to say that until the 
issue came before us and the issue was briefed.
    We have had an increase during the last year or so in cases 
in which we have been asked to stay injunctions that have been 
issued by the district courts. And we have received 
applications from the Solicitor General in a number of cases to 
grant certiorari before judgment, which would allow us to take 
a case directly from a district court, bypassing the court of 
appeals. That is a procedure that has always been available, 
but it has always been recognized as one to be used quite 
sparingly.
    I think--I don't think I can go further on that issue.
    Mr. Stewart. Justice Kagan, do you want to share any 
thoughts?
    Justice Kagan. Not really.
    Mr. Stewart. I understand. And, of course, not being 
completely oblivious, I anticipated that you would be very 
cautious in how you responded.
    Can I ask for one clarification, and just for my own 
knowledge? When we do have these nationwide injunctions, does 
that compel you to examine all of those cases or not in every 
case?
    Justice Alito. They are typically made in connection with a 
petition for a writ of certiorari, which is a matter of court 
discretion. So we don't have to grant certiorari in any case, 
and therefore the application is also discretionary.
    Mr. Stewart. Okay. Thank you both.
    Mr. Quigley. Thank you.
    Mrs. Kirkpatrick.
    Mrs. Kirkpatrick. Thank you so much for being here.
    Both my husband and I are attorneys, and so is our oldest 
son, so we not only read your opinions, we debate them at the 
dinner table. And so I appreciate your thoughtful deliberation, 
you do take the hardest cases, and your excellence in legal 
writing. We, as a family, very much appreciate that.
    And, of course, being from Arizona, we are very fond of 
former Supreme Court Justice Sandra Day O'Connor. And Justice 
Alito, it is a pleasure to hear from you today as her 
successor, not replacement, you can't replace Sandra Day 
O'Connor.
    But thank you again both for being here.
    My question involves financial disclosure. Supreme Court 
Justices, like all Federal judges, file an annual financial 
disclosure report each May. But unlike Members of Congress, 
these reports are not posted online. Would you support a change 
in policy to online disclosures?
    Justice Alito. As a practical matter they are available 
online almost as soon as they are released to the public. There 
are private groups that request all of the financial disclosure 
forms of the Justices as soon as that is possible, and as soon 
as they obtain them they put them online. So as a practical 
matter, they are already available online and anybody can see 
any of our financial disclosure forms.
    We follow the procedure that is set out in the Ethics in 
Government Act and in the implementing regulations of the 
Judicial Conference on this matter, and we have not gone 
further, but that is certainly something that we could consider 
if there is a real issue. Because they are documents that are 
available to the--supposed to be available to the public.
    Mrs. Kirkpatrick. And you were talking about the 
transparency of your website and the things that you post 
there, and that was what sort of prompted my question there.
    Justice Alito. Yes.
    Mrs. Kirkpatrick. Justice Kagan, anything different?
    Justice Kagan. No, I think that is my view, too.
    Mrs. Kirkpatrick. Okay.
    Again, along the lines of financial disclosure, currently 
the Supreme Court Justices are not bound by the STOCK Act, 
which requires Members of Congress to post securities 
transactions within 45 days. Do you see any reason that Federal 
judges, including the Justices, should not be included in such 
a measure?
    Justice Kagan. You know, I have not looked into that piece 
of legislation, so I don't know what is in it. But it would 
certainly be something that maybe we would take a look at as to 
whether there were some kinds of transactions that some of us 
might be participating in that in other branches of government 
are being reported and then ours not. I just don't know that to 
be the case. But certainly we will take it back with us.
    Mrs. Kirkpatrick. Thank you. Thank you. All in the interest 
of more transparency.
    Justice Alito. We are prohibited by statute from 
participating in any case in which we have a financial 
interest. So if we own stock in a company that is a party or 
related to a party, a subsidiary or a parent, then we are 
prohibited from participating in that case. And all of that is 
disclosed in our financial disclosure form.
    Mrs. Kirkpatrick. Thank you, again. I yield back.
    Mr. Quigley. Thank you.
    Mr. Crist.
    Mr. Crist. Thank you, Mr. Chairman.
    And it is wonderful to have both of you here today. Thank 
you for your presence.
    I was curious, it has been 4 years, I believe, since a 
Justice of the Supreme Court has been before this committee. Do 
you think it would be advantageous to have this opportunity on 
a more regular basis or do you think this is sufficient?
    Justice Kagan. Well, we were talking before the hearing 
began with the chairman, and he was suggesting that he would 
not think that this is an every year kind of thing, but an 
every few years kind of thing.
    I hope I am not misrepresenting you, Mr. Chairman.
    But we are at your disposal. I agree with the chairman, it 
might not be different enough year by year by year, it might be 
sort of repetitive. But if you want us to come back in a few 
years' time, we would be glad do so.
    Mr. Crist. Thank you.
    And then my only other question. I was just kind of 
curious, I notice that there is discussion of the 2020 Supreme 
Court salaries and expenses budget totals $90.4 million and 
that 87.7 is for discretionary expenses. Can you elaborate on 
what those might be? I am just not aware, that is all.
    Justice Alito. Yeah. Mandatory expenses are the salaries of 
the Justices that cannot be decreased pursuant to the 
Constitution. That is why they are called mandatory. It is 
somewhat misleading terminology. But discretionary expenditures 
are everything else. And the vast bulk of that consists of the 
salaries and benefits for our staff. So the amounts that they 
are entitled to in accordance with their pay grade.
    Mr. Crist. Is there any per diem or travel expense 
allocation?
    Justice Alito. There is. Not for us. Most of the members of 
our staff don't do a lot of traveling. Our police officers do, 
and I assume that there is a per diem for that.
    Mr. Crist. Probably when you would travel they would be 
need to be with you, I assume.
    Justice Alito. That is correct, yes.
    Mr. Crist. Thank you very much.
    Thank you, Chairman.
    Mr. Quigley. Thank you.
    I would just ask the ranking member if there is any member 
on his side who has a second round of questioning.
    Mr. Graves. No, sir.
    Mr. Quigley. And I would ask my members as well if someone 
has a second round of questions. All right.
    There is one thought. There was some curiosity on how the 
shutdown impacted the Court. You seem to be up and running with 
some ability to move forward. Did that impact you in any way?
    Justice Alito. Fortunately, it did not. My understanding is 
that we operated during the shutdown using the same pool of 
funds as the rest of the judiciary, and those are funds that 
are derived from the filing fees that parties are required to 
pay in civil cases. So we are permitted to use those for 
operating expenses in an emergency such as that. And, 
fortunately, there was enough money for us to keep operating 
during the shutdown.
    Mr. Quigley. Very good.
    Justices, do either of you have anything else you would 
like to add.
    Justice Kagan. Thank you very much for having us.
    Mr. Quigley. The ranking member and myself and all members 
here, thank you very much for your service and your time today. 
Thank you so much.
    Justice Alito. Thank you.
    Justice Kagan. Thank you.

                                           Tuesday, March 12, 2019.

             TREASURY'S ROLE IN COMBATTING FINANCIAL CRIMES

                                WITNESS

SIGAL MANDELKER, UNDER SECRETARY U.S. DEPARTMENT OF TREASURY
    Mr. Quigley. Today's hearing is called to order.
    This morning we welcome Sigal Mandelker, the Under 
Secretary of Terrorism and Financial Intelligence of the 
Department of Treasury.
    As a member of the House Select Committee on Intelligence, 
I have traveled to countries around the world and had the 
benefit of receiving briefings from multiple agencies to 
understand the meanings and tactics used by terrorists, drug 
traffickers, human smugglers, and other bad actors who threaten 
our national security.
    One thing I have learned from these briefings is that all 
of these criminal organizations have one thing in common. Their 
unlawful operations are supported and financed through money 
laundering.
    Treasury plays a vital, but often overlooked role, in 
combatting terrorist financing and money laundering. In 
particular, the Office of Terrorism and Financial Intelligence 
works to protect the integrity of our financial system using a 
variety of tools and authorities.
    TFI's activities range from economic and trade sanctions 
administered and enforced by the Office of Foreign Assets 
Control against targeted foreign countries, terrorists, and 
others who seek to do us harm, to the collection and analysis 
of intelligence and financial information that can be used by 
law enforcement to investigate financial crimes and money 
laundering.
    The fiscal year 2019 omnibus appropriations included an 
increase of $17.2 million above the fiscal year 2018 levels for 
TFI. This additional funding supported the newly established 
Terrorist Financing Targeting Center, a multilateral effort 
between the U.S. and Gulf Cooperation Council countries to 
counter terrorist financing and provide a substantial 
enhancement to Treasury's programs targeting North Korea.
    From the limited information we have so far on the 
Department's fiscal year 2020 budget request, I am pleased to 
see continued recognition of the important work you do with a 
proposal for a modest increase above fiscal year 2019 for TFI 
and FinCEN.
    Lastly, I would be remiss if I did not take this 
opportunity to comment on the recent announcement of Treasury's 
intent to divert $601 million from the Treasury Forfeiture Fund 
to pay for the construction of physical barriers along the 
southern border. These funds are typically used to augment 
funding for critical Treasury and Homeland Security operations, 
such as IRS criminal investigations, Title III wiretaps, and 
electronic crimes task forces.
    In fiscal year 2019, Treasury's budget request stated its 
intent was to use available funds to support investigations and 
other activities to combat money laundering and terrorist 
financing. The recent decision to redirect these funds toward 
border fencing recklessly undermines the ability of Treasury 
and Homeland Security to address known threats against our 
financial system and the Nation.
    Before I turn to our witness for their statement, I would 
like to recognize Mr. Amodei.
    Mr. Amodei, do you have a statement on behalf of Mr. 
Graves?
    Mr. Amodei. Mr. Chairman, thank you.
    I want to apologize for my tardiness, and you have covered 
it pretty well. So I have no statement on behalf of Mr. Graves.
    And I yield back. Thank you.
    Mr. Quigley. Thank you so much.
    Under Secretary Mandelker, thank you for being here today. 
Without objection, your full written testimony will be entered 
into the record.
    With that in mind, we would ask you to please summarize 
your opening statement in 5 minutes.
    Ms. Mandelker. Thank you very much, Chairman Quigley and 
distinguished members of the subcommittee.
    I want to begin by expressing my gratitude for the 
committee's strong and continued support for Treasury's Office 
of Terrorism and Financial Intelligence. We are very proud to 
work closely with the Congress across U.S. national security 
and law enforcement agencies and also with our foreign 
counterparts to disrupt malign activity and to safeguard and 
strengthen the integrity of the U.S. and international 
financial system.
    It is an honor for me to be the Under Secretary of TFI 
during our 15th year. Although TFI itself is a relatively 
recent creation, it actually has its roots in the 1940s out of 
an effort to prevent Hitler and the Nazis from seizing U.S.-
held assets of countries as the Nazis invaded them.
    In a novel use of our tools then, the Treasury Department 
officials used the emergency powers of the United States to 
freeze those assets. In fact, they were able to freeze billions 
of dollars to keep them out of the hands of the Nazis.
    Treasury moved swiftly then, and we move swiftly now as we 
are constantly working to keep funds out of the hands of 
dangerous actors around the world and to change their behavior.
    I am humbled to supervise TFI's career officials within 
OFAC, FinCEN, the Office of Intelligence and Analysis, and the 
Office of Terrorist Financing and Financial Crime, including 
the Treasury Executive Office of Asset Forfeiture, or TEOAF.
    These dedicated public servants work day in and day out, 
often behind the scenes, to keep America safe. They work at an 
increasing pace to implement our complex authorities and our 
successes are a testament to their skill and dedication.
    TFI's economic authorities play an increasingly central 
role in countering some of the Nation's most critical national 
security and illicit finance threats. This last year has 
undoubtedly been one of our most active.
    We have reimposed nuclear related sanctions against Iran; 
brought maximum pressure against North Korea; targeted major 
Russian companies, oligarchs, malicious cyber actors, and many 
more; ramped up our efforts worldwide to combat terrorist 
financiers and narco traffickers, as well as their networks; 
taken unprecedented action to hold human rights abusers and 
corrupt actors to account; reinvigorated our work with partners 
to strengthen domestic and international anti-money laundering, 
countering the financing of terrorism safeguards; among many 
other things.
    We are also increasing our efforts to share information 
with the private sector. We have issued multiple advisories on 
issues ranging from corruption in Nicaragua, Venezuela, and 
South Sudan to illicit maritime networks, to deceptive 
practices that Iran uses, among many more.
    With each of these actions, we are strategically 
calibrating our economic tools and authorities across our 
components, and all of our efforts are underpinned by bilateral 
and multilateral engagement with partners, also with civil 
society organizations, including efforts that we undertake to 
share information with other governments to work together to 
disrupt specific threats.
    We, again, greatly appreciate the confidence and support of 
this committee. As the chair already mentioned, in the last two 
budget cycles, our appropriations have continued to increase, 
and we are using these funds to ensure that we remain agile and 
responsive to a wide range of national security and law 
enforcement objectives and that we are innovating and adapting 
at a faster pace than our adversaries.
    These budget increases are critical to supporting our 
workforce and our mission.
    Thank you, again, for your support, and I look forward to 
answering your questions.
    [The information follows:]
    
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Quigley. Thank you so much.
    We have some members who need to move on to other hearings 
as well. So I am going to move forward with others first, and I 
would ask, given that consideration, that we observe the 5-
minute rule, and so we ask members and the witness to try to 
keep their questions, especially on the first round, to that 5 
minutes.
    Mr. Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman.
    And thank you for being here, Ms. Mandelker.
    I want to start with the Financial Crimes Enforcement 
Network. It recently made a statement jointly with regulators 
of federal depository institutions, encouraging banks to 
implement what they call, quote, ``innovative approaches,'' 
unquote, to meet Bank Secrecy Act and anti-money laundering 
compliance requirement, with the goal of better identifying and 
reporting money laundering, terrorist financing, and other 
illicit financial activity.
    Can you provide us examples of some of the innovative 
approaches that you are seeing?
    Ms. Mandelker. Thank you for that question.
    This actually we thought was a very important effort. It is 
the first time that you have had all of the Federal banking 
agencies along with FinCEN, which is part, of course, of TFI, 
coming out with a statement like that, where we are encouraging 
innovation.
    We have had a number of financial institutions come to us 
with innovative ideas. I do not think at this point I am at 
liberty to tell you what those are, given what those 
discussions are like. But we are happy to come in and talk to 
you about it more.
    You know, I believe that we are going to be that much 
better at the end of the day detecting money laundering, 
illicit activity if we give financial institutions the 
incentive and the space to engage in all that more 
sophisticated activity to detect those crimes.
    And we have seen a lot of great innovation coming out of 
the financial institutions, and I look forward to seeing more, 
in part, as a result of that statement.
    Mr. Cartwright. Yes, and I welcome working directly with 
you off script.
    And you mentioned the participation of depository 
institutions, and I want to ask you. What level of 
participation are you seeing from banks in conducting pilots 
and other innovative approaches?
    Ms. Mandelker. So that was, in part, the purpose of the 
statement. We want to make sure that financial institutions 
have the space to pilot these kinds of innovative approaches 
without feeling like they are going to be dinged, so to speak, 
in an examination because they have undertaken these kinds of 
pilots.
    We have actually received great feedback from financial 
institutions. This has gotten a lot of attention at senior 
levels of the banks because we do have a lot of people in 
financial institutions who have a sophisticated background in 
how to use financial crime units within their organization to 
ferret out that kind of illicit activity.
    So, again, we are happy to have a discussion with you, 
about what kind of pilots we are seeing because those are, you 
know, conversations that we have in confidence with those 
financial institutions, and we are in the process of evaluating 
those.
    I would rather not speak about it here, but happy to have 
further conversations, and what I can tell you is there is a 
lot of really good work that is happening in the compliance 
community to incentivize even more sophisticated work in this 
space.
    Mr. Cartwright. Good. Yes, let's talk offline on that as 
well.
    And I want to move to this question of AI. I notice in the 
joint statement it is mentioned that some banks are 
experimenting with artificial intelligence to strengthen and 
enhance compliance measures.
    Can you explain as best you can publicly a bit more about 
how these types of systems are being used?
    Ms. Mandelker. I bring it to the comments I made before, 
and again, I am happy to have other conversations with you.
    But the bottom line here is that as actors, illicit actors, 
are becoming all the more sophisticated in trying to get around 
our rules, our laws, we have to be many steps ahead of them.
    And so when it comes to whether it is the use of artificial 
intelligence or other technology to detect that kind of 
activity, we think it is important.
    The other effort that a lot of the banks are now 
undertaking is they are forming, under an authority that was 
pursuant to the Patriot Act, they are forming consortia where 
they are actually able in certain circumstances to share 
information with one another.
    Mr. Cartwright. With each other.
    Ms. Mandelker. Yes, exactly. And when you do that, of 
course, you can detect a broader pattern of activity, which we 
think is a really important development.
    And when they do that, not only does it enable them to 
harden their networks, but they also provide information back 
to us through suspicious activity reports and other reports 
that have been crucial in our ability to take down, with law 
enforcement, broader networks.
    Mr. Cartwright. Well, I am glad to hear that. So one bank 
can say, ``Well, we are seeing that, too,'' and that gives 
added credence to a particular threat.
    Well, I thank you for being here, Secretary.
    And I yield back.
    Mr. Quigley. Thank you.
    Mr. Amodei.
    Mr. Amodei. Thanks, Mr. Chairman.
    Madam Under Secretary, I want to kind of go to the FinCEN 
area as well for a minute, and I want to talk about banking and 
marijuana.
    Not my cup of tea, no pun intended. I understand Schedule 1 
is floating around out there, and the Congress has or has not 
done or is going to do some things. But I am talking now as 
somebody who has reached out and had FinCEN come in for 
briefings about, ``Hey. How are you doing this? And what is 
going on?'' because we get that federally regulated banks are 
sensitive to what FinCEN has to say about things and stuff like 
that.
    But I am looking, at least in the neighborhood that I 
travel in, at a situation where, for instance, let's take a 
large national bank that has not had a great couple of years. 
So they are really, really conservative on that Schedule 1 
stuff, and ``we cannot.'' Okay. I get that.
    But then you get another bank who says to the plumber, who 
may have done work on rental property for the landlord, which 
is leased to somebody who grows or distributes King's X. Okay, 
I think. Maybe not okay.
    But I want to get right to the point here, which is when 
those folks who are operating in States under a privileged 
business license, are paying local governments, State 
governments, and the Federal Government their taxes in cash, 
which are then put in depository institutions, there is no 
scrutiny whatsoever.
    It is okay to take cash from a licensed marijuana grower if 
you are the State of Nevada and you deposit it in pick the name 
of the institution, and there are not examination issues. There 
are no FinCEN issues. Clearly Schedule 1 prohibited substance 
tax revenues, while there is for all of these other things.
    So I am not trying to put that all on you because Congress 
has to fill a void. I get that, but right now status quo is if 
you are a government entity, putting your cash from marijuana 
businesses in a Federal depository institution, as near as I 
can figure, it is just fine.
    Help me. Why are all of the private sector people being 
told, ``Figure out a way to launder your money,'' but yet the 
government's political subdivisions are saying, ``Pay the IRS 
in cash''?
    As a matter of fact, some of them are overpaying them and 
getting Treasury checks back. So we have essentially laundered 
the money for them.
    Ms. Mandelker. So I want to make clear what our role is in 
this area and what it is not. So, of course, it continues to be 
a crime, as you know, under Federal law to engage in certain 
activities related to distribution, et cetera, of marijuana.
    Nothing that FinCEN does or can do in this area changes 
that. That continues to be the state of Federal law.
    Mr. Amodei. Understood.
    Ms. Mandelker. And in that context, of course, banks have 
to make their own decisions about risk-based decisions as we 
ask them to do in a variety of circumstances about what they 
are and are not willing to bank.
    We do not tell them what to bank. They make those decisions 
based on a variety of circumstances, including their concerns 
about whether or not engaging in certain types of banking is 
going to bring regulatory scrutiny on them or, alternatively, 
concerns that it may be involved in money laundering or other 
illicit activity.
    What FinCEN did in 2014 was issue guidance to financial 
institutions about the kinds of SARS that they should file 
related to guidance. That was in connection with guidance the 
Justice Department had put out at that time related to what 
they were and were not going to prosecute.
    That guidance remains in place. We have not changed it. We 
continue to review it, but as you mentioned, this is really 
something, I think, that Congress needs to look at because 
nothing that we do can or does change what is prohibited under 
Federal law.
    Mr. Amodei. Okay.
    Ms. Mandelker. And of course, it is really----
    Mr. Amodei. And I do not mean to cut you off, but my time 
is a little limited.
    Ms. Mandelker. Sure.
    Mr. Amodei. I would like to request a copy of the guidance, 
if that is appropriate, from your office to the guidance you 
put out in 2014.
    And then I would also like to do one follow-up, which is: 
has FinCEN done anything in a disciplinary sense against any 
banks that are taking deposits for the U.S. Treasury or for any 
State treasury or for any local government treasuries in States 
that have legalized marijuana?
    Ms. Mandelker. So we are happy to provide that guidance. It 
is also available on our Website. We can give a copy to you and 
to your staff.
    What we do with the suspicious activity reporting that 
comes in in connection with that activity is we analyze it, of 
course, and you know, law enforcement, I think, believes that 
that analysis is valuable to them.
    We also have to understand that any activity related to 
narcotics can also show other illicit activity that we all have 
to take----
    Mr. Amodei. I appreciate it, Madam Under Secretary.
    I will just do one more request before I yield back, which 
is: could you please let us know if there have been any SARS 
filed by any financial institutions with respect to deposits 
made by the Federal Government, any State government, or any 
local government?
    Do you have in your system any SARS filed for deposits made 
by political subdivisions that are affiliated with the 
marijuana industry?
    Ms. Mandelker. So what I can tell you is, of course, we 
have a number of SARS related to the marijuana industry, as we 
do in a wide range of activity.
    With respect to your specific question, we are happy to get 
back to you.
    Mr. Amodei. Thank you very much.
    I yield back Mr. Chairman.
    Mr. Quigley. Thank you.
    Mr. Bishop.
    Mr. Bishop. Thank you very much, Mr. Chairman.
    Welcome, Ms. Mandelker.
    Ms. Mandelker, on February 28th, 2019, there was an article 
in the New York Times that described how Internet companies 
like Facebook are planning to roll out new cryptocurrencies 
over the next year that are meant to allow users to send money 
to contacts on their messaging systems, like Venmo or Paypal 
that can move across international borders.
    Facebook, for example, is working on a coin that the users 
of WhatsApp, which Facebook owns, can send to friends and 
family instantly.
    Given the reach of Facebook, as well as the current lack of 
central authority like a government or a bank regulating them, 
what are the potential vulnerabilities of a Facebook coin to 
money laundering?
    How would it be regulated?
    What can be done to make cryptocurrencies less vulnerable 
to criminality and scammers?
    Does FinCEN or other investigative organizations monitor 
public Blockchain that works for potentially illicit 
transactions?
    And I am going to ask my second question.
    One of the preferred methods of money laundering is through 
real estate, which can offer stable values or appreciated 
values and also anonymity if they are purchased through shell 
companies.
    Real estate is also functional in that a money launderer 
could use the property as a second home or rent it out, earning 
income from the investment. Those transactions are also less 
subject to scrutiny when they are compared with transactions 
related to banks, which have a legal requirement to report 
suspicious activities.
    What tools do you need to bring these transactions to the 
light of day?
    Ms. Mandelker. Thank you very much for both questions.
    So just starting with the virtual currency aspect, I do not 
want to comment on any particular organization's efforts in--
    Mr. Bishop. I understand.
    Ms. Mandelker [continuing]. The virtual currency space, but 
what I can tell you--
    Mr. Bishop. My bad.
    Ms. Mandelker. No. What I can tell you is that this is a 
very heavy effort, a focus of ours.
    So among other things, for example, I have a group of 
people that stretches across all of my components that is 
looking every day at illicit activity related to virtual 
currency.
    FinCEN actually was one of the first regulators in the 
world to look at this issue and take it very seriously, and in 
about 2014, FinCEN issued guidance that said that virtual 
currency administrators and exchangers are the same as money 
transmitters, which effectively meant that they had to have 
compliance, AML/CFT compliance programs just like other money 
transmitters. They have to have internal controls. They have to 
have compliance officers. They have to file suspicious activity 
reports.
    In fact, we have gotten thousands and thousands of 
suspicious activity reports as a result of our efforts.
    In addition, what we have been doing systematically with 
IRS criminal investigators is examining virtual currency 
administrators and exchangers, and we say that any virtual 
currency administrator or exchanger, if it transmits currency 
through the United States, has to have those kinds of controls, 
regardless of whether or not they are headquartered----
    Mr. Bishop. Are you enforcing it?
    Ms. Mandelker [continuing]. Here in the United States?
    So we are. We are examining them in our supervisory role. 
We also have brought examination enforcement cases against 
certain virtual currency administrators and exchangers.
    We also have a very big effort globally to get other 
countries to do the same because bad actors are always going to 
go to the lowest common denominator.
    So this year we hold the presidency of the Financial Action 
Task Force, which is the international standard-setting body 
for AML/CFT, and one of our three top priorities is to----
    Mr. Bishop. I have got 1 minute left.
    Ms. Mandelker [continuing]. Encourage other countries to do 
the same.
    We could talk about this for a long time, but I can tell 
you we are tracking it. We are working very closely with law 
enforcement to do the same, and it is a very heavy focus for 
us.
    In terms of your question on real estate, that is also 
another area of focus. So you may be aware that we have issued 
a number of what we call geographic targeting orders, which is 
an authority that we have gotten from Congress that requires in 
certain jurisdictions title insurance companies to provide 
information to us very specifically to address the problem that 
you have identified, which is the use of shell companies to buy 
property, real estate, using cash.
    Those title insurance companies have to provide reports to 
us about who the beneficial owners are, among other areas.
    We have also issued an advisory to the real estate sector 
to help them identify red flags that they need to be alert to, 
to make sure that they are not being used to funnel money. It 
is a big effort of ours, and it is going to continue to be.
    Mr. Bishop. Thank you very much.
    Mr. Quigley. Thank you.
    Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman.
    Ms. Mandelker, thank you for being here today.
    As you are well aware, opioids are having a epidemic effect 
on our States, and I was wondering if you could explain to us 
what role the Treasury might have in helping Federal, State and 
local prosecutors in trying to figure out the organizations, 
one; two, how they are trafficking or laundering their money 
through communities and the things that they are doing similar 
to what you might have seen in, obviously, the TV shows that 
have shown different ways that they are doing it.
    But most importantly to me is: what are we doing to counter 
the effects of the Chinese importation of fentanyl and 
carfentanil, which is the deadliest thing out there today?
    Ms. Mandelker. Thank you for your question.
    So opioids and illicit narcotics as a general matter is a 
very big effort for us. So among other things, we have an 
authority under the Kingpin Act, which has been historically 
our most active OFAC program, where we have systematically 
targeted narcotics traffickers, international narcotics 
traffickers and their networks in a variety of different ways.
    So we have sanctioned a number of trafficking rings and the 
financial infrastructure that supports those trafficking rings 
all over the world, including in the last year we sanctioned a 
big fentanyl ring out of China.
    So we are very focused on the Chinese fentanyl issue and 
problem, and we are going to continue to be.
    In addition, what we have been able to do when it comes to 
understanding those networks and those rings is taking the 
information that we have through the BSA and suspicious 
activity reporting and otherwise, analyzing the information, 
and as appropriate, we share that with our State, local, 
Federal partners because we think we bring a particular type of 
expertise into how they work and they operate, and sharing that 
knowledge base is, we think, of high value.
    So we are going to continue to be focused on the opioid 
crisis. I think the other piece of it that we have been able to 
bring to the table is the work that we do with our foreign 
counterparts. So it is often the case that we will take action, 
and that action will spur the action of other counterparts in 
countries.
    We also work very closely with law enforcement in those 
countries to take parallel action, to share information with 
them as appropriate so that they can use their effective tools 
to do the same.
    Mr. Joyce. Certainly the seizures that have taken place of 
the drug itself is one thing, but as you are well aware, to 
really try to stop the program, you have got to seize their 
assets and the finances that are moving around.
    You know, for one who has been a local prosecutor for 25 
years, I was really interested in the sharing aspect because 
obviously you are in a position to make that available. When 
the Feds. came to me, the first question I would have is, 
``What is wrong with this case?'' because if it was good, they 
would have taken it in the first place.
    But you know, I would like to see more of that sharing 
because I think the most important thing we can do is continue 
to work as a team on all of those things and try to seize as 
many of their assets and break them up accordingly. Because in 
seizing those assets and getting them back in the communities 
that are being hit by this epidemic, I mean, we are losing 
people at too high a rate today.
    You know, one thing that is needed is treatment, and that 
requires dollars, and so it would be nice if we could continue 
to seize those assets.
    Any thoughts on how we could get that accomplished?
    Ms. Mandelker. I agree with you 100 percent. I am also a 
former prosecutor, and I have seen how much more impactful we 
can be when we are able to take those kinds of actions because 
they hurt people's pocketbook, and that is another 
disincentive, so to speak, to engage in that kind of activity.
    Again, I think what we bring to the table is, on the FinCEN 
side, the information that we are able to share through our 
analysis, and then on the OFAC side, it is going after being 
able to designate and sanction the financial infrastructure 
that supported those networks.
    So just in the last year, for example, we had a big case in 
Mexico where we did not just go after the known sort of 
narcotics traffickers. We went after the companies, the shell 
companies that were behind those traffickers. We went after 
some very significant, with attention internationally on some 
very significant individuals who were helping to be used as a 
cover for narcotics rings, and that similarly is going to 
continue to be a big effort of ours.
    Mr. Joyce. Thank you. Keep up the great work.
    And I yield back what no time I have left back, Mr. 
Chairman.
    Mr. Quigley. Thank you.
    Mr. Crist.
    Mr. Crist. Thank you, Mr. Chairman.
    And, Deputy Secretary, thank you so much for being with us 
today.
    My home State of Florida recently legalized medical 
marijuana overwhelmingly at the ballot box. Currently our State 
is home to 14 lawfully licensed and regulated cannabis 
companies.
    By 2020, data suggests that the regulated cannabis market 
in the State of Florida will be about $880 million. So between 
the economic impact and the benefit to seniors, veterans, 
persons with certain disabilities, and other conditions, I 
think it is safe to say that medical marijuana is extremely 
important in my State.
    And yet we are currently having no banks, none, to publicly 
extend financial services to any of these lawfully licensed and 
regulated businesses in Florida, essentially treating them like 
criminal enterprises that your office may have to approach.
    I guess imagine for a moment that every lawfully licensed 
and regulated marijuana business in the State of Florida has 
open access to banking, and every dollar of every transaction 
was banked, traced, and taxed within our banking system.
    Would this give your department more control and oversight 
over illicit activities that contribute to the problem of 
financial crimes and money laundering?
    Ms. Mandelker. Thank you for that question.
    What I can tell, what I mentioned before earlier in the 
hearing is I think it is important to understand what our role 
is in this area and what it is not.
    So of course, it is still a Federal crime to engage in 
certain activities related to marijuana. Nothing that we do in 
this area changes that, and of course, what financial 
institutions have to do as a result is make their own risk-
based decisions as to what they do want to bank and what they 
do not want to bank.
    There are a number of financial institutions actually who 
are doing banking in certain respects. I cannot speak to what 
is happening specifically in Florida.
    In 2013, I said 2014 before, but it was actually in 2014. 
Sorry. FinCEN did issue guidance, and that guidance very 
specifically identified for financial institutions what their 
BSA obligations are relative to the marijuana guidance, and 
they did that at the time because the Justice Department had 
come out with parallel guidance about what they do, what they 
are and what they are not going to prosecute.
    That guidance effectively just told financial institutions 
or gave them guidance on what kinds of suspicious activity 
reports they should file in connection with certain types of 
marijuana related activities.
    It did not change Federal law. It just provided that kind 
of guidance, and that is really the role that we play here. We 
do get suspicious activity reporting related to marijuana 
business among a wide variety, of course, of other kinds of 
activity.
    Law enforcement has access to that suspicious activity 
reporting as they do across many, many different other areas, 
and we will continue to play that role, which is to be a 
recipient and analyzer of that kind of data.
    But at the beginning and the end of the day I think this is 
really a question of what is and what is not permitted under 
Federal law.
    Mr. Crist. Can you discuss more broadly how the current 
lack of banking access may be contributing to the problem of 
financial crimes and money laundering and how giving access to 
businesses operating legally under State law would help your 
office better carry out that work?
    Ms. Mandelker. So, Congressman, I am happy to come back and 
have a discussion with you about that. We are happy to take 
that question and do additional analysis. Some of that may be 
law enforcement sensitive, of course, and it is not something I 
could share with you today, but we are happy to have further 
discussions with you about it.
    Mr. Crist. When you do get those reports of suspicious 
activity, what do you do with it?
    Ms. Mandelker. So our BSA database is actually available to 
a wide range of Federal, State, and local law enforcement 
officials. So it is not just a matter of what we do with it. It 
is also a matter of how Federal, State, and local law 
enforcement officials look at and analyze that data.
    Mr. Crist. I appreciate that, but you are here today. So 
what, if anything, do you do with it when you get it?
    Ms. Mandelker. We track the data. In a lot of different 
areas we do analysis of the data because we think it is helpful 
both to Federal, State, and local law enforcement as they are 
investigating money laundering.
    Similarly, within TFI generally speaking, we use the BSA 
database to support many of our activities. You know, one 
thing, of course, in the narcotics area that we are always 
looking to see is whether or not the activity is contributing 
to other criminal activity, organized crime, and what have you.
    So it depends on the data, but we do spend time and effort 
analyzing it and using it and providing it to other law 
enforcement partners.
    Mr. Crist. Thank you.
    Thank you, Mr. Chairman.
    Mr. Quigley. Thank you.
    I will take a turn.
    Let's step back more broadly. Looking at the issue of money 
laundering, large foreign banks, if they were to launder money 
for a U.S. person or a U.S. entity, what tools do you have in 
place and systems that will detect this activity?
    How do we even know they are doing this?
    Ms. Mandelker. So we have access to a great deal of 
information related to banking, banking activity and other 
sanctions evasion activity, whether it is information that we 
have through the BSA database or information that we have from 
law enforcement partners or information that we have vis-a-vis 
the intelligence community.
    As you know, I have an intelligence agency that sits under 
my supervision, and that has been extremely valuable in our 
efforts to counter illicit finance all over the world. So we 
bring all of that information together. We analyze it, and we 
make decisions about what to do with it.
    So just as an example, yesterday we sanctioned a Russia-
Venezuela bank in connection with our Venezuela program.
    Similarly, we have sanctioned other banks in Russia and 
elsewhere, where we have found or detected that they have been 
engaged in illicit money laundering and in different programs.
    Mr. Quigley. Again, what type of activity would trigger 
your awareness of this?
    Ms. Mandelker. So it really would be across a wide spectrum 
of our programs. So whether it is in connection with North 
Korea, whether it is connection with what is happening in 
Venezuela, whether it is in connection with illicit activity 
that we see in our Iran program in counterterrorism, for 
example, among other areas, narco trafficking or what have you.
    And I have teams of people in TFI who are focused on very 
specific areas, national security areas, law enforcement, narco 
trafficking, human rights and corruption.
    The other thing that we have been able to do with great 
impact is use a tool that FinCEN has under the Patriot Act 
called Section 311, and that authority allows us to call out 
financial institutions or jurisdictions who are engaged in 
money laundering. We say they are primary money laundering 
concerns.
    And when we do that, there are a variety of different 
measures that we can take under that tool that relate to the 
ability of those institutions to continue to do business with 
the United States, and we have used it to great effect.
    So last year, we used the 311 authority to do a rulemaking 
in connection with a bank in Latvia where we had seen that 
particular bank engage in a wide swath of illicit activity 
related to North Korea, related to Russia, related to 
elsewhere.
    Similarly, actually my first week on the job, we did a 311 
action against a Chinese bank that we had found had ferreted a 
lot of money illicitly to North Korea.
    And those kinds of actions have had wide ranging impact not 
only in the particular institution, but they also send a 
message, I think, worldwide that the United States is not going 
to tolerate that kind of illicit activity, and we are going to 
take action where we think is necessary.
    Mr. Quigley. Just for the 100 level, how did you detect 
that they were doing that?
    Ms. Mandelker. It is a combination. It would be a 
combination of information that we have through the Bank 
Secrecy Act. We also have information that we are able to use 
through the intelligence community, among law enforcement, 
among other sources.
    Mr. Quigley. It is something that typically transferring 
money, you are able to detect that?
    Ms. Mandelker. We have a lot of tools to detect how 
financial institutions are operating.
    Mr. Quigley. And it is a new world with all sorts of new 
currencies, and how are you able to keep up with encryption and 
so forth?
    What tools do you have to match what the bad guys are 
using?
    Ms. Mandelker. So in a very similar way. So as I mentioned 
before, we get a lot of reporting from various entities. So, 
for example, the virtual currency space, we get reporting, BSA 
reporting, from exchangers and administrators. We get 
information. We are able to share information.
    We also get information from foreign counterparts and 
information that we have in partnership with law enforcement 
and other national security agencies.
    Mr. Quigley. Thank you.
    Mrs. Torres.
    Mrs. Torres. Thank you for being here with us.
    I represent California's 35th Congressional District. 
Within it, we have seven freight corridors, massive logistics 
industry. So it is a fairly targeted area for the Mexican 
cartels to move around narcotics.
    I am very concerned with the asset forfeiture account. I 
know that in previous years the Treasury has sought to maintain 
a minimum of 100 to $150 million in the TFF for operating 
expenses. This year is at 71. So I am concerned about that 
remaining balance and how much would really be available.
    My local agencies use asset forfeiture funding to, you 
know, work on these major crimes.
    I am also concerned with the President's decision to spend 
up to $601 million on a border wall, taking that money out of 
TFF.
    Can you tell me what other law enforcement activities will 
not be supported in fiscal year 2019 as a result?
    Ms. Mandelker. So in any given year, we have been able to 
fund, depending on what is remaining in the Treasury asset 
forfeiture fund, we have been able to fund a range of different 
kinds of activities. Including actually in a number of areas, 
we have actually taken similar steps, which is we have been 
able to support other border security related programs.
    So as you know, DHS is a very active participant in the 
Treasury Forfeiture Fund, and we get requests from CBP, from 
HSI to fund certain kinds of programs, and that is what 
happened in this instance. We got a request from the Department 
of Homeland Security to use a big chunk of the Treasury 
Forfeiture Fund in relation to border security.
    In many years in the past actually, we have not had those 
kinds of funds available either because we did not have as many 
inputs into the Treasury asset forfeiture fund----
    Mrs. Torres. Was that just surplus?
    Ms. Mandelker. And also because there have been a number of 
rescissions that Congress has taken to the Treasury asset 
forfeiture funds. In certain years, we have actually had 
nothing available because of those rescissions or we have had a 
minimal amount that we have been able to use in this context.
    This year we are actually fortunate that we have a larger 
amount of money that we can use for those kinds of projects.
    Mrs. Torres. I am going to be keeping a close eye, and I 
will probably follow up with you on that because it is a 
critical piece of infrastructure that my local jurisdictions 
use to deal with human trafficking and drug trafficking within 
my district.
    The Magnitsky Act in Central America, I am very focused on 
the Northern Triangle issues, very corrupt governments in that 
area.
    I am concerned that out of this, is it 101 people that are 
on the list right now under the Magnitsky act? There is only 
one person from the Northern Triangle and a total of two from 
Central America; is that correct?
    Ms. Mandelker. I would have to go back and look at the 
actual numbers that we have had. However, we have had a number 
of actions against individuals engaged in human rights or 
corruption from the general region.
    So we take certain actions under the Global Magnitsky Act. 
We also have other authorities that we can use to similar 
effect. So we have actually designated well over 500 
individuals and entities in connection with human rights and 
corruption. Many of those have not been under the Global 
Magnitsky Act. They have been under other executive orders and 
statutes.
    Mrs. Torres. In fiscal year 2019, NDA included an amendment 
which I authored requiring the State Department to provide 
Congress with a list of corrupt elected officials within the 
Northern Triangle. That list is almost a month overdue.
    I guess the shutdown really had an impact on them. Will you 
commit to working with us to ensure that we move forward and 
impose the Magnitsky Act on some of these very corrupt 
officials that are causing a crisis for us at the southern 
border?
    Ms. Mandelker. Absolutely. We are happy to do so. What I 
can tell you is that we have seen when we use those authorities 
in that region and others, it can create real change.
    Mrs. Torres. Yes.
    Ms. Mandelker. And I am very committed to using these 
authorities in that way.
    So we are happy to do that and happy to have other 
discussions with you about it.
    Mrs. Torres. Dealing with the root causes of migration has 
been a priority for me, and I hope to work with your office to 
continue that work.
    Thank you and I yield back.
    Ms. Mandelker. Absolutely.
    Mr. Quigley. Thank you.
    Our members have one more round. Mr. Amodei.
    Mr. Amodei. Thanks, Mr. Chairman.
    Madam Under Secretary, to make sure that I understand, 
FinCEN does not have prosecutors. You guys are kind of an 
administrator. If you get a SAR that you think is a smoking 
gun, my words, not yours, you forward that on to the 
appropriate people, for instance, at Department of Justice; is 
that correct?
    Ms. Mandelker. So we do not have prosecutors. We do have 
enforcement authorities that we use in connection with 
financial institutions that are----
    Mr. Amodei. There is that authority, but what can you do to 
somebody if you think they are breaking the rules?
    Ms. Mandelker. Well, we have authority to take enforcement 
action against financial institutions that do not have AML/CFT 
internal controls that meet up to our regulatory standards.
    Mr. Amodei. So that is an administrative sanction, not in 
the nature of petty offense, misdemeanor, felony----
    Ms. Mandelker. No, that is exactly right.
    Mr. Amodei [continuing]. In Federal court.
    Ms. Mandelker. That is right, and the Justice Department 
and many other law enforcement agencies have access to the BSA 
database. So we maintain the database. It is our responsibility 
to make sure it is secure.
    We do a lot of analysis of the information that is in the 
BSA database, and we work with our law enforcement partners to 
analyze that data. We often analyze it and provide that to a 
wide range of law enforcement partners.
    But it is the Justice Department that would be prosecuting 
those cases criminally.
    Mr. Amodei. Okay. And so I would like to finish with, and 
FinCEN has stopped by my office before to help me understand 
some stuff, which as you can tell from my questioning, I am not 
doing well with, but not FinCEN's fault, but anyhow, we would 
like to follow on.
    If I could get after the hearing the contact or the person 
to set that up----
    Ms. Mandelker. Absolutely.
    Mr. Amodei [continuing]. To do that discussion offline, I 
would appreciate it.
    Thank you very much.
    Ms. Mandelker. We are happy to do that.
    Mr. Amodei. I yield back, Mr. Chairman.
    Mr. Quigley. Thank you.
    So our sanctions are important. They are our policy. They 
are the effort short of war to get other countries to do what 
you want them to do and to punish those who have misbehaved.
    But obviously, the countries and individuals we have 
sanctioned principally use money laundering as a means to avoid 
this. I would like you to talk about how you address this. In 
particular, use Russian sanctions as an example of your 
efforts.
    Ms. Mandelker. So every day we work to make sure that we 
are using our sanctions authorities consistent with our 
national security and illicit financial priorities, consistent 
with what Congress wants to do.
    What we always strive to do is to make sure that we are 
using the authority to actually carry out a particular 
strategic or tactical objective.
    So, for example, I will just take the Russian bank that we 
designated over the summer in connection with the North Korea 
program. So there we saw illicit activity happening through 
that particular financial institution. We designated it, and 
actually a couple of months later, the Russian government 
pulled its license so that it would no longer be operative.
    We have also been able to use our authorities in a variety 
of different sophisticated ways. So there are many or most of 
our sanctions are effectively blocking actions. We designate an 
institution or a person. They are no longer able to access the 
U.S. financial system.
    In areas where we have secondary sanctions authorities, 
that has an even greater effect because it puts those banks or 
companies to the choice of either doing business with the 
United States or not, and it has a spiraling impact and effect.
    In the Russia context, we also have a different kind of 
tool, which is what we call sectoral sanctions, where in 
connection with certain types of industries, in energy, 
defense, in finance, we have been able to launch these sectoral 
sanctions where we limit their ability to engage in certain 
types of debt, among other things.
    So we use different tools depending on the program.
    Mr. Quigley. I want to talk about the tactics used to evade 
sanctions, shell companies, going through other countries. You 
sanction XYZ corporation. They transfer all their assets to 
ABC, which is then sitting in Cyprus with a corporation with 
absolutely no history.
    How do you detect that kind of effort and what tactics do 
you see the Russians using to avoid these sanctions?
    Ms. Mandelker. So really as I mentioned before, we have an 
approach of using all source information, whether it is 
information that we get through the BSA database. It is 
information that we have because we do have an intelligence 
agency in TFI, which is unlike any finance ministry in the 
world. No one else, as far as I am aware, has the ability to 
access that.
    Whether it is because we work with foreign partners who 
also share information with us, we have become increasingly, I 
would say, sophisticated in our abilities to detect the kind of 
shell company activity. So when we go after a particular 
target, it is often the case that we do not just sanction the 
individual. We sanction the financial infrastructure, whether 
it is the shell companies, front companies that are being used 
to ferret money all over the world.
    And by doing so, by OFAC putting those entities on the 
list, we make them radioactive all over the world.
    The other thing that happens when we designate particular 
entities is there is a whole compliance community out there 
that takes the names that we put on our list, and they do their 
own analysis as they are advising the compliance sector, 
whether it is financial institutions or other companies, about 
how to keep themselves out of being caught up in the web of 
those kinds of shell companies and front companies.
    And as an example, you mentioned Cyprus. We have been 
working with Cyprus to really push them to keep bad money out 
of the country because that has been an historic problem.
    Similarly, as I mentioned, the 311 action that we took 
where we called out a bank for being a money laundering concern 
was in Latvia. So in that instance we were able to identify 
this bank in Latvia that had been used to engage in money 
laundering in the Russia program, in the North Korea program.
    And because we took that action, it actually had a big 
impact on the Latvian banking sector and ultimately in Europe, 
and what we have seen as a result of not only that action, but 
as a result, of course, of some other scandals that have come 
out, real reform efforts underway in Europe, which is part of 
what we want to do.
    You know, we want to work with other counterparts to make 
sure that they are not vulnerable to the movement of money, 
whether it is illicit movement of money, whether it is coming 
from Russia or elsewhere.
    Mr. Quigley. Thank you.
    Mr. Stewart.
    Mr. Stewart. Thank you, Mr. Chairman.
    I am sorry I came a little late to the party. Like many 
others, we are kind of juggling schedules a little. Thank you.
    I am going to start with a proposition and then give you an 
opportunity to respond, and I am going to make this simple. 
This is just, you know, for people like me, just normal, 
everyday, average Americans to try and wrap their head around 
something.
    Because I think sometimes the narrative is produced which 
is not accurate, and let me start with this. I would argue that 
this President has been tougher on one of our global 
adversaries, Russia, than many Presidents have been now and I 
would say in a generation or more, and I will give as evidence 
of that.
    First, the kinetic weapons to the Ukraine, whereas the 
previous administration refused to do that, sent MREs, and 
really nothing else.
    The reinforcing of NATO, going to NATO and challenging them 
to pay their dues, the 2 percent, which is, of course, the 
whole purpose of that is to counter Russia's influence in 
Eastern Europe and Western Europe.
    The missile defense shields throughout Europe; the 
European-Russian initiative, again, to build and counter the 
Russian influence.
    I think even energy policy. I think the most important 
sanction we could put on Vladimir Putin is to keep the price of 
energy, the price of oil at $50 a barrel, their incredible 
reliance on that for foreign currency, including discouraging 
Germany and other European nations from being so reliant on 
Russian sources of energy.
    So on one hand, you have these policies that are enacted 
that are meant to counter the influence of Russia. Now, break, 
break. The narrative is that this President sometimes is weak 
on Russia, and that is created sometimes because of the lifting 
of sanctions.
    And, you know, a recent example in January with Rusal, the 
metal producer.
    Help us understand the thinking behind that, that on one 
hand, you want to counter them, but you justified lifting these 
sanctions so the American people can understand that.
    Ms. Mandelker. Sir, I am happy to do so.
    So what we had with Rusal, En+, another company called ESE, 
these companies were designated purely because this guy, Oleg 
Deripaska, who is an oligarch, who we believe is responsible 
for a wide range of activity, was designated back in April.
    So the way our rules work is if you are an entity that is 
50 percent or more owned or, alternatively, controlled by a 
designated person or entity, they automatically get on our 
list. So that is why those three companies were designated.
    Following that set of designations, we engaged in months 
and months of negotiations. The companies came in to us with a 
delisting petition.
    Mr. Stewart. When you say ``the companies,'' who do you 
mean? The two entities you----
    Ms. Mandelker. Right, exactly, and as well as an individual 
who was leading that effort, who is chairman of the holding 
company, En+.
    So we engaged in months of negotiations, and what we did in 
the course of those negotiations is push them into an agreement 
whereby the designated person, his ownership fell under 50 
percent, and we took a number of very significant and really 
unprecedented steps to sever his control of the companies.
    Effectively what we were able to negotiate was, among other 
things, a Western foothold into those companies. So whereas 
before he controlled the boards, among other things. Today half 
of the board of the holding company is U.S. or U.K., which is 
quite significant when you think about the fact those are major 
Russian----
    Mr. Stewart. How were those board members selected, those 
Western board members, the U.S. or U.K.?
    Ms. Mandelker. So those board members were selected by the 
company. What we did was we vetted those. So we told the 
companies, you know, whether or not a particular board member 
would pass our vetting, and the independent board members are 
required to sign affidavits effectively that say that they are 
not controlled or will not be influenced by this individual.
    Mr. Stewart. Are you satisfied that they are independent?
    Ms. Mandelker. We are going to continue. What I am 
satisfied is that we have very significant and substantial 
measures to continue to monitor compliance.
    So we inserted into the agreement things we have never done 
before in any program, the ability for a great amount of 
auditing, a great amount of transparency, and we have signaled 
very clearly, much more than a signal, to the companies that if 
they do not comply with the terms of what was a very 
significant restructuring and very significant corporate 
governance changes, then we will take swift action, up to and 
including putting them back on our list.
    So now you have these boards, again, with the infuse of 
Western influence that are on the hook to us, to OFAC, to abide 
by the terms of the agreement.
    The other thing that we were able effectively to negotiate 
was to have a very significant chunk of the shares of the 
holding company are now voted by independent U.S. parties.
    So I am not aware of any enforcement action, whether by us 
or the Justice Department, where we have been able to 
effectively negotiate terms, such that a huge chunk is voted by 
independent U.S. parties.
    Mr. Stewart. Thank you.
    Mr. Quigley. Mrs. Torres.
    Mrs. Torres. On money laundering and real estate, so we 
have the GTO that revealed about the role of money laundering 
in real estate. So Los Angeles Metropolitan Area was just added 
to that.
    Can you talk to me a little bit about that?
    Ms. Mandelker. Sure. I am happy to do so.
    So we have this tool, again, the geographic targeting 
orders which allow us to require, in particular, types of 
companies to provide information to us here about the 
beneficial owners of shell companies that are used when they 
purchase real estate by cash.
    And we take that information, and we do a lot of analysis. 
We have expanded the GTOs, as you have mentioned, to identify 
information from other jurisdictions. We have also lowered the 
thresholds of what title insurance companies that are required 
to give us this information.
    We have lowered the threshold in terms of the dollar value 
of the cash transfers, and what we do is we use that 
information. We share it with law enforcement. We analyze the 
information, and ultimately it informs our thinking on whether 
or not we should make regulatory changes.
    The other thing that we have done, which I mentioned 
before, is that we issued guidance to the real estate sector to 
help them identify money laundering in connection with real 
estate transactions, and I think that that advisory, likewise, 
has been quite helpful.
    Mrs. Torres. Is that the principal source?
    And how does it impact our current state of the housing 
market and rents?
    Ms. Mandelker. So I cannot tell you how it impacts the 
housing market and rent. We are happy to see if we have 
information about that. That is not really what we do.
    What it does impact is our ability to understand how real 
estate transactions are used in order to identify money 
laundering, so illicit activity.
    Mrs. Torres. The bigger picture for us in California is we 
are continuing working on addressing the issues of 
homelessness. We want to make sure that, you know, we are 
checking every box, and how are these purchases making a 
negative impact into the housing market, and how is it 
affecting our constituents?
    Ms. Mandelker. So, again, that is not my area of expertise, 
but I am happy to go back and see if we have anything about 
that.
    Mrs. Torres. Thank you.
    I yield back.
    Mr. Quigley. Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman.
    Madam Under Secretary, terrorists and international crime 
organizations have used different methods in which to avoid 
detection by the Treasury. Can you explain the threat posed by 
these alternative remittance channels that they have been 
using?
    Ms. Mandelker. Sure. So we have actually had a number of 
actions in which we have gone after money service businesses 
and the other money transmitters that have been involved in 
helping to funnel money for groups like ISIS, Hezbollah, Al 
Qaeda. You name it. We are tracking that kind of activity.
    Of course, you know, terrorists are always going to try and 
find new and different means and methods to evade detection, 
and what I can tell you is that we have a great ability to see 
and understand what they are doing, and we work consistently to 
try to disrupt that kind of activity, whether it is action that 
we take through a sanction, for example, or whether it is 
information that we will be able to share with our foreign 
counterparts to encourage them to take action.
    So one thing, just in the example of ISIS, one thing that 
we have been able to do in strong partnership with a number of 
other countries is to set up a multilateral body called the 
CIFG where we work very closely with a number of other 
countries to share information on how ISIS moves its money, to 
work collectively to take action with other countries, to help 
inform their prosecutors about actions that they should be 
taking to keep ISIS and others from being able to transmit that 
kind of money, whether it is through money transmitters or in 
other means.
    Mr. Joyce. And realizing that you cannot really elaborate 
on some of this, but to the best that you can answer it, the 
Terrorist Financing Targeting Center that your activities, that 
you have done on that, and the other question is what methods 
are these groups using to obtain these funds they need to push 
on to their groups throughout the world.
    Ms. Mandelker. So the Terrorist Financing Targeting Center 
is a new initiative that we have been very grateful to this 
subcommittee to help us fund. It is a partnership with all of 
the GCC countries, where we come together both in a center, but 
also in other multilateral or bilateral engagement to take 
action to disrupt terrorist financing through that region.
    So as a result of this, and it is really unprecedented. We 
have never had that kind of partnership. We have never been 
able, I think, in the past to get all of those countries in one 
room to focus on this effort.
    So among other things, we have had three rounds of 
sanctions that we have taken multilaterally with all of those 
countries related to ISIS, related to AQAP, related to 
Hezbollah.
    The entire GCC with us, for example, designated Hezbollah's 
Shura Council, which we thought was a very important effort.
    The other thing that we have been able to do, and that was 
really one of the objectives of the TFTC, was to do a lot of 
capacity building. So we want, you know, many other countries 
to have the same kind of tools and methods to detect and 
disrupt terrorist financing.
    For example, we had a week-long training here in Washington 
over the summer with all of those countries. We are doing 
another workshop, a 2-day workshop, with those countries.
    Later this month, we will be presenting information about 
what we are seeing, and other countries will be doing the same. 
What we really want that center to do and what we are striving 
towards is to use it to root out terrorist financing in the 
region, and I think we are making great strides.
    We have a long way to go, but this effort has really been 
instrumental to our ability to do so.
    Mr. Joyce. In raising those funds, is that through drug 
sales?
    What are the ways that these organizations are raising 
their money, if you can explain?
    Ms. Mandelker. It is through a wide variety of means. So 
without a doubt, there has been criminal activity that has 
enabled terrorist financiers to get access to money.
    Of course, traditionally we have been able to stop this, 
but ISIS, because it had territorial control over certain 
regions, had access to oil revenues, right? That is no longer 
going to be the case, but they have used extortion. They use 
kidnapping. They move money through charitable organizations 
that are really fronts for terrorist financing.
    They get money from governments. So, you know, the Iranian 
regime, of course, has spent hundreds and hundreds of millions 
of dollars supporting terrorist activities, terrorist 
organizations like Hezbollah, Hamas, and others. So some of it 
is state financed, which is more than an outrage.
    So we are taking a number of actions with partners in that 
region, but also elsewhere to really put pressure to disrupt 
that kind of movement of money.
    I will give you one example of action that we took.
    Mr. Joyce. Please.
    Ms. Mandelker. I believe it is in October. So we identified 
and disrupted this international network. Part of it you had 
Syria, Iran, and Russian companies working in concert to help 
move oil, Iranian oil, through Russia to the Assad regime.
    You had actors in the Central Bank of Iran that were 
helping to facilitate the movement of that money. There was a 
company in Iran that had the name ``medical'' and 
``pharmaceutical'' in it, as if that is what it was doing. That 
was helping to funnel money to a company, bank accounts in 
Russia, that then moved money to a subsidiary of the Russian 
Ministry of Energy. We designated that subsidiary.
    That resulted in enabling oil going to Syria. At the same 
time, that same international network, which was led by a 
Syrian businessman who is now designated, was able to work to 
move hundreds of millions of dollars through certain means 
through Syria onwards to Hezbollah and Hamas.
    So they operate in a variety of different means. In that 
case we call that an oil for terror network, and that is what 
we are working every day to try to shut down, not only through 
Treasury tools, but in concert with a number of other 
interagency and international partners.
    Mr. Joyce. Please keep it up. Thank you for your testimony 
here today.
    Ms. Mandelker. Thank you.
    Mr. Joyce. I yield back.
    Mr. Quigley. Thank you.
    Thank you to the members for participating and the staff 
for putting this together.
    Madam Under Secretary, thank you so much for participating 
and for your service and for all who work with you.
    Ms. Mandelker. Thank you. Thank you very much.
    Mr. Quigley. The meeting is adjourned.
    [Questions and answers submitted for the record follow:]
    
    
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                                         Wednesday, March 13, 2019.

                         GSA OVERSIGHT HEARING

                               WITNESSES

EMILY W. MURPHY, ADMINISTRATOR, GSA
    Mr. Quigley. Good morning. Thank you all for joining us. We 
are pleased and we would like to welcome the GSA Administrator, 
Emily Murphy, back before the committee this morning.
    Today we plan to engage with Administrator Murphy on a 
variety of matters, including her past testimony before this 
subcommittee, as well as her management of major projects under 
GSA purview.
    First and foremost is whether the interest of the American 
taxpayer are being put first, where they belong, or whether the 
personal financial interests of the President are taking 
precedence when GSA is making real estate and procurement 
decisions. To get to the bottom of this, we will need the 
administrator to answer our questions truthfully and 
forthrightly about the construction and consolidation of the 
new FBI headquarters.
    The plan to acquire the new headquarters for the FBI has a 
long history. In the 2009 omnibus appropriation bill Congress 
directed the GAO to review the security concerns of the J. 
Edgar Hoover building and other FBI locations in the National 
Capital Region.
    In a report issued in November 2011, GAO found that actions 
were needed to address concerns with the condition of the FBI 
headquarters because the building had become delipidated and 
the FBI staff had outgrown the building.
    In addressing the concerns raised about the Hoover 
Building, GSA and the FBI jointly recognized that consolidating 
all the FBI personnel in the Hoover Building and other 
locations throughout the region into one modern facility was 
the best answer.
    GSA expected the new headquarters facility would eliminate 
close to 1 million square feet in rentable space, significantly 
reduce the need for FBI leased space in the National Capital 
Region, and address the serious security concerns raised by the 
FBI headquarters being located in downtown D.C.
    In 2014, GSA issued a solicitation to interested developers 
asking for bids to develop a new FBI campus headquarters, one 
of three suburban locations in either Maryland or Virginia, 
that would house 10,000 FBI employees. In 2015, GSA identified 
a short list of offers and asked for bids for a new FBI campus. 
In exchange, the winning bidder would receive the current 
Hoover Building site.
    On July 11, 2017, GSA canceled a procurement to replace the 
FBI headquarters. And in February of 2018, GSA and FBI 
presented Congress with a new, revised raze and rebuild plan 
for a new FBI building at the existing Hoover location. This 
raze and rebuild plan represented abandoning nearly 10 years of 
work of moving the FBI to a suburban Washington, D.C. campus.
    In addition, the long-term plan to relocate the FBI 
headquarters to a suburban location would cost an estimated 
$3.57 billion according to the inspector general and would be 
offset by $334 million of proceeds from selling the existing 
Pennsylvania Avenue site.
    In contrast, the plan to keep the Pennsylvania Avenue 
property, demolish the existing facility, and construct a new 
building would cost an estimated $3.84 billion or $279 million 
more than the relocation plan, and it would accommodate 2,300 
fewer employees.
    Further, the new revised raze and rebuild plan would make 
the FBI the only member of the intelligence community to have a 
new headquarters in an urban site.
    In testimony to Congress back in 2013, the then-Associate 
Deputy Director of the FBI stated that although the FBI had 
implemented some countermeasures at the Hoover Building to 
improve security, these efforts are not a substitute for 
relocating FBI headquarters to a location that affords the 
ability to provide true security in accordance with interagency 
security committee standards.
    So what changed? Why would a nearly 10-year project agreed 
upon by both GSA and FBI be abandoned for a significantly more 
expensive proposal that compromises the safety and security of 
FBI personnel?
    Interestingly enough, many years before becoming President, 
Donald Trump expressed interest in the FBI headquarters moving 
out of Washington, D.C. so that he could acquire the land on 
Pennsylvania Avenue and redevelop the property which is 
directly across from Trump International Hotel.
    However, after he was sworn in as President and became 
ineligible as a Federal employee to obtain the property, he 
reportedly became dead opposed to the government selling the 
property. This reversal caused many to question--and rightfully 
so--whether the President wanted to protect his financial 
interests in Trump Hotel, particularly if another private 
developer could obtain the property and compete directly with 
the Trump Hotel.
    With this in mind, I asked Administrator Murphy last year 
at a hearing on April 17, 2018, directly and repeatedly if 
President Trump or other White House officials had any 
communications with GSA or the FBI about this abrupt and 
expensive new decision to keep the FBI at the Hoover location.
    Unfortunately, in Ms. Murphy's response, she withheld the 
fact that she met twice with White House officials about the 
FBI project, both on December 20, 2017, with General Kelly and 
OMB Director Mick Mulvaney and on January 24 with the President 
himself.
    The GSA inspector general later described these omissions 
as having left a misleading impression with our subcommittee 
that those meetings didn't occur. Ms. Murphy misled us in spite 
of the fact that according to the GSA inspector general she had 
practiced answering these questions several times while 
preparing for the hearing. When the inspector general asked why 
Administrator Murphy had misled the committee, she replied that 
she did not want to derail the hearing.
    Well, let's be clear. We are off the tracks. This committee 
demands truthful and forthright answers going forward. Today, I 
take it at face value view that Administrator Murphy sure wants 
to answer our questions and put last year's hearing behind us, 
and we would like to do that.
    We want to know why the relocation plan for the FBI changed 
dramatically and how it impacts the security of FBI 
headquarters and what level of White House involvement there 
was in this decision. We want to know why the new plan is more 
costly than the previous plan that had been vetted and approved 
by Congress.
    We also want the questions answered in the followup letter 
from October 18, 2018, where I and other Members of Congress 
requested a complete timeline of the FBI project and all 
documents and communications associated with the FBI 
relocation.
    So with that said, I look forward to what will hopefully be 
an open and truthful discussion today.
    Thank you. And I defer to the ranking member, Mr. Graves.
    Mr. Graves. Thank you, Mr. Chairman.
    Ms. Murphy, good to see you again. Thank you for joining us 
today.
    When it comes to our Federal Government operations, you 
have a tremendous role. In essence, you operate the agency that 
is the landlord for all the Federal Government. I know it is a 
tremendous task, and you are prepared for this hearing today.
    But you also act as an acquisition agent in many respects, 
including purchasing the services, supplies, and equipment for 
all the agencies. Each year you manage tens of billions of 
dollars of hard-earned taxpayer money. This is a great 
responsibility, and obviously you are a part of a lot of 
conversations, a lot of tremendous decisions.
    I did want to from the outset compliment you and what your 
agency has done. In your testimony you have identified about $6 
billion of savings that you are presenting to this committee, 
and that is not something we see often from agencies.
    So thank you for doing that, because our Nation faces a 
crisis. $22 trillion in debt has amassed, and the deficit 
continues to grow. A lot of folks can point a lot of fingers, 
but I appreciate the fact that you are willing to come before 
us with cost savings measures.
    I look forward to your testimony today. I am not one that 
believes that you have joined in colluding with the President 
or anyone else in any kind of manner to intentionally or 
knowingly mislead this committee or any other committee. I 
don't see that in your character, in your person. I wouldn't be 
one to sit here as well and say my words always come out the 
way I intended.
    So today is your great opportunity to clarify anything you 
may have said in the past, and I look forward to your testimony 
this morning.
    Thank you, Mr. Chairman.
    Mr. Quigley. Thank you, Mr. Graves.
    And let the record reflect that it is 10:08 and the word 
``collude'' has entered our lexicon this morning. I had it in a 
later----
    Mr. Graves. It might have been implied before 10:08.
    Mr. Quigley. Well, the word itself. And I had it in a later 
pool. I thought it would be more like 10:15.
    But I can't express enough, I care a lot less about the 
testimony last time. We will touch on it. I care a lot more 
about how this decision was made. And I know it is a sensitive 
topic for you, and I want to give you every opportunity to help 
us understand.
    But you have to appreciate the fact that 10 years of 
planning and work--and a line that you said that--and I would 
like you to address this in your opening, you reportedly stated 
that the Pennsylvania Avenue location--this is January of 
2018--was not GSA's preferred site and a lot of work had gone 
into the campus concept. So I just want to know why the abrupt 
change and how the apparent cost differentials and safety 
issues were addressed and who was involved in those decisions.
    So I want you to take your time. We usually tell folks in 
the opening, please don't filibuster. Your written statement is 
there for the record. But if it is something new and we can 
learn from it, take your time and help us understand how we 
came to that abrupt change. Please go ahead.
    Ms. Murphy. Good morning, Chairman Quigley, Ranking Member 
Graves, and members of the subcommittee. Thank you for the 
invitation to join you today. I look forward to discussing a 
wide range of priorities and programs within GSA, an agency 
that supports Federal agencies with their real estate 
procurement, IT, and shared services needs.
    I am pleased to say, GSA saved the American taxpayer nearly 
$7 billion in fiscal year 2018 alone. We look forward to 
building on our service and cost-savings success this year and 
in the future.
    As the Federal Government's primary landlord, GSA manages 
more than 368 million square feet of owned and leased space, 
housing more than 1 million Federal employees. As part of our 
ongoing efforts to be better stewards of taxpayer dollars, last 
year GSA's public building service generated more than $1 
billion in savings, including over $900 million in cost 
avoidance from these transactions through consolidations, 
footprint reductions, and longer-term leases.
    From office equipment to satellites, GSA's contracting 
vehicles help agencies procure $56.7 billion in goods and 
services annually. By simplifying and streamlining access to 
the Federal marketplace and modernizing procurement systems and 
processes, GSA helped agencies save nearly $6 billion in 2018.
    The modernization of Federal IT infrastructure and 
applications is an important priority for GSA, and our agency 
has become a trusted leader and a valued partner in improving 
IT across the Federal government.
    By expanding shared services across the Federal government, 
GSA is improving performance and saving taxpayer money. This 
allows agencies to direct more resources towards their core 
missions. One example of shared service savings, GSA fleet 
provides more than 217,000 vehicles to more than 75 agencies, 
delivering a savings of $0.28 per mile when compared to 
independent fleet programs.
    Before I close, I do want to address the one issue that was 
discussed last year in the subcommittee and that you addressed 
in your opening remarks, Sir, the FBI headquarters project. 
Given the intense interest in this project, I want to be clear: 
The FBI made the decision to propose remaining at its current 
location.
    I wish the FBI were here with me today to explain their 
reasoning for doing so, but there was a new FBI director who 
joined the agency in August of 2017. And I don't find it at all 
surprising that a new leader coming in to run the agency would 
want to take a step back, given the fact that the procurement 
had just been canceled, and look at the best way to address the 
needs that he assessed for his agency moving forward.
    Last year I did not mention meeting with the President with 
regard to the location decision because to my knowledge then--
and now--the President had no involvement in the FBI's location 
decision. The FBI's decision to remain at the current location 
was communicated to GSA at a meeting on January 4 of 2018.
    Three weeks later, FBI Director Wray, Deputy Attorney 
General Rosenstein, Director Mulvaney, General Kelly, and I met 
in General Kelly's office and decided to use a demolish-rebuild 
approach to construction at the current site. The location 
decision had already been made prior to that meeting.
    Following that meeting, Wray, Rosenstein, Mulvaney, Kelly, 
and I met with the President to discuss the only outstanding 
question, how should the project be funded. The FBI has also 
testified that it made the decision to remain at the current 
location; and I included in my written testimony a recent 
statement from the FBI reiterating that it made this decision.
    Also after an exhaustive investigation, the GSA IG 
determined that my testimony that the FBI made the 
determination decision to remain at its current location was 
true. I look forward to answering all of your questions on this 
matter this morning.
    And I also look forward to being able to discuss with you 
all of the good things that GSA is trying to do to better serve 
American taxpayers and the Federal agencies that it is our core 
mission to support.
    So thank you very much for the opportunity to be here this 
morning.
    [The information follows:]
    
    
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    Mr. Quigley. Thank you.
    Let me begin on the cost issue then.
    Ms. Murphy. Please.
    Mr. Quigley. Because as I read the inspector general 
report, Director Wray reportedly said, quote, if the cost 
savings between a suburban campus site and the existing site 
were similar, his preference was to remain at the Hoover 
Building. But, quote, if the campus scenario offered 
significant savings, which we now know it does, he was not 
opposed to a suburban campus site. Is that your understanding 
of Director Wray's understanding and belief at the time?
    Ms. Murphy. That was--that is the--yes, that is my 
understanding. I am sorry. Do I--yes. That is my understanding 
of Director Wray's statement that he was a strong supporter of 
remaining at the current location but that if the cost 
difference were--if it was a wild cost difference that he would 
reconsider.
    Mr. Quigley. What is your definition of wild, and is there 
a cost difference?
    Ms. Murphy. So I think the way the IG did her cost analysis 
is one that I would like to, if I may, I would like to explain 
why GSA disagrees with it. There are a lot of elements that go 
into any, you know, cost buildup, and I would be happy to 
provide you with a really detailed briefing. I won't waste your 
time going through all of it now.
    But I think the key issue where we disagreed is how we 
treat the cost--the value of the current location. When the IG 
did her analysis, they subtracted from the cost of the campus 
the money that would be put toward--that we would receive from 
selling the FBI building.
    Mr. Quigley. Right.
    Ms. Murphy. They did not give a similar credit though to 
the--remaining in the current location. And if you think about 
it, if you owned a home that was $200,000 and you owned it free 
and clear, and you decide that you want to buy a $300,000 home, 
just because you can get $200,000 from the sale of your current 
home doesn't mean that the new home costs $100,000. The new 
home still costs $300,000, it is how you are going to pay for 
it.
    Mr. Quigley. But it is the net effect on taxpayers. We are 
going to get money back one way or another if we sell the 
Hoover Building, correct?
    Ms. Murphy. Well, again, if you think about the analogy 
from the home----
    Mr. Quigley. Just let me just--let me just--but answer 
that. And I want to give you a chance to respond. We would get 
money back. Approximately, what is your ballpark guess of what 
we would get back selling the Hoover Building?
    Ms. Murphy. The GSA has not released that amount because we 
have wanted to protect that as procurement sensitive 
information. The IG has stated that they believe that, I think 
you quoted in your remarks----
    Mr. Quigley. Right.
    Ms. Murphy [continuing]. that it was $334 million. GSA's 
concern has all along been that we----
    Mr. Quigley. It is a pretty good location.
    Ms. Murphy. Well, we believe the site is worth far more 
than that and that because of the cost--but we are not getting 
the full value, that the--because of the way that the prior 
lease exchange was structured where we didn't have the full 
appropriations, we were going to be taking--your $200,000 home 
was going to become a $50,000 home, and so you weren't going to 
be recognizing the full value of that first investment you had.
    So when we look at how much we are actually going to--it is 
going to cost taxpayers, it was still going to cost taxpayers 
the same amount to build the campus or to remain--roughly the 
same amount to build a campus or to remain in the same place. 
There are other factors----
    Mr. Quigley. You still haven't explained why the money we 
get for selling it doesn't count.
    Ms. Murphy. The money we get for selling it isn't money we 
can then go and just apply to the new building. And even if it 
were, it is an asset the Federal Government has then lost. It 
is a valuable piece of land, as you have acknowledged. And at 
the end of the day, if we are talking about, you know, a campus 
that the FBI doesn't believe meets its requirements and a 
headquarters facility that the FBI says does meet its 
requirements----
    Mr. Quigley. Let me try to get through the cost issues with 
you. Were you aware that several officials within GSA thought 
that they were understating the cost associating with the newly 
revised plan? And this was stated in the inspector general's 
report.
    Ms. Murphy. I read that in the inspector general's report. 
The information that was provided to me with the funding gap 
analysis would be continuing to dive into the funding issue and 
look at, among other things, what are the relocation costs of 
moving employee--the 23 employees--2,300, I am sorry, employees 
the FBI has identified it is moving out of the area.
    Mr. Quigley. Is that a yes? Were you aware that there were 
those in GSA that thought that we were understating the cost of 
the raze and rebuild project?
    Ms. Murphy. Not at the time I appeared here last year.
    Mr. Quigley. Okay. Are you aware of those now?
    Ms. Murphy. I am aware of them due to the IG's report, yes.
    Mr. Quigley. And did any of these--those who dissented 
discuss this with the GSA leadership team now at this point, to 
your knowledge?
    Ms. Murphy. No one--no. They had not discussed it with me. 
The project team that has been working on it has been working 
to refine what the cost associated with the project would be. 
And they continue to do so.
    Mr. Quigley. To your understanding, did this take into 
consideration the hardening of the building and all the other 
issues that come with being downtown and the only building in 
the intelligence community that would be in an urban setting?
    Ms. Murphy. So, yes. The security measures were taken into 
account. In fact, the numbers that GSA presented in the 
February 2018 report included the fit-out cost, which is what 
the--usually what GSA comes to appropriations with--in the past 
has come with is the cost of building the building, not of all 
the things you have to add on it to make it a functional 
building.
    And in an attempt to be much more transparent as to what 
the real costs of the building were, we included in the 2018 
report what we thought the additional cost would be. And that--
and the issue with the hardening of the building is indeed the 
reason that GSA strongly argued that a remodel of the building 
would not be a successful project, that we believe that the 
demolish and rebuild, if the FBI wanted to stay on that site 
the demolish and rebuild was the approach that we should use.
    Mr. Quigley. Is the quote correct that you stood by the 
original plan in January--on January 4 of 2018 was not the 
preferred site and that a lot of work had gone into the campus 
concept, you said this?
    Ms. Murphy. So when I met with Director Wray on January 4 
of 2018, I presented him with each of the options, including 
what we understood at the time was his new preference. And I 
spoke--I had a telephone conversation with Director Wray on the 
22nd of December of 2017, at which time he told me that he 
wanted to remain at the current location. And I asked for the 
ability to come over and brief him on what that would mean and 
the alternatives.
    My concern for--was that by switching from a campus to an 
urban--to remaining at the current location, we would have a 
lot of trouble getting funding, that we would have trouble 
having support from our appropriators, and----
    Mr. Quigley. Well, what did you view then--what was your 
argument on what the other downsides were besides this, the 
fact that there were the capacity for 2,300 fewer employees 
that were going to have to be housed someplace else, additional 
security requirements downtown?
    All the arguments you made in this 10-year plan that 
Congress approved to move forward, you must have made some of 
those arguments with the director.
    Ms. Murphy. So when I met with the director, the decision 
had already been made by the FBI independently of GSA that it 
was going to reorganize its headquarter structure and move 
2,300 employees outside of the National Capital Region, so that 
those employees were already off the table as far as the 
director was concerned.
    Mr. Quigley. And did the director tell you who he had 
talked to about this with the White House?
    Ms. Murphy. No.
    Mr. Quigley. Did you ask him?
    Ms. Murphy. No.
    Mr. Quigley. Did anyone ever tell you whether the White 
House communicated with the director about their preferences as 
to this site?
    Ms. Murphy. I want to be careful in answering this 
question, sir, because I know that there have been questions 
about this in the past. I mean, it is longstanding executive 
branch practice and privilege not to discuss conversations 
between the President, his advisers, between senior advisers--
heads of agencies and senior White House advisers. So I am 
going to respectfully decline to answer that question.
    Mr. Quigley. Well, are you exerting a privilege?
    Ms. Murphy. I am not exerting a privilege because the 
privilege belongs to the White House. I am saying that 
longstanding--that all my predecessors of either party would 
have declined to have a conversation about conversations that I 
wasn't even a party to that may or may not have occurred.
    Mr. Quigley. Well, I am going to--we will talk a little bit 
about that and then I will pass it onto Mr. Graves. The fact of 
the matter is the President has not asserted this privilege, 
correct?
    Ms. Murphy. To the best of my knowledge, no.
    Mr. Quigley. Well, he would have had to have told you?
    Ms. Murphy. Yes.
    Mr. Quigley. It is his privilege.
    Ms. Murphy. It is his privilege, no.
    Mr. Quigley. So you are asserting a privilege that has--the 
President hasn't?
    Ms. Murphy. I am not asserting a privilege. I am declining 
to answer based on the fact that--first of all, you are asking 
me to speculate about conversations I wasn't party to.
    Mr. Quigley. I am asking you if you are aware of any.
    Ms. Murphy. And going either way, either answering yes or 
no to that question would reveal what conversations took place 
between agency heads and the President, and it is my 
understanding that longstanding executive branch policy and 
practices we just don't discuss conversations between the heads 
of the agency, the President, and senior White House advisers.
    Mr. Quigley. And respectfully, I am asking you to answer 
because there has been no assertion of privilege.
    Ms. Murphy. And respectfully, I am going to decline, sir.
    Mr. Quigley. We will get onto that, but I will let Mr. 
Graves continue.
    Mr. Graves. Thank you, Mr. Chairman.
    I can sense the difficulty in her with this question 
because you are asking her to answer a question based on a 
conversation that could be hearsay that maybe she heard about 
or didn't hear about or others talked about.
    In this place, in this city, Mr. Chairman, you know there 
are a lot of conversations that people think they heard or 
didn't hear or others presume might have been said. In fact, 
you are implying that yourself.
    Ms. Murphy, it sounds to me like with the chairman's 
questioning he accepts your initial opening statement about the 
previous hearing we had and how you clarified that, unless he 
says something different here a little bit later. So thank you 
for doing that.
    Tell me about how decisions are made. Is it common practice 
that you as the head of GSA tell directors, or Presidents, or 
agency heads where they will have a building built or not 
built? Is that your job?
    Ms. Murphy. Thank you, Congressman.
    Usually what GSA does is an agency comes to us and they 
say, we have a requirement, and they give us that requirement. 
And then GSA works with them to find a suitable approach, and 
then we present what we think the answer to that is to our 
oversight committees, and they then have the ability to pass 
resolutions either agreeing with us or disagreeing with us.
    Mr. Graves. So it is common that you receive a preference 
from----
    Ms. Murphy. We receive requirement----
    Mr. Graves [continuing]. Those that are doing their own 
research and have their own request?
    Ms. Murphy. Yes. And I will be candid, I don't believe that 
the GSA administrator gets to dictate to the FBI director what 
national security requirements are.
    Mr. Graves. Do you know of any time in which a GSA 
director, whether yourself or in the past, has ever told 
another director no and just said, you are wrong, we are not 
going to do that?
    Ms. Murphy. I have argued with other directors about 
whether I agree with their delineated area, whether I agree 
with their requirements, whether I think we can sharpen our 
pencils. But I have never told them, no, absolutely no, you may 
not.
    Mr. Graves. Are you aware of anyone in the past that has 
has done that? I can't think of one where there has been that 
conflict where FBI or anyone comes forward, or DOT recently 
within the last decade, and said we need a new facility and 
this is where we need--and this is how much we need and how we 
need it and where we need it and a director said no, we are not 
going to do that for you, can you?
    Ms. Murphy. I can't think of anytime that I have done that, 
but I don't want to speculate as to what my predecessors have 
done. I am not aware of any such--I can't recall any. But I 
don't want to go--I have learned not to speculate at all.
    Mr. Graves. That is fine. So let's go back in time to when 
all this started. The chairman referenced this is about a 10-
year process we have all been in.
    Ms. Murphy. More than, yes.
    Mr. Graves. More than ten. You have been with GSA for a 
while too in some capacity, so maybe you have heard 
conversations in the past about where all this began and where 
it came from. So it began maybe in 2004, 2005, 2006, 2007. 
Where did it all start? Let's go back to the beginning for a 
second.
    Ms. Murphy. It was back, you know, beginning of the prior 
decade where the FBI was coming and saying that they are--that 
the building is falling down and----
    Mr. Graves. Right.
    Ms. Murphy. If I can give you an example.
    Mr. Graves. But then investment and site research began 
when, you think, maybe 2007, 2008, 2009?
    Ms. Murphy. I think it was 2007, 2008 that they began doing 
the work on that. 2009 there was a GAO study. There was another 
study in 2011. There has been a lot of work that has gone on 
into this.
    Mr. Graves. When were the sites identified, the suburban 
sites?
    Ms. Murphy. The suburban sites were identified in--I 
believe it was about 2014 that they had--the final three were 
identified. There were more before--prior to that. If I am not 
exactly correct of the date, I would love to correct it 
afterwards.
    Mr. Graves. No, that is fine. I am just asking in general. 
I am trying to help the committee with the timeline.
    Ms. Murphy. Yes. Yeah.
    Mr. Graves. This is not something that happened last year--
--
    Ms. Murphy. No.
    Mr. Graves [continuing]. That all of a sudden you stepped 
in and told the President or anyone else or the President told 
you or someone where all this is going.
    So the sites were narrowed down to three, that is my 
understanding?
    Ms. Murphy. That is correct, yes.
    Mr. Graves. Is it still three suburban sites, or has it 
been narrowed down any further aside from the recommendation 
from the FBI director?
    Ms. Murphy So when the procurement was canceled in July of 
2017, which was before I became the administrator----
    Mr. Graves. Right.
    Ms. Murphy [continuing]. At that point in time GSA did not 
pursue keeping its options on those sites. So we--at this point 
in time----
    Mr. Graves. Okay. Let's go back to those three sites.
    Ms. Murphy. Yes. Okay.
    Mr. Graves. Where were those sites?
    Ms. Murphy. There were two in Maryland and one in Virginia.
    Mr. Graves. And was any one preferred over another from the 
previous administration?
    Ms. Murphy. I don't know if the previous administration had 
a preferred site. I believe it would be inappropriate for me to 
have a preference as to if there is going to be a competition, 
the competition runs itself.
    Mr. Graves. The two Maryland sites.
    Ms. Murphy. The GSA administrator should be ambivalent as 
to what the outcome is.
    Mr. Graves. Are you aware of any conversations prior to you 
being in this position where political influence was asserted 
and preferences were indicated from Congress?
    Ms. Murphy. Yes. The--I am aware that both the Maryland and 
Virginia delegations have a strong vested interest in having 
the project in their States, yes.
    Mr. Graves. And the two Maryland sites, if we were to look 
at a congressional map, where would those two Maryland sites 
be? Whose congressional district would those be in?
    Ms. Murphy. I----
    Mr. Graves. Maybe Steny Hoyer's?
    Ms. Murphy. Yes, that would be one of them. And the 
Virginia site would be in Mr. Connolly's----
    Mr. Graves. So both Maryland sites would be Steny Hoyer's?
    Ms. Murphy. Yes, they would be.
    Mr. Graves. So if I remember right, Steny Hoyer was 
majority leader back in 2009 and 2010. Barack Obama was 
President. They had the Department of Justice. They are back at 
it again now, and Steny Hoyer is the majority leader again. Is 
it possible there is some political influence on the other 
side?
    Ms. Murphy. I would never want to impugn the motives. I am 
sure that every Member of Congress is doing what he or she 
believes is best for its constituents and the American people, 
just as I am trying to do what I believe is best for my 
customer agencies and the American people.
    Mr. Graves. And you are right to do that. You are being 
fair here. Maybe I am not. Maybe the chairman is not with 
implications as well. But we could all probably go back and ask 
for some research to be done to see if there were any emails or 
any phone calls or any pressure by leadership offices of this 
body on GSA in the past, and that might make an interesting 
investigative report as well.
    So, Mr. Chairman, it can cut both ways, I think. But it 
would be nice to move forward and allow this committee to 
accept the fact that on February 8 a letter was directed to Ms. 
Murphy that says after careful consideration the FBI decided 
that demolishing and rebuilding the Pennsylvania Avenue 
facility best balanced the equities at stake for the 
organization.
    So it was their request. It was not Ms. Murphy's 
conversation with anyone aside from being given this 
recommendation by the FBI themselves.
    So with that, Mr. Chairman, I will yield back.
    Mr. Quigley. I won't ask you if Steny Hoyer owns any 
property across from the FBI building or in Maryland a more 
direct influence.
    And I will reference that when the IG report was released 
August 27, 2018, the FBI had not completed the security program 
of requirements for raze and rebuild. And we will talk about 
privilege again in a second, but for now, Mr. Bishop.
    Mr. Bishop. Thank you very much.
    I am troubled by what appears to be a lack of regard of the 
findings and the determination of the inspector general of your 
department as administrator. A neighbor to the FBI building is 
the Trump International Hotel Washington on Pennsylvania 
Avenue, which is housed in the Old Post Office Building on a 
60-year lease from GSA. Of course, the lease contains the 
provision that says no U.S. officials should be admitted to any 
share or part of this lease or to any benefit that may arise 
there from.
    In March of 2017, GSA made a determination that the 
President--that Trump's presidency does not present a conflict 
of interest to the lease. But then on January 16 of 2019, the 
GSA Office of Inspector General released a report finding that 
the President's business interests in the Old Post Office 
raised issues under the Constitution's Emoluments Clauses that 
might cause a breach of the lease. But you decided at that time 
not to address those issues in connection with management of 
the lease, which is your responsibility.
    Then the GSA inspector general advised you and GSA to 
reconsider the constitutional issues presented by the OPO lease 
agreement, and if a violation was found to reconsider your 
earlier finding that the President--that President Trump had 
not violated the lease agreement. The Emoluments Clause issues, 
of course, that is under litigation in Federal court.
    But it appears to me that the recommendations of the 
inspector general don't carry very much weight with you as 
administrator and the folks at GSA. Can you tell me why that is 
the case? Most agencies have a great deal of deference to the 
recommendations of their inspector general.
    But in this instance, it appears that you don't have very 
much regard for that. And I might note that this is a neighbor 
piece of property to the FBI building that has been the subject 
of discussion for most of this hearing.
    Ms. Murphy. Thank you, Mr. Bishop. I appreciate the 
question because I think there has been a great deal of 
confusion as to the January 2019 IG report and what the actual 
recommendation is.
    If I may, I would like to read the recommendation to you. 
It says that we recommend that before continuing to use the 
language--meaning the language that the clause is in the 
lease--GSA determined the purpose of the interested parties 
provision conduct a formal legal review by the Office of 
General Counsel that includes consideration of foreign 
presidential Emoluments Clauses and revise that language to 
avoid ambiguity.
    The--GSA accepted that recommendation. I would say that the 
entire report, the only recommendation that the Inspector 
General's Office gave to GSA was about the prospective use of a 
clause in out leases that did not recommend that GSA make any 
changes to its current administration of the lease before the 
Old Post Office building.
    Mr. Bishop. Did you or did GSA consult with the attorney 
general with regard to legal advice on that--
    Ms. Murphy. So the----
    Mr. Bishop [continuing]. Or did you have--the inspector 
general obviously had a strong suggestion for you, but did you 
seek other legal counsel to get a contrary opinion?
    Ms. Murphy. So the decision to not consult with the 
Department of Justice before issuing the contracting officer's 
letter in March of 2017 was actually made by the prior 
administration in December of 2016. That was 2 years before I 
was--I am sorry, it was a year before I was confirmed.
    GSA has been--and as you know, the topic of the Emoluments 
Clause is the subject of litigation. The Department of Justice 
has in public pleadings at this time said that there is not an 
Emoluments.
    Mr. Bishop. Let me just interrupt you. My time is about to 
expire, but didn't the IG report criticize your leadership at 
GSA for improperly ignoring the constitutional issues there?
    Ms. Murphy. They were criticizing the decision to not 
consult with the Department of Justice. That decision was made 
by the prior administration.
    Mr. Bishop. So the answer to my question is yes?
    Ms. Murphy. They criticized the Agency's decision but it 
was the decision made by the prior administration.
    Mr. Bishop. Thank you. My time has expired.
    Mr. Quigley. My friend, Mr. Joyce.
    Mr. Joyce. Thank you, Chairman Quigley.
    Good morning Administrator Murphy.
    Ms. Murphy. Good morning, sir.
    Mr. Joyce. Let's get down to brass tacks. Was the President 
involved in the selection and location for the new FBI 
headquarters?
    Ms. Murphy. To the best of my knowledge, he was not 
involved in the decision for the location.
    Mr. Joyce. Did the Trump Hotel influence the decision not 
to move the FBI headquarters from its current location?
    Ms. Murphy. No. To the best of my knowledge, there was no 
discussion at the Trump Hotel involved in the decision on the 
location.
    Mr. Joyce. Did the IG report on the FBI headquarter 
location dispute your testimony last year that the FBI made the 
decision to remain on Pennsylvania Avenue?
    Ms. Murphy. No. No, sir, it didn't.
    Mr. Joyce. What was the January 24 meeting in the Oval 
Office about?
    Ms. Murphy. It was about how we were going to fund the 
FBI--the demolish-rebuild of the FBI location, and it was an 
important meeting for GSA because we were proposing a ground-
lease leaseback. The ground-lease leaseback has been a matter 
of controversy--I shouldn't say controversy--of debate between 
the Office of Management and Budget and GSA for many 
administrations now. And the idea that we were going to be able 
to use a ground-lease leaseback to expedite construction was 
one that was actually very exciting for GSA.
    Mr. Joyce. The current status of the FBI headquarters, good 
condition? Poor condition? Fair condition?
    Ms. Murphy. Sir, to answer your question, last month an 8-
pound block of concrete fell through the ceiling onto an 
employee's desk. If it had been--it took out the overhead lamp, 
his phone, part of his monitor. If he had been sitting there, 
he would have been seriously injured if not killed. We now have 
to wall off parts of the building.
    I would invite any member of the committee to join me. I am 
sure the FBI would be happy to have everyone come over there 
and see not just the state of the current building but also 
talk about what our plans are for the future.
    Mr. Joyce. Is it normal for you to tell the political 
appointee, such as Director Wray, where they should go and what 
they should do? Or do you act with them in concert? Or how does 
that procedure work where you--and you are dealing with 
administrators as far as where they want to maintain their 
headquarters?
    Ms. Murphy. So GSA works with agencies. Agencies give us 
the program requirements, and the agencies own that program 
requirements. GSA then works with them on a solution that will 
meet that requirement. GSA has opinions and we try to influence 
the decision, but ultimately we are going to--you know, 
especially when it is a matter of national security, we are 
going to defer to the FBI director.
    Mr. Joyce. This wouldn't be your normal office building 
maintaining government employees. There is a certain level of 
security necessary that is already in place for the FBI 
headquarters where it is?
    Ms. Murphy. There is security that is already in place, and 
the ability to do a demolish-rebuild lets us put a lot of very 
new cutting-edge security features in as well.
    Mr. Joyce. How old is the building?
    Ms. Murphy. The building was built--I think it is 51 years 
old now, sir.
    Mr. Joyce. What is the normal lifespan for a building, 
governmental building? Now, granted the Capitol is a different 
structure, but, you know, something that would take it back to 
what, in early 1980s it was built?
    Ms. Murphy. No, sir. It was built in the late 1960s.
    Mr. Joyce. Oh.
    Ms. Murphy. So it is a brutalist structure. The average age 
of the GSA own portfolio is 50 years, so about half of our 
buildings are older than 50 years, and half are newer than 50 
years.
    Mr. Joyce. Do you do a benefit-cost analysis on the moving 
of an agency versus rebuilding at the--on site?
    Ms. Murphy. Yes, sir, we do. And the idea of renovating on 
site, really just we were concerned that that was going to--
that the operational risks to the FBI were going to be so high, 
as well as the risk to the construction project by moving them 
out and then demolishing, rebuilding, and we could get them the 
headquarters they need for the 8,300 employees who were going 
to remain in the area.
    Mr. Joyce. Now, we have gone through a similar cost 
analysis with the Smithsonian Institute and Air and Space 
Museum, correct?
    Ms. Murphy. Well, the Smithsonian is independent of GSA. I 
would assume that the individuals who were working on the 
Smithsonian project have done that work.
    Mr. Joyce. Well, I apologize for that. I thought you were a 
party to the discussion, because my understanding a teardown, 
rebuild there is $1 billion?
    Ms. Murphy. That is my understanding, but the Smithsonian 
has some independence from GSA. So they are----
    Mr. Joyce. Still $1 billion of taxpayer money.
    Ms. Murphy. Still $1 billion, but--yes.
    Mr. Joyce. And that was a fairly new building. It is 
similar to--again, we talk about the Capitol or the other 
buildings that we are in here are older, but they have stronger 
bones for lack of a better term.
    Ms. Murphy. I would say the GSA headquarters building, for 
example, is 101 years old now. And it needs some work, but it 
has got really good bones. And so we--we are actually able to--
we are adding another 1,000 employees to the building this 
year, so we will be able to really maximize the utilization of 
it because it is a very solid building.
    It is one of the reasons that last year's budget request I 
asked for a lot of money--you know, funds for repair and 
alteration work because I think that if we invest in these 
buildings and keep them in good shape we don't end up having to 
have conversations about do we demolish the building or do we 
sell it and need to build a new building.
    Mr. Joyce. I am out of time. Thank you, Mr. Chairman.
    Mr. Quigley. Certainly.
    And before I recognize Mr. Crist, just as you go forward 
with your testimony, Madam, you openly discussed and 
characterized the January 2018 White House meeting, including 
the one with the President. And in your other answers with my 
Republican colleagues you seem to be selectively asserting a 
privilege that you aren't asserting. So let's hope we can be a 
little more consistent.
    Mr. Crist.
    Mr. Crist. Thank you, Mr. Chairman.
    Good morning, Administrator. It is nice to have you with 
us.
    Ms. Murphy. Thank you, sir.
    Mr. Crist. In 2014 the Government Services Administration 
began procurement proceedings for a new FBI campus outside of 
Washington, citing the clear financial benefits of a suburban 
location. Is that accurate?
    Ms. Murphy. That is sir, yes.
    Mr. Crist. At some point between now and then the GSA 
scrapped the relocate plan in favor of a more expensive plan to 
raise J. Edgar Hoover Building and build a new headquarters on 
the existing site. You have said that the wishes of the FBI 
director were part of that decisionmaking process. Did he share 
with you why he wanted to do something that was more expensive?
    Ms. Murphy. Sir, and I really wish the FBI director were 
here with me to answer these questions because I think he could 
do the best job of answering, you know, what his requirements 
are. But, yes, we talked about his need to have proximity to 
his parent organizations. The FBI is part of the Department of 
Justice.
    The fact that there are infrastructure concerns that will 
make it easier for their employees will also make it easier for 
them to secure, to have some--whether it be plumbing, 
electricity, that there is a lot of the--the work is already in 
place. They talked about the number of meetings that they have 
in the area and the transportation costs and the increased cost 
to the FBI of being there.
    But additionally----
    Mr. Crist. Isn't there less traffic outside the District 
than coming into it?
    Ms. Murphy. Well, I think that their issue would be that 
they would still have a large number of meetings in the 
District, and so their employees would be constantly commuting 
between a campus and their--whoever it is they were meeting 
with.
    The overall concern though, sir, was, again, it was a brand 
new director in August of 2017. So the prior procurement was--
without full appropriations was not financially viable by the 
end. It was clear by the end of July of 2017 that it just was 
not a viable procurement anymore.
    Mr. Crist. But under a previous director----
    Ms. Murphy. Under--yes.
    Mr. Crist [continuing]. This mission was put into motion to 
have this relocation to go outside the District.
    Ms. Murphy. Uh-huh.
    Mr. Crist. Do you know who that director was?
    Ms. Murphy. I would believe it would have been--I believe 
it would have been Director Comey, but I am----
    Mr. Crist. I think it was Mueller.
    Ms. Murphy. Mueller. Sorry.
    Mr. Crist. I believe so.
    Ms. Murphy. Yes.
    Mr. Crist. In weighing the pros and the cons of the two 
options, relocate or raze and rebuild, I would like to know 
what changed in the almost 10-year run-up to the plan of 
relocation, either by you or by the new director in addition to 
what you may have already just stated that made it more 
attractive to stay on Pennsylvania Avenue?
    Ms. Murphy. So the first thing that made it more attractive 
was that the FBI's requirement itself changed. They no longer 
needed a campus for 10,600 employees. They needed a building 
for 8,300 employees. The FBI's decision, which was independent 
of GSA and I believe was--already obtained independent funding, 
to relocate 2,300 of their own employees changed the calculus. 
It put the site on Pennsylvania Avenue back in play. So when 
GSA was informed of that that brought the--an owned site back 
into contention.
    Mr. Crist. So smaller but more expensive was deemed better?
    Ms. Murphy. Well, they are just--they are different mission 
needs. So the--when the FBI though is saying that the--you 
know, having a building there that they could accommodate their 
employees in, it wouldn't have--you know, you wouldn't need the 
space for a parking garage. You wouldn't need a separate 
physical plant. So it is smaller but it is because you don't 
need those other things you would need with a campus.
    Mr. Crist. All right. Did you have at any time any 
knowledge of the President's preference of which of the two 
plans he preferred?
    Ms. Murphy. So I want to be clear that you are asking me if 
I had knowledge of whether the President----
    Mr. Crist. Had a preference.
    Ms. Murphy. A preference to relocate. Sir, again, I am not 
going to--I don't want to speculate, and I don't want to----
    Mr. Crist. I am not asking you for speculation.
    Ms. Murphy. Please don't read--don't read a yes or no into 
this, but I am going to decline to discuss conversations that I 
may or may not have had with the President or his advisers.
    Mr. Crist. Why?
    Ms. Murphy. It is longstanding executive branch practice 
and privilege for heads of agencies not to discuss those, 
whether they existed or didn't exist.
    Mr. Crist. But as pointed out by the chairman, nobody has 
asserted a privilege.
    Ms. Murphy. No one has asserted a privilege, sir, but that 
is--in the same way with attorney-client privilege it is the 
client who asserts the privilege, not the attorney.
    Mr. Crist. And----
    Ms. Murphy. And it wouldn't be me who asserts the 
privilege. It would be the White House, and I don't get to make 
the decision for the White House.
    Mr. Crist. So you were in two meetings with the chief of 
staff of the President and the President and the FBI director 
on this issue?
    Ms. Murphy. So prior to the hearing last year I had been in 
one meeting with the President on this issue.
    Mr. Crist. And you said that was on cost?
    Ms. Murphy. And that was on cost.
    Mr. Crist. No discussion of the location of the facility?
    Ms. Murphy. I am authorized to discuss what we decided in 
that meeting and so--and----
    Mr. Crist. Did you decide in that meeting the location?
    Ms. Murphy. No. The location had already been decided weeks 
before I met with the President, and that was the first time I 
ever met the President.
    Mr. Crist. By whom?
    Ms. Murphy. By the FBI.
    Mr. Crist. I think my time is expired. Thank you.
    Mr. Quigley. I just want to ask, you were authorized--you 
just answered a question you were authorized to--by whom?
    Ms. Murphy. Normally that I wouldn't--it would be--
    Mr. Quigley. But who authorized you?
    Ms. Murphy. White House Counsel's Office said that I could 
discuss the fact the meetings existed and what the conclusions 
were. The----
    Mr. Quigley. All right. I am sorry, we will get into that. 
I don't want to delay Mr. Stewart.
    Mr. Graves. Mr. Chairman, if I could just----
    Mr. Quigley. Certainly, sir.
    Mr. Graves [continuing]. Clarify--I believe her answer was 
correct on the FBI director at the time, Mr. Crist. Comey took 
over in 2013, and Mueller was prior to 2013, 2013 and prior. So 
just for clarification of the record.
    Mr. Crist. Thank you.
    Mr. Quigley. We will put into the record eventually who was 
the FBI director at each point in this long process, but I 
don't want to delay Mr. Stewart.
    Mr. Graves. And maybe who was President at the time in 
conversations that took place between then GSA director and----
    Mr. Quigley. Those would all be interesting too if somebody 
could answer.
    Mr. Graves [continuing]. And the majority leaders.
    Mr. Quigley. I appreciate that.
    Mr. Stewart.
    Mr. Stewart. Thank you, Mr. Chairman.
    Administrator Murphy, thank you. We have had a chance to 
get to know you in your tenure, and I want you to know that 
many of us think you are doing a terrific job. It is a 
difficult position. And you have had some stuff thrown on your 
lap that I don't think was--you didn't expect. But--and I think 
we--to use a phrase--beat this dead horse in this hearing 
today, and I haven't been here for all of it, but I have been 
here for enough to get a sense of where it has gone.
    So I want to ask a few clarifying questions and then move 
onto something that is important to me and my district, which 
matters as well, and allow you to respond, if you could.
    And just for clarity, for my own benefit, I understand that 
career--and I will emphasize career contracting officials 
determine that the tenant of the Old Post Office Building lease 
is in compliance with the terms of that lease. Is that true?
    Ms. Murphy. That is correct, sir.
    Mr. Stewart. And do you believe that these decisions should 
be made by career, nonpartisan, nonpolitical, hopefully 
unbiased professionals, which is what we are counting on them 
to be, and which I think they take pride in being, that they 
would be the ones who would determine that versus elected 
officials or political appointees?
    Ms. Murphy. Yes, sir, I do.
    Mr. Stewart. And to a sensitive subject, but someone 
questioned your intentions or perhaps accuracy of your words or 
testimony before this committee or Congress, I will give you a 
chance to answer very simply: Have you been truthful in your 
testimony?
    Ms. Murphy. Yes, sir, I have. And----
    Mr. Stewart. Have you tried to mislead in any way?
    Ms. Murphy. No, it was never my intention, and I don't 
believe I----
    Mr. Stewart. And I believe that.
    Ms. Murphy. And I don't believe I did, but----
    Mr. Stewart. I don't believe you did either.
    And if I could make an extended argument here, and that is, 
it is important to keep in mind that when we make accusations 
or perhaps insinuate, as we have seen--and not in your case. I 
am not talking about you or this committee at all now. I am 
talking about more generally.
    But we have seen innocent people accused of essentially 
treason over the last few years. We are not accusing them of 
jaywalking. Innocent people have been accused of treason and 
other high crimes with no evidence. And it has had an enormous 
impact on their lives. It has broken them financially. It has 
ruined their reputations. It has broken in many cases their 
professional careers and their families.
    And I think it is important that when we make accusations 
like that or when we imply things such as that, to remember we 
are talking about real people who many of them are serving 
honorably and trying to do a good job and that it has impacts 
on them personally. And it would perhaps make us careful in how 
we respond to them or how we treat the information that may be 
before us.
    Now, if I could talk to you a little bit about some things 
back home. We have some real needs in Salt Lake City, as you 
know. I know you are coming out in a few weeks. We hope to 
visit with you while you are there.
    Ms. Murphy. Look forward to it, sir.
    Mr. Stewart. In our courthouses and others, we have had 
several earthquakes in my district over the last few weeks. The 
renovation of this beautiful courthouse, a historic courthouse, 
which is a beautiful building, but it is going to be incredibly 
expensive to bring up to code for earthquake standards. Can you 
give us your feeling on that and what is the best way forward?
    Ms. Murphy. So you are referring to the Moss courthouse, 
sir?
    Mr. Stewart. Yes, ma'am.
    Ms. Murphy. Yes. So my understanding is it currently houses 
the tax and the bankruptcy courts, and that it is the top--it 
is the, you know, what we consider to be the highest seismic 
risk. GSA is going to treat it accordingly. We would need to--
in order to renovate that building we would need to move during 
the renovations the judges and the courts out into the Federal 
building and into the new courthouse temporarily until we can 
complete remediation.
    I don't have an exact date of when we would be able to 
begin our remediation, but I would like to work with you on 
that so we can try and find a way to fund and get that to 
happen.
    Mr. Stewart. And we look forward to that, and thank you. It 
is a boatload of money, to use a technical term.
    Ms. Murphy. It is. It is, indeed.
    Mr. Stewart. It is almost as much as building the new 
courthouse was out there, which we just completed. And we 
appreciate your help on that.
    And then one thing I will mention quickly, and then we are 
going to have to work with you, Ms. Murphy, on this, and that 
is our judicial--our courts have already outgrown the 
courthouse. There is a floor there that has been set aside--the 
sixth floor has been set aside for non-Federal offices.
    And we need to work with you to try to clear up some space 
for our judges out there right now that some of them--well, all 
of them are doubling up on their courtrooms, and it has been a 
real issue. And we will reach out to you and try to work with 
you on that conflict as well.
    Ms. Murphy. I look forward to working with you on it, sir.
    Mr. Stewart. Thank you, ma'am.
    Ms. Murphy. Thank you.
    Mr. Quigley. Thank you.
    Mr. Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman.
    And thanks for being with us, Administrator Murphy.
    I want to clarify some of your testimony. I believe you 
have testified that you have spoken to the Office of White 
House Counsel about today's testimony. Is that correct?
    Ms. Murphy. I received clarification going into--when I met 
with the IG last year that I could speak to meetings I had and 
the conclusions of those meetings.
    Mr. Cartwright. No. No. I am asking you a simple question. 
Have you spoken to the Office of White House Counsel prior to 
today's testimony about today's testimony? If the answer is no, 
that is fine.
    Ms. Murphy. I want to be careful, again, sir, because it is 
my understanding that it is longstanding executive branch 
policy and practice to not discuss what we do deliberatively to 
prepare for a hearing.
    Mr. Cartwright. Certainly. But we are talking about a 
privilege not to disclose the contents of conversations or 
communications. I am simply asking you, yes or no, have there 
been communications between you and Office of White House 
Counsel to prepare for today's testimony?
    Ms. Murphy. Again, I am going to respectfully decline to 
answer that question because of the deliberative nature.
    Mr. Cartwright. Okay. Well, let's delve into that a little 
bit. When you say you are declining, I think you said before 
that you are declining on the basis of potential executive 
privilege being invoked. Am I correct in that?
    Ms. Murphy. And, sir, I am a government contracts lawyer 
not a constitutional scholar, but, yes, it is my understanding 
that no matter the party, no matter the administration that 
witnesses don't discuss what they did to prepare, and that 
heads of agencies don't discuss what they--conversations they 
had or the details of conversations they had with the President 
or his senior advisers.
    Mr. Cartwright. I am asking you a simple question. Has 
anybody at the White House, including White House counsel, 
instructed you that they are invoking executive privilege in 
any part of your testimony today?
    Ms. Murphy. No.
    Mr. Cartwright. Okay. So we are talking about a theoretical 
invocation of executive privilege here, and I suppose this is 
your idea that that may happen. There may be an invocation of 
executive privilege from the White House. Is that what it is 
about?
    Ms. Murphy. I am not speculating as to whether there could 
be or couldn't be, or would be or wouldn't be. I am saying that 
just historically no administrator, no secretary, no head of an 
agency discusses the contents of conversations with--that they 
had or didn't have with the President or his senior advisers.
    Mr. Cartwright. You are not only declining to discuss the 
content of conversations with the White House, you are 
declining to tell us whether you even had any conversations 
with the White House prior to today's testimony to get you 
ready for today's testimony. Am I correct in that?
    Ms. Murphy. Yes, sir.
    Mr. Cartwright. Okay. But you have said that you have not 
been instructed that there is an invocation of executive 
privilege. You did tell us that, correct? Correct?
    Ms. Murphy. Yes.
    Mr. Cartwright. Okay. What about the April 17, 2018, 
testimony that you gave us. Same set of questions, 
Administrator Murphy, did you have meetings with the White 
House to get you ready for the April 17, 2018, testimony?
    Ms. Murphy. Sir, again, I want to decline to answer that 
question for the same reasons, that----
    Mr. Cartwright. All right. And same followup question. Are 
you declining on the basis of an executive privilege that 
someone actually invoked?
    Ms. Murphy. I am declining because it is both deliberative 
and that, you know, historically I think that the Department of 
Justice has stated that we just don't discuss how we prepare 
for hearings.
    Mr. Cartwright. And to be precise, again, the same 
question, prior to the April 17, 2018, testimony that you gave 
us, did anybody at the White House instruct you that they were 
invoking executive privilege with respect to any of that 
testimony, April 17, 2018?
    Ms. Murphy. No. And I hope that when I am declining to 
answer these questions, please don't read a yes or no into that 
answer. It really is that it is just not mine to discuss.
    Mr. Cartwright. But it is a no for that question.
    And so the April 17, 2018 testimony, if there were any 
refusals to answer based on executive privilege, again, this 
was a theoretical executive privilege invocation as opposed to 
a real one. Am I correct in that?
    Ms. Murphy. I am trying to make the distinction between a 
theoretical and real because, again, it is not my privilege. It 
is the----
    Mr. Cartwright. I don't remember. Did you decline to answer 
any of our questions April 17, 2018?
    Ms. Murphy. No, sir. I didn't believe that there were any 
questions that I needed to decline to answer.
    Mr. Cartwright. Okay. But----
    Ms. Murphy. I didn't understand the question to be--I 
understood the questions that I was being asked to be about the 
location decision.
    Mr. Cartwright. All right. But you are standing on your 
refusal to answer our question about whether you met with 
anybody from White House counsel or anybody from the White 
House to prepare you for today's testimony. Are you?
    Ms. Murphy. I am.
    Mr. Cartwright. I yield back, Mr. Chairman.
    Mr. Quigley. Mrs. Torres.
    Mrs. Torres. Thank you, Mr. Chairman and Ranking Member, 
for holding this hearing.
    And thank you for coming to my office, I don't know, last 
month or so.
    Ms. Murphy. Yes.
    Mrs. Torres. As a new member of this committee, I really 
appreciate having that time with you. And as I stated to you 
during that meeting, I am never going to do a surprise question 
to you. I was very clear as to the issues that are important to 
me and what I was going to address at today's hearing.
    So having said that, I want to ask you if it is common 
practice for GSA to not sign agreements?
    Ms. Murphy. No.
    Mrs. Torres. Okay. So you are----
    Ms. Murphy. At least, I hope it is not. I am not aware that 
it is. I would be very upset to learn that it was.
    Mrs. Torres. Okay. Great. I am happy to hear that.
    This GSA agreement with the Park Service about the Post 
Office, when was that signed?
    Ms. Murphy. So can I--may I give some background on this?
    Mrs. Torres. Uh-huh.
    Ms. Murphy. I think you are asking me--and I want to be 
clear because I learned last time that I need to be really 
clear that I understand what the question is. You are asking me 
about the clock tower at the Old Post Office----
    Mrs. Torres. Yes.
    Ms. Murphy [continuing]. And GSA's agreement with the 
National Park Service to maintain that. So there was a public 
law, it is I believe 98-1, that was enacted in 1983 that 
requires GSA to work with the National Park Service to make 
sure that the clock tower remains available. GSA pays for that 
as a service contract to the National Park Service.
    Mrs. Torres. My question was only about the date. When did 
GSA sign this contract?
    Ms. Murphy. I believe their latest--it is an MOU. I believe 
it was signed in late December of 2018.
    Mrs. Torres. During the shutdown?
    Ms. Murphy. Yes.
    Mrs. Torres. During the same shutdown where many national 
parks across the U.S. were completely destroyed. When I met 
with you, I expressed my frustration over Joshua Tree in 
California. That park is a national treasure. It will never 
recover, never, never, never recover. It was an incredibly 
irresponsible decision to keep that open. I understand that is 
not your decision.
    But you--I am sure you can imagine how I feel and how my 
constituents feel that when they realize that while there was 
no staff there to guard those 300-year-old Joshua trees, there 
were staff at the clock tower, at the Trump Hotel to ensure 
that the visitors of that hotel had a nice place to visit.
    Ms. Murphy. So, Congressman, and I understand your concern 
with this. GSA during--throughout the entire month of December 
did not furlough any of its public building service employees. 
We never furloughed any of our general counsel staff. The--so 
the decision to continue to--and we funded all of our service 
contracts throughout the entire shutdown. There were none that 
we did not pay, so we continued to execute and pay those 
contracts.
    GSA noticed that the clock tower had been shut down. It is 
my understanding that my regional office had reached out to the 
National Park Service and said GSA was still paying its service 
contracts and so still could pay its service contracts.
    And there was no interference either from political 
appointees, there was no interference from the White House, 
there was no interference from the--to the best of my 
knowledge, no one from the Trump Hotel even reached out.
    Mrs. Torres. So why was there a failure from Lisa Mendleson 
to date this contract? Why did she fail to date this contract?
    Ms. Murphy. I couldn't tell you, ma'am. I am happy to go 
back and find out, you know, and ask why it wasn't dated. I 
wasn't aware it wasn't dated until you just mentioned that to 
me.
    Mrs. Torres. I would like for you to follow up with me----
    Ms. Murphy. I would be happy to.
    Mrs. Torres [continuing]. On that. As well, if it is common 
practice and if it is not common practice, how do you resolve 
this issue moving forward to ensure that all employees that are 
allowed to sign agreements or contracts follow the direction 
and the policy in place.
    Ms. Murphy. Ma'am, that is something I take really 
seriously. When I was at GSA the first time, I instituted a set 
of procurement management reviews where we have individuals go 
out and review contract files throughout the course of the year 
to make sure that everyone is following the appropriate rules. 
And I am going to continue--I am happy to look into this 
because I take very seriously that we need to keep our records 
in proper order.
    Mrs. Torres. Thank you. I yield back. And I am going to 
leave this with the clerk so you can have it.
    Ms. Murphy. Thank you very much.
    Mr. Quigley. Thank you.
    Let's do a round two, if we can. It has been discussed in 
this hearing that you had discussions with Director Wray about 
this, and it is normal that when you are dealing with an agency 
that you talk with the agency head about their needs and what 
they need out of a facility like this, correct?
    Ms. Murphy. Yes, sir.
    Mr. Quigley. Okay. Because I--and I read in this, November 
2011 GAO and the FBI worked together on this report, and they 
talked about moving to a suburban campus because they raised 
concerns about the Hoover Building and they jointly recognized 
that consolidating all of the FBI and the Hoover Building and 
other locations into one facility was the best answer.
    The GSA expected the new headquarters facility would 
eliminate close to 1 million square feet in rental space, 
significantly reduce the need for FBI for leased space, and 
address the security--serious security concerns raised by FBI 
headquarters being located in downtown D.C.
    And they would have--they wouldn't have to find a home for 
2,300 other employees someplace else. And it has been our 
analysis and in talking with the FBI and being a member of the 
Intelligence Committee that the number of FBI personnel hasn't 
gone down. It is gone up. So this building has only lasted 51 
years, and we get it. It is falling apart.
    But what we are talking about is hopefully building 
something that will last longer than 50 years, and we would 
imagine that the FBI's concerns about our national security 
would not dictate having fewer employees.
    So at what point did anyone suggest to you what was wrong 
and what has changed since 2011 that makes downtown location 
safer, a need to galvanize that building, secure it, find home 
for more and more employees? Did anyone express to you as you 
defended this in early January 2018 why this was incorrect?
    Ms. Murphy. So my first conversation with the director was 
the 22nd of December of 2017. We did a quick conversation. We 
agreed that we would have that meeting. That was--my 
understanding though is that in October, November of 2018--of, 
I am sorry, of 2017, before I was confirmed, and I wasn't party 
to these conversations, that there was some career level 
conversation about maybe they wanted to put the J. Edgar Hoover 
site back into play.
    GSA, when I met with the director, he had already made the 
decision that the 2,300 employees were not going to be part--at 
least my understanding was the decision was made that the 2,300 
employees were no longer part of the requirement. After that 
meeting GSA's efforts pivoted into how do we address their--you 
know, if their new requirement is to stay at this location, how 
do we address that requirement.
    So they had come back and believed that--and that I think 
contracted with an outside company to look at how could we 
address security measures, how could we address the very issues 
that you are mentioning, and they have done that independently 
of GSA.
    Mr. Quigley. And I just want to ask, these 2,300 are going 
someplace, and included in the cost has to be wherever the heck 
they are going, the fact that there has to be a chair for them 
and a desk for them someplace else. Was that included in this 
when you are calculating which one of these things was more 
efficient?
    Ms. Murphy. It was not included in the numbers that we 
submitted in January of 2018--I am sorry, in February of 2018.
    Mr. Quigley. Or the fact that they will have more employees 
as time goes on?
    Ms. Murphy. The FBI came to us with what their requirement 
was, and, again, as I have stated, it is the FBI that tells us 
what the requirement is going to be. So, you know, the FBI's 
plan to--they believe they could achieve the consolidation, 
they could achieve the safety concerns, and that they no longer 
had the need for 10,600 headquarters employees in the D.C. 
area. My understanding is they have actually obtained most of 
the funding independently of GSA to move those employees 
already.
    Mr. Quigley. But, as you said, with the money we would get 
from a sale the dollars count in someplace. They are not 
getting it from some other government. In the end, the money we 
get from the sale is U.S. taxpayer dollars, and the money that 
they get from someplace else is still U.S. taxpayer dollars. So 
if we are comparing the cost of which is more efficient, in the 
end it doesn't matter at all where the spigot is. What matters 
is the total net differential.
    Ms. Murphy. Although at that time we were--when the FBI 
came back to us and said the requirement was 8,300, GSA was not 
going to build a campus for 10,600 employees if the FBI was 
already moving to 2,300 of those employees. So at that point in 
time that it was--that money was going to be spent whether we 
did a suburban campus or we remained on Pennsylvania Avenue.
    Mr. Quigley. Bottom line, why did you defend this in 
January, early January of 2018? Why did you defend the suburban 
campus?
    Ms. Murphy. Honestly, Congressman, I believe that the best 
way to get funding for this project was a suburban campus, that 
it was going to be the one that it would be easiest to get 
support from the Maryland and Virginia delegations to go 
forward and get funding for.
    Mr. Quigley. But you got this job for a reason. You are a 
numbers person. You calculate all this. That had to be 
calculated in some of your reasoning. It couldn't have been 
just this is the easiest way for us to get the money.
    Ms. Murphy. No. It was----
    Mr. Quigley. There had to be some other factors that you, a 
smart person, would have weighed and said this makes more 
sense. And it can't--please don't tell me all your decisions 
are politically expedient.
    Ms. Murphy. It is not a political expediency question.
    Mr. Quigley. So beyond that, why a suburban location in 
January?
    Ms. Murphy. So when I went and toured the FBI building, I 
was incredibly upset to see the conditions under which those 
employees were working. There are nets outside the building to 
make sure that pieces of facade don't fall and injure or kill 
the employees coming to work, pedestrians walking by.
    Inside the building they brought out a media cart filled 
with pipes that had rusted through. There are parts of the 
basement that had collapsed, the parking garage that had 
collapsed. My primary concern is getting the FBI headquarters 
that meets its requirements. If I--if the way to get that done 
and what I believe the fastest path to getting them a 
headquarters in January--on January 4 I believe was going to a 
campus.
    The FBI told me that that no longer met their needs. At 
that point then that takes that off the table. So their mission 
comes first. My job is to now get--find some way to hopefully 
work with you to get them a headquarters that will meet their 
requirements. And I would love to have them be part of this 
conversation as well.
    Mr. Quigley. Mr. Graves.
    Mr. Graves. Thank you, Mr. Chairman.
    Thank you for your responses today.
    Mr. Chairman, I wish all the committee members were here 
and could understand that a lot of this really predates Ms. 
Murphy. I remember prior to her being nominated and sworn in, 
we had these same conversations with the previous acting 
director at the time, Mr. Horn, and even before that about this 
same building and same concept. This is nothing new. It may be 
new to the newer members on the committee, but it is certainly 
not new to this discussion, debate, and unfortunately, we are 
still spending more time on it.
    Mr. Chairman, I think we should all respect the idea that 
when a new administration comes in, there is new leadership. 
Sometimes there is new direction, there are new ideas, there is 
new vision, there is a new concept.
    And so it is unfair to accuse Ms. Murphy of changing course 
and direction when she is just trying to carry out the 
direction of the request of a director, a new director who came 
in just after she did, who has a different vision for the 
Bureau. This may be a fairer conversation for another hearing 
with the director of the FBI.
    Now, I have visited the facility.
    Mr. Quigley. I couldn't agree more.
    Mr. Graves. And it is dilapidated. It is falling apart. I 
was there just 4 months ago. It is in dire need of demolishing, 
and then certainly they need a new facility.
    But what I hear is that Director Wray has said, look, we 
want to operate differently. We want to deploy more people out 
into the field offices and have less people in a centralized 
location, but in that centralized location we still need access 
to our resources and our intelligence community assets and 
friends that we work with, just because there is something 
about that synergy that is helpful for national security 
purposes.
    Maybe we could just totally dismiss this notion that we 
have a President's office that is oftentimes criticized by the 
other side for poor ideas or lack of direction or incapability 
of carrying out a mission when, in fact, what I hear today is 
that in some way maybe this President is so conspiring that in 
2012 or so he and his family organization put a bid in on a 
project that they won in 2013.
    They invested millions of dollars to build a facility, 
predicting that he would run for office, that he would beat 15 
other Republicans and then Hillary Clinton just so he could be 
across the street from a building that he didn't want 
demolished and sold to a private party. I mean, that is a 
pretty far stretch.
    Mr. Quigley. I think it is the other way around. Once he 
owned it, was he concerned about what was across the street.
    Mr. Graves. But so then he must have appointed----
    Mr. Quigley. Just the timing is pretty dramatic to shift 10 
years of bipartisan support for a project and then all of a 
sudden overnight, yeah, maybe not so much.
    Mr. Graves. I guess my point is that this predates Ms. 
Murphy and this debate predates the President being sworn in. 
And you and I have been on this committee for a while. We know 
that.
    Mr. Quigley. Look, I think a lot of what you are saying is 
true. I said at the beginning to Ms. Murphy, I care far less 
about the fact that I believe that she misled us by not stating 
the obvious about the meetings at the White House and far more 
about how this decision was made and whether she thought it was 
a good idea, and how her notion of how she thought it was a 
good idea in January changed, because just a few weeks later 
there was a meal--a meeting at the White House with these folks 
and then an email chain shortly thereafter that said, we are 
changing direction right after this meeting. So there are 
coincidences and then there are coincidences and then there is 
commonsense, sir.
    Mr. Graves. Reclaiming my time, my point being in some 
cases that picture--I don't know who all is in that picture. It 
hasn't been shared with the committee----
    Mr. Quigley. Well, we will ask.
    Mr. Graves. But Director Wray, I imagine, is in that 
picture. Is he? Is the director in that picture?
    Mr. Quigley. Well, why don't you ask Ms. Murphy.
    Ms. Murphy. May I? So in that picture you will see Deputy 
Attorney General Rod Rosenstein, sitting next to him is FBI 
Director Wray, then there is me, and then I believe Mick 
Mulvaney, and General Kelly, and the President. So the FBI and 
the Department of Justice were in that meeting. And that 
meeting----
    Mr. Quigley. Who was there from the FBI and the Department 
of Justice? And I will wait until after, but I just want----
    Ms. Murphy. No. That is--Director Wray is the director of 
the FBI was there, and Deputy Attorney General Rod Rosenstein 
was there from the Department of Justice.
    Mr. Quigley. I am sorry, sir.
    Mr. Graves. No. That is fair.
    And so what I am hearing through all this, there has been a 
lot of debate and discussion about where the facility should 
go, shouldn't go, but there is a part of me that might think 
that it is less about the President trying to block a private 
entity from building on Pennsylvania Avenue and maybe it is a 
little bit more about an FBI director who has a different 
vision for the Department and wants to do something different 
and he has reasons for that.
    And I share that because I have been there. I have met with 
some of the career staff at the FBI, and I have asked the 
questions because this has been an ongoing topic. And there is 
a common thread there. And the people I talked to were not in 
that picture. I don't think they have been to the White House. 
They are just normal folks. And so maybe we should not pin as 
much of this on Ms. Murphy because I think she is trying to do 
her job, and it is a big, complex agency she runs.
    Mr. Chairman, I will just close with this, because Mr. 
Crist brought up a point and was asking questions and Mr. 
Cartwright as well. In this letter from the Department of 
Justice and the FBI to Ms. Murphy, it says clearly the FBI 
decided that demolishing and rebuilding the Pennsylvania Avenue 
facility best balanced the equities at stake for the 
organization.
    It addresses the suburban campus. But it says that 
maintaining the current location addresses several equally 
significant concerns, including the proximity to FBI partners, 
transportation concerns, and reduced land acquisition and 
parking cost. Now, that is from the FBI director. I am sorry, 
not director, the associate deputy director.
    But there was one critical sentence in the end here. It 
says, we believe that the construction of a secure 
technologically advanced facility in the current location near 
mission partners and multiple forms of transit will best meet 
the FBI's need. That is from the FBI themselves and not Ms. 
Murphy.
    With that, I will yield back.
    Mr. Quigley. Mr. Crist.
    Mr. Crist. Thank you.
    Yeah. I just--confused, I guess, because it seemed that--I 
think you said for like 10 years this plan to be outside the 
District had been pursued.
    Ms. Murphy. The prior--yes. The--I believe the plan began 
at the end of the Bush administration and throughout the Obama 
administration. That was indeed the--that was the plan that GSA 
was pursuing.
    Mr. Crist. So back as far as 2008?
    Ms. Murphy. Yes.
    Mr. Crist. Okay. And so the idea for that long period of 
time until, I guess, January of last year?
    Ms. Murphy. Until January--in my mind, until January--was 
when GSA learned was January 4. I believe that records reflect 
that the FBI began changing its mind as soon as August of 2017.
    Mr. Crist. Okay. So the run-up had been significant?
    Ms. Murphy. Yes. But the requirements also changed. So when 
GSA and GAO and the FBI----
    Mr. Crist. If I might, I have got more questions.
    Ms. Murphy. I am so sorry.
    Mr. Crist. That is quite all right. That is quite all 
right.
    So the run-up had been a long time. Apparently a consensus 
had been developed that it was smarter and wiser and I guess 
you defended that to have the suburban location where other 
intelligence facilities after all are based. And then we have a 
change of direction where you are going to be able to house 
less employees, and it is going to be more expensive to do it 
than what the majority of people in a bipartisan way apparently 
thought was a better way to go.
    And I think what is confusing to some of us at least is if 
that thought had been embraced by so many for so long, it is 
hard to explain why all of a sudden there is a dramatic change 
in the direction of what should be done with the FBI 
headquarters, and that is why we are kind of scratching our 
heads here. Some of us. Some of us are not.
    But that is a frustration, and, you know, that you won't 
let us know, you know, who you consulted with, not the content 
but even who you consulted with to come before here today is--
that is a little troubling.
    Mr. Graves. If the gentleman would yield, I would like to 
just comment that this debate predates Ms. Murphy, predates 
Christopher Wray. We have had--prior to you being on the 
committee many discussions as well, this is nothing new. 
Actually, it goes back a couple years, several years.
    Mr. Crist. That is exactly my point. It had been in play 
for a long time and all of a sudden it got abandoned.
    Mr. Graves. There are two different viewpoints and have 
been under previous administrations, as well.
    Mr. Crist. Well, the point I am trying to make is, and I 
think the chairman made it better than me, is that the plan 
that is being pursued now, the new direction is to have less 
people housed in a contiguous location to look out for the 
safety and welfare of the American people and cost them more to 
do it. Now, who does that make sense to?
    Ms. Murphy. May I respond, sir?
    Mr. Crist. Of course you can. It is not a question, but you 
may.
    Ms. Murphy. Well, you asked what had changed. And, again--
and I don't want to put myself in the FBI director's shoes 
because he has far greater insight into the FBI's mission 
requirements than I could ever hope to have. And I am grateful 
that he is doing that job. But taking----
    Mr. Crist. And I want to be clear, I am not attacking you.
    Ms. Murphy. No.
    Mr. Crist. I am trying to find out why a change in decision 
and direction came about. It may or may not have been your 
decision. I suspect it wasn't because you were defending the 
suburban location.
    Ms. Murphy. But----
    Mr. Crist. So you don't have to defend this.
    Ms. Murphy. But the 2,300 employees that are proposed to 
move, it is my understanding that they provide payroll, 
administrative, support functions so that they--and that in 
looking at how the FBI headquarters staff was functioned, GSA 
has its payroll function located in Kansas City. It is still a 
headquarters function, but it is in Kansas City and operates 
very well there.
    We have--so it is not unusual that agencies would have 
administrative functions being carried out on behalf of the 
agency outside of the District of Columbia.
    Mr. Crist. Thank you.
    Mr. Quigley. Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman.
    And while I have found all this to be fascinating if, in 
fact, there was some movement of this office, we could have 
some lovely land in the 14th District of Ohio on Lake Erie 
there that would provide a beautiful setting for the--all 
2,300, 5,000, all the employees that would love to come to 
Ohio.
    But I am also very interested--pardon?
    Mr. Quigley. Both of them.
    Mr. Joyce. I am very supportive of the streamlining of 
certain government systems for efficiency. But I know a number 
of my colleagues and I have concerns regarding the suitability 
of certain healthcare products being purchased on the e-
commerce portal.
    If certain healthcare-related products are not exempt, we 
could see unintended consequences for the healthcare facilities 
and the patients they treat. Could you give us an update on 
GSA's consideration of either a full exemption or a delayed 
implementation for healthcare products from the procurement 
through commercial e-commerce portals program?
    Ms. Murphy. Thank you, Congressman.
    And I believe you are referring to the fiscal year 2017, I 
believe it was, NDAA directed the GSA administrator to put in 
place an e-commerce platform in a portal. GSA submitted its----
    Mr. Joyce. Like you didn't have enough on your plate.
    Ms. Murphy. This is one of those things where it started 
off as an idea when I was working on the Hill as a 
congressional staffer, so it has sort of come full circle. I 
have been able to watch it evolve and change, and it has been a 
fascinating lesson.
    But the GSA submitted its first report last March detailing 
how we intended to proceed on the project. Our second report is 
due this month, and we will hopefully be getting it to you--
getting it to anyone who is interested by the end of this 
month. Our plan to proceed though has always been not to look 
at things like office supplies first.
    GSA's own contracting we delegate responsibility for those 
healthcare products to the Veterans Administration believing 
that they have better subject matter expertise than that to run 
those. So my understanding is that we would be starting 
something along the lines of office supplies in any 
demonstration or pilot program that we were on.
    Mr. Joyce. Well, is it possible that you would wait to 
implement this portal for healthcare products after the 
programs have been tested for safety and effectiveness?
    Ms. Murphy. As I say, it would not be for healthcare--it 
wouldn't be for healthcare products as we start it. It would be 
for office supplies.
    Mr. Joyce. Correct. But, I mean----
    Ms. Murphy. And we would start with that and do it as a 
proof of concept to make sure that works, and then as we 
continue to test and learn and refine potentially add new items 
in. So we are not looking to--and we would especially, at least 
my inclination would be we would not start with items that we 
delegate contract and responsibility to other agencies for. We 
would work with things that we had the subject matter expertise 
in first.
    Mr. Joyce. And that being so, because I know you have got 
so much time on your hands to look into these things, but would 
you make one that would be healthcare specific then versus 
being one of a general portal for all?
    Ms. Murphy. So the requirement is that we have multiple 
portals, and so that is already our plan is to have multiple 
portals. If we get to a point--and, again, this is an iterative 
process by which we are going in doing proofs of concepts, 
studying what happened, I think that that would be something we 
would be very interested in looking at whether that would make 
more sense.
    One thing we are doing right now though, to make it easier 
to buy any item GSA sells, is modernizing our schedules program 
and the systems that support that, and then we would be able to 
make those tools available to VA, so that would make it easier 
for anyone in the Federal Government to contract with those 
healthcare supply providers and vendors that have already been 
vetted by VA.
    Mr. Joyce. Got it.
    And I know I have a little bit of time remaining. But I 
wanted to let you know that if there is any agency of the 
Federal Government that would like to move to the 14th District 
of Ohio, we would welcome them with open arms. And our office 
would help in the procurement process in making sure that they 
are taken care of and their safety needs will be addressed on 
the lovely shores of Lake Erie.
    Thank you, Mr. Chairman. I yield back.
    Mr. Quigley. Thank you.
    I am tempted to ask you if anyone told you how to answer 
questions about healthcare products, but I am concerned there 
would be some assertion of privilege. I am just kidding.
    Mr. Graves brought up----
    Mr. Joyce. It is covered by occupation.
    Mr. Quigley. Okay, Doctor.
    Mr. Graves brought up the first White House meeting and you 
mentioned who was there, correct? Was anyone else----
    Ms. Murphy. In the picture, I want to be clear, that was 
not the first meeting.
    Mr. Quigley. I know. But was someone else----
    Ms. Murphy. That was the first meeting I ever had with the 
President.
    Mr. Quigley. Okay.
    Ms. Murphy. There was a meeting that preceded that meeting 
that day that had all--that had the Deputy Attorney General Rod 
Rosenstein, the FBI Director Christopher Wray, the OMB Director 
Mick Mulvaney, you know, General Kelly was the chief of staff 
at the time, and myself, and that was a discussion of the 
demolish-rebuild versus the renovation in place.
    So there were--in my mind there were three maybe four 
decisions that have taken place in this procurement. There was 
the decision in July of 2017 before I was confirmed to 
discontinue that procurement that--the prior lease exchange.
    There was the decision on the location which was made by 
the FBI, in my mind, on the 4th of January of 2018. There was a 
decision that was made on what were we going to do on that 
site, so were we going to renovate it, are we going to demolish 
and rebuild it, and that was made on the 24th by the FBI in a 
meeting with----
    Mr. Quigley. Okay. But I just want to--I told Mr. Graves we 
would just wrap that part up.
    So there was a meeting earlier this day at the White House?
    Ms. Murphy. Yes.
    Mr. Quigley. With the people you just referenced?
    Ms. Murphy. Yes.
    Mr. Quigley. And this was the second meeting that day?
    Ms. Murphy. That was the second meeting that day.
    Mr. Quigley. Okay. And that discussion you said before was 
just about----
    Ms. Murphy. How were we going to pay for it. What we 
concluded at that meeting was how we were going to pay for this 
project. And we agreed that we were going to use a ground-lease 
leaseback and that was a big decision for GSA.
    Mr. Quigley. In either of those meetings did you raise any 
concerns with abandoning the original relocation plan?
    Ms. Murphy. Again, I apologize. Please don't read into this 
yes or no, but I can't discuss the contents of the 
conversations. I can tell you who was there and what we 
concluded.
    Mr. Quigley. No, and I get it. And just so I can put that 
on the record. For the record, you are going to say--have the 
same answer, did anyone overrule and push back about your 
concerns, did you receive any directions from the President of 
the United States about these issues, your answers are all 
going to be the same about all these meetings, correct?
    Ms. Murphy. What I can tell you explicitly is that what was 
concluded on the January 4 meeting was the location. What was 
concluded in the first meeting that did not have the President 
in it on January 24 was the how we were going to address the 
project that we were going to do a demolish-rebuild. And in the 
meeting with the President what we concluded was that we were 
going to use a ground-lease leaseback.
    Mr. Quigley. And the second White House meeting, which was 
a second date, would be June 15, correct?
    Ms. Murphy. There was a meeting on June 15 as well, yes.
    Mr. Quigley. And who was there for that?
    Ms. Murphy. So all of the individuals from the January 24 
meeting were there, and then there were additional individuals 
who were present as well.
    Mr. Quigley. And who were they?
    Ms. Murphy. Mark Schwartz was there.
    Mr. Quigley. Mark who?
    Ms. Murphy. Mark Schwartz was at the time, I believe, the 
head of congressional affairs.
    Mr. Graves. What year are you speaking of on this June 15 
date?
    Ms. Murphy. 2018.
    Mr. Quigley. It is 2018, right?
    Ms. Murphy. Yes.
    Mr. Quigley. Okay. I am sorry. And who else?
    Ms. Murphy. Don McGahn who was the White House counsel was 
there at the time. And I am trying to remember everyone who was 
there, and I know I gave a list to the inspector general when 
they asked me. And I apologize, sir, it was 9 months ago, and I 
am not exact--I know there were other people in the room but I 
am not clear. My memory is not great on it.
    Mr. Quigley. Okay. And you are not going to answer any 
questions about what was discussed but just generally overview, 
correct?
    Ms. Murphy. I can tell you what was concluded, which was 
that we were going--the topic of the meeting was an update on 
where we were, and the conclusion was we were to go forward 
with the plan as articulated in the February 2018 report.
    Mr. Quigley. All right. Look, I respect you have made your 
decisions. I disagree with them. We are going to conclude with 
that. But general awareness is a different question.
    In all that you have been through with this, was any 
influence that you were aware of, made, saw, heard, was any 
influence brought to bear that would impact this decision based 
on what would help the President's personal interest?
    Ms. Murphy. None whatsoever.
    Mr. Quigley. Mr. Graves.
    Mr. Graves. Thank you, Mr. Chairman.
    And thank you for your time today. I know these are tough 
questions and pointed questions, but you have answered them to 
the best of your ability today.
    Mr. Chairman, thank you for the way you have conducted the 
meeting. You have allowed everybody to have sufficient time, 
and the tone has been appropriate.
    I would like to submit the letter from the FBI for the 
record for the committee.
    Mr. Quigley. No objection.
    [The information follows:]
    
    
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    Mr. Graves.
    Ms. Murphy, what I hear from you is that in your opinion 
the decision about the facility location was made prior to you 
being confirmed and sworn in. Is that correct? Did I get the 
timeline right?
    Ms. Murphy. So I believe that the FBI director was working 
on that decision--it was conveyed to me that that was--when I 
left the meeting on January 4, it was my understanding that 
that was the decision and from that point forward GSA only 
worked on, you know, developing plans for how we would rebuild 
on that site. And that was within, I think, less than 3 weeks 
of my being confirmed after I was confirmed. But----
    Mr. Graves. But prior to that----
    Ms. Murphy. But my understanding is that the FBI began 
working on the idea of----
    Mr. Graves. Prior to you being confirmed?
    Ms. Murphy. Yes.
    Mr. Graves. You mentioned they had stepped away from that.
    Ms. Murphy. I believe they actually--they had a contractor 
who was going through and looking at designs so that----
    Mr. Graves. And who was the FBI director then?
    Ms. Murphy. Well, August of 2017 was when Director Wray was 
confirmed. So that was----
    Mr. Graves. So prior to that the decision, in your mind, 
was made. I was trying to walk through the timeline Mr. Quigley 
has stated there. There was a summer decision to move away from 
the----
    Ms. Murphy. There was a summer 2017 decision to terminate 
the lease exchange because there simply wasn't enough funding 
to go forward with it.
    Mr. Graves. Right. Okay.
    Ms. Murphy. The--which then sort of--and then within, I 
think, 2 to 3 weeks the FBI director was confirmed. So he 
became the director at a time when there was the opportunity to 
go in and reshape those plans. And he took that opportunity and 
began work on what it would mean to stay on that location, on 
that site.
    Mr. Graves. You are in a tough spot. I know that. And the 
chairman has highlighted that from the appropriation side. We 
do have oversight and so----
    Ms. Murphy. Of course.
    Mr. Graves [continuing]. You have been kind to give us as 
much time as you have today. I think it is appropriate for us 
no matter who is in the White House or who is in certain 
offices or majorities in the House and the Senate to recognize 
sometimes there is a change of direction when there is a change 
of leadership.
    In fact, we have noticed that just in the last 2 months. In 
the House there are different decisions being made. There is 
different direction, different play calls being made from last 
year. And that is just part of the nature of the changing of 
leadership.
    So, Mr. Chairman, it has been a good hearing. I appreciate 
the way it has been conducted.
    And, Ms. Murphy, thank you for your time today.
    Mr. Quigley. And I do need to add, Mrs. Torres ask that we 
introduce the interagency agreement between the U.S. General 
Services Administration and the U.S. Department of Interior 
into the record. So without objection, I would appreciate that.
    [The information follows:]
    
    
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    Mr. Quigley. Thank you so much for being here. I get you 
walked into a lot of this. We appreciate your coming back 
today. I would just conclude there are coincidences and then 
there are things that go beyond commonsense. And we have more 
information to uncover.
    We are aware that there was--in response to our letter a 
document dump, I guess, you might want to describe of 2,500 
that we have yet to see, the letter that we sent you asking for 
information. So we are going to sort through that and see what 
other information still has to come forward. But we appreciate 
your sending that and hope that the rest of the requests in 
that letter comes soon.
    Other than that, we thank you for your participation today 
and, again, your service.
    Ms. Murphy. Thank you, sir.
    [Questions and answers submitted for the record follow:]
    
    
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                                           Tuesday, March 26, 2019.

      OFFICE OF MANAGEMENT AND BUDGET REQUEST FOR FISCAL YEAR 2020

                                WITNESS

RUSS VOUGHT, ACTING DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET
    Mr. Quigley. Good morning. Thank you all for joining us 
today.
    I would like to welcome the Acting Director of the Office 
of Management and Budget, Russ Vought.
    This is a fitting topic for this subcommittee's first 
budget hearing of the year because OMB oversees the 
implementation of the President's agenda and prepares the 
President's budget.
    That budget offers a chance for this Administration to lay 
out in detail its vision and priorities for America. 
Unfortunately, it is hard to imagine being more frustrated by 
what OMB has delivered this year. The budget deeply slashes 
programs that support the most vulnerable among us, the sick, 
the elderly, the poor, while doubling down on a discredited 
economic policy that widens the inequalities in our society.
    Overall the budget cuts non-defense discretionary spending 
by 9 percent in 2020. To get there, it slashes programs that 
working- and middle-class Americans rely on for bare 
necessities, like food, transportation, medical care, and 
housing.
    As justification for these cuts, the budget cites the 
pressing need to cut deficits and stabilize the national debt, 
conveniently forgetting that the deficits are ballooning right 
now because of the tax cuts for the wealthiest.
    As a reminder, this Administration has claimed and 
continues to claim that its 2017 tax cuts will pay for itself 
and more. Yet Goldman Sachs, hardly a liberal bastion, 
concluded that it will add as little .3 percent to GDP in 2018 
and 2019 and could be slightly negative in 2020 and beyond.
    And the nonpartisan Congressional Budget Office has 
estimated the tax cut bill will increase the total deficit by 
almost $2 trillion over the next 10 years.
    To pay for this, the President breaks his promise to the 
American people and cuts as much as $1.5 trillion out of 
Medicaid and $500 billion from Medicare, while once again 
calling for the repeal of the Affordable Care Act.
    In short, this budget puts the price of these tax cuts for 
the rich squarely on the backs of hard working, regular 
Americans, and it gets worse.
    The budget relies on gimmicks, false savings, and 
unsustainable assumptions to cover up the full impact of its 
disastrous policies. For example, the budget makes extremely 
unrealistic economic growth assumptions to mitigate the true 
impacts of its policies on the deficit. It estimates that the 
GDP will grow by roughly 3 percent each and every year over the 
next decade.
    That is a full percentage point higher than most serious 
economic experts believe is possible, and according to the 
President's own economic report, that growth is contingent on 
even more tax cuts and non-existent increases in infrastructure 
spending.
    The budget also relies on a so-called 2-penny plan to 
further reduce non-defense discretionary spending to 27 percent 
below the 2019 level. They hardly can be called a plan. The 
budget does not spell out any of the hundreds of hard choices 
that would be necessary to cut spending that drastically, and 
it is completely unrealistic.
    Meanwhile, OMB asks other agencies to make drastic cuts, 
but is hardly willing to do so itself. It proposes a cut of 
less than 1 percent after accounting for funding it shifts 
elsewhere or that are not part of OMB's core responsibilities.
    On defense, the budget rejects the longstanding principle 
of parity and once again avoids making hard choices. Rather 
than making a workable proposal to increase budget caps for 
defense and non-defense spending in tandem, the budget uses 
sleight of hand to sidestep the issue entirely.
    The Administration makes no adjustment to the budget caps. 
Instead it proposes, quite unapologetically, to get around them 
and bump up defense spending by 5 percent by increasing the 
Overseas War Fund to the tune of $100 billion. And I quote Mr. 
Mulvaney, ``If appropriations come across with any OCO money 
hidden in it, I will do everything I can to strip it. It is a 
slush fund and a gimmick, and our own budget called it a 
backdoor trick last year,'' Politico, 4/30/2015.
    The budget also proposes $5 billion of additional funding 
for a border wall that Congress and the majority of the 
American people have already rejected.
    Despite all of these fantastical growth numbers, 
unrealistic cuts, and numerous gimmicks, the Administration 
still fails to balance the budget by the end of the decade, a 
standard set by Republicans when deficits will still exceed 
$200 billion. This budget strays so far from reality, in fact, 
that we really have no choice but to disregard it entirely.
    We will continue to exercise the power of the purse to 
benefit all Americans, even if the Administration does not seem 
interested.
    Finally, it would be remiss if I did not mention 
frustrations by the way OMB has conducted its management and 
oversight work. OMB does not just prepare the President's 
budget. It clears regulations and testimony and oversees 
government-wide policies and initiatives.
    Yet this Administration's officials at multiple agencies 
have committed repeated and egregious violations of ethics 
rules and other government regulations, costing taxpayers 
potentially millions of dollars. We do not have enough time to 
mention all of the questionable spending decisions appointees 
have made on travel, office renovations, and furniture.
    We also continue to be concerned about the general lack of 
transparency and responsiveness from this Administration on 
ethical and budgetary issues. Agencies continue to complain to 
us that their reports, testimony, and questions get routinely 
stuck in the OMB clearance process. This subcommittee provides 
significant budgetary resources to OMB to help address and 
improve these and other government-wide policies, and it is 
aggravating to only see the problems get worse.
    I look forward to discussing these issues in more detail.
    Before I turn to the Acting Director, I would like to 
recognize Mr. Graves for his opening remarks.
    Mr. Graves. Thank you, Mr. Chairman. I always enjoy your 
positive and encouraging opening statements.
    Mr. Quigley. I learned from the master.
    Mr. Graves. You did not let us down today at all.
    Well, Acting Director, welcome. I want to thank you for 
joining us today, but most importantly, it is your birthday. 
Thank you for spending your birthday with us.
    That shows where we all are in life. I think I have spent 
my birthday here several times, too. But great to have you. I 
appreciate your efforts and what you have done with the budget 
and your staff.
    I know it has taken a lot of work, and I hear the comments 
from the chairman here about, you know, his insights into the 
budget you have presented, and so I actually look forward to 
seeing the budget they present someday, one which I have not 
seen presented.
    So at least you have taken that first step, and we are 
grateful for that. I know it is a lot of hard work, and I have 
publicly said, I mean, you have taken a courageous step forward 
in what you have presented to us, as Congress, and how you 
foresee budgeting in a recommendation to us.
    And not only have you done that. You have done it in a way 
where some would say your hands were tied just a bit. You know, 
you are operating under constraints, and there are budgetary 
caps that were adopted by Congress 8 years ago, I believe, and 
it was the Congress that said, ``Hey, if you allow us to raise 
the debt limit, we promise we will not spend more than these 
amounts of dollars over the next several years.''
    But each time it seems like it has been raised, and I 
appreciate your intent as you looked at this. There is no 
anticipation of a cap raise. In fact, you say, ``Congress, that 
is your job. If you are going to change the spending levels, do 
that, but until then, we will show you how we would recommend 
spending dollars under certain constraints we have.''
    So thank you for what you have done there. It is clear to 
me that you have recognized the national debt is $22 trillion. 
It is not something that happened on your watch nor on this 
President's watch. In fact, under the previous Administration 
the debt doubled or nearly doubled in those short 8 years, and 
so it is, in fact, an inherited debt that I would say that you 
are trying to manage right now, and you have taken some great 
strides forward to show us how we can reduce spending by $2.7 
trillion over the next 10 years, which takes a lot of work, and 
I applaud the Administration for embracing what we would say is 
reality.
    I mean, these are bold steps you are showing us and making 
some tough choices rather than playing it safe, like many like 
to do in this town.
    I agree with a lot of parts of what you have presented, and 
I look forward to hearing your presentation today, but let me 
just point out the investment in our military and national 
defense is something that we should all be supportive of and 
not critical of in any way. That should be our number one 
focus, and I know that has been the Administration's number one 
focus all the way down to not only national security from 
abroad context, but national security here locally at home on 
our border and how the Administration is doing everything 
possible within their legal means to make sure our country is 
safe.
    So let me thank you for that as well, keeping a promise to 
secure our border, whether it means building a wall, whether it 
means investment in technology, infrastructure, personnel, 
whatever it is. You guys have done a fantastic job of staying 
at it and not yielding to some of the political whims around 
here.
    I do want to point out to the chairman that OMB is actually 
operating or proposing an operation of less, spending less. I 
think you mentioned 1 percent with some money movement, but my 
understanding under this budget is there is actually an 11 
percent reduction. That is living by example and something that 
I think a lot of your agencies are actually looking at.
    I think it was a 5 percent mandatory cut in some cases that 
you all were looking at all across the board. So thank you for 
your willingness to do that.
    I just wanted to correctly point out that you are willing 
to do more with less and live within the constraints that 
Congress has imposed upon the Federal Government in our 
spending levels, and you have taken some steps to show us some 
bold answers in how it can be done.
    I know they are not easy choices, but somebody had to make 
them, and I am glad you were there to make those choices for 
us.
    So I look forward to working with the chairman here as we 
go through this hearing and as we put together the 
appropriations request in the days ahead.
    But, Mr. Vought, again, thanks for being here, and happy 
birthday. I look forward to spending some time with you.
    Mr. Quigley. Mr. Vought, I did not know. In Jack Benny's 
paraphrase, happy 29 again.
    We are glad you are here, and we look forward to your 
opening statement, keeping in mind, as Mr. Graves would have 
always, that we have your official statement on record. So if 
you can stay as close to 5 minutes as possible it would be 
appreciated.
    Mr. Vought. Thank you, Mr. Chairman.
    Chairman Quigley, Ranking Member Graves, members of the 
subcommittee, I appreciate the opportunity to be here today to 
discuss the President's budget request for 2020 for the Office 
of Management and Budget, or OMB.
    I submitted to you my full opening statement, and I will 
just give a brief overview here today.
    The full request for OMB is $116.6 million, which is an 11 
percent cut from the fiscal year 2019 enacted level. This 
reduction demonstrates OMB's own commitment to fiscal 
discipline and efficiency as we enforce these same principles 
across the executive branch.
    Within OMB's request, $101.6 million will support a 
staffing level of 477 FTEs. The request reflects a decrease of 
$1.4 million and 16 FTEs below the enacted level in 2019.
    OMB is also requesting $15 million for the Information 
Technology Oversight and Reform Fund, of ITOR, another OMB 
account. This is a $13.5 million decrease below the 2019 
enacted. To ensure that its important work continues, ITOR 
anticipates collecting $3 million in reimbursable funding from 
the U.S. Digital Service Agency teams for personnel that USDS 
details to those in agencies.
    The proposed funding will allow OMB to continue to 
modernize and improve government operations and service and 
delivery of IT.
    On top of the $116.6 million request, OMB is requesting an 
additional $400,000 in three FTEs to establish a new office 
that will provide government-wide strategic direction on 
Federal human capital policy and coordinate personnel policies, 
regulations, and procedures for the executive branch.
    This request is part of a legislative proposal to reform 
the Office of Personnel Management and OMB's human capital 
leadership will be in conjunction with OPM's activities that 
will be vested within the General Services Administration.
    OMB continues to focus on strengthening and improving not 
only OMB's organizational effectiveness, but also increasing 
the effectiveness of the Federal Government to serve the needs 
of the 21st Century.
    For example, regulatory reform where OMB reviews tax-
related and similar regulations with the goal of ensuring that 
the regulations adhere to core government principles and are 
transparent, simple, efficient, and pro-growth, and 
implementation of the President's management agenda consistent 
with the Administration's reshaping of the American government 
reform and reorganization recommendations, which serves as the 
cornerstone for a productive, bipartisan dialogue on 
structurally realigning the Federal Government to more 
effectively operate in this century.
    Before I close, I know based on past hearings that there is 
a large interest in this subcommittee to discuss the overall 
President's [sic] budget request. Similar to President Trump's 
previous budgets, the fiscal year 2020 budget was written with 
everyday Americans in mind.
    This year President Trump directed most agencies to meet a 
target of 5 percent reduction to non-defense discretionary 
spending. I am proud to report to you that the fiscal year 2020 
budget achieves that goal, and OMB has held itself to the same 
high standard of fiscal discipline.
    The President came to Washington with a commitment to help 
get our fiscal house in order and end wasteful spending, and we 
believe this President's budget does that.
    With that I want to thank you and look forward to your 
questions.
    [The statement of Russ Vought follows:]
    
    
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    Mr. Quigley. Thank you.
    Let me begin, sir. Just some policy issues and procedures 
within the Administration.
    According to recent press reports, senior White House 
officials appear to be using WhatsApp to conduct official 
government business. First question would be: are you aware of 
this?
    And does the practice comply with OMB's official guidance 
on recordkeeping?
    Mr. Vought. I have read in the paper what you have read. I 
cannot speak to whether it complies. Obviously, we need to be 
doing official government business in areas such as email that 
comport with the Federal Records Administration.
    I cannot speak to what steps other senior Administration 
officials have taken, but I have read the same press reports 
that you have.
    Mr. Quigley. If you cannot speak to it, with all due 
respect, who can?
    Is it not OMB's responsibility to manage this from the 
overall point of view?
    And I understand you cannot officiate every person's 
activities, but you set the policy, correct?
    Mr. Vought. We do set many of these types of policies. I 
know that you mentioned some of the instances of waste, fraud, 
and abuse that we have attempted to identify, and whether it 
came to private travel or other areas, we do set policies, and 
then we expect agencies to take those policies to heart and 
align their behavior and practices and work with their 
Inspector Generals that are in the enforcement business.
    Mr. Quigley. So who can answer the question does WhatsApp 
comply with the government policy regarding recordkeeping?
    Mr. Vought. I would have to refer you to the various 
General Counsel's Offices for the agencies that are within the 
executive branch to comply with the laws that are in place.
    Mr. Quigley. What law is in place right now as it involves 
recordkeeping and the use of WhatsApp, for example?
    Even if a person wanted to know, who would they go to?
    Mr. Vought. I think first and foremost they would probably 
go to the Federal Records Act that requires Federal officials 
to keep track of the documents that they are working on, to be 
able to preserve an accurate historical record.
    Mr. Quigley. Respectfully, let's just say someone, a senior 
official at the White House, wants to use WhatsApp. They call 
you because apparently, as you say, you set this policy.
    Would you then refer them to General Counsel?
    I mean, if you set the policy, do you not refer to General 
Counsel and others to find out what the law is and then set the 
policy?
    Mr. Vought. We do. We also work with the General Counsels 
to make sure that their staff are complying with the various 
laws that are in place.
    And I know that the agencies do that. You know, I would 
refer you to each one of those agencies to decide as to how 
well they are doing and complying. The White House does that as 
well through their own White House counsel.
    Mr. Quigley. I will just try one more time. What is the 
policy? What is your understanding of the policy about using 
WhatsApp?
    Mr. Vought. To my knowledge----
    Mr. Quigley. Or official government work.
    Mr. Vought [continuing]. Mr. Chairman, it is to comply with 
the laws that are in place, including the Federal Records Act, 
to ensure that Federal officials are keeping an historical 
record of their documents.
    Mr. Quigley. Is it okay to use WhatsApp as an official 
record under the guidance of recordkeeping?
    Mr. Vought. It should not be used. We should not be using 
personal devices for government business. So I think that 
answers your question.
    You know, there are often times where things come in, and 
you have to get it to your device and do as best you possibly 
can to comply with the Federal Records Act.
    Mr. Quigley. And I want to make it generic. I do not know 
for sure if anybody is using WhatsApp. I just want to know, 
first, they should not be using a personal device. Second, if 
they are using a personal device or an official one, I would 
assume that if we were trying to keep records, that they should 
not use WhatsApp. Is that not correct?
    Mr. Vought. I think that is fair.
    Mr. Quigley. Thank you very much.
    I refer now to the ranking member, Mr. Graves.
    Mr. Graves. Mr. Joyce has another hearing to step into that 
he is ranking on. So I would yield some time to him, if you do 
not mind. Is that okay?
    Mr. Quigley. Yes.
    Mr. Graves. Thank you.
    Mr. Joyce. Thank you very much for your generosity, Mr. 
Ranking Member.
    And thank you for being here on your birthday.
    And I agree with where Mr. Quigley was going. Certainly as 
a former prosecutor, the collection of records and documents 
that have been part of your government activity should be 
stored someplace, and certainly you should not have like a 
Secretary of State acting out and setting up service in their 
own home and dealing in instruments of top-notch security, top 
clearance security outside that premise.
    So it would certainly be something that OMB, if they have 
opportunity, should put even stricter guidelines on and make 
sure all of the people who have not complied with the law in 
the past are held to account for that as well.
    There are, speaking of holding people to account, there are 
several financial regulators, such as the Office of Financial 
Research and Consumer Financial Protection Bureau, whose 
operations are outside of the appropriations process. These 
agencies do not have to present a budget request to the 
Congress, and they receive their funding without annual 
congressional action.
    Do you believe, sir, that putting CFPB and other financial 
regulators in the appropriations process would improve their 
accountability to Congress and the taxpayer?
    And also, with deficits approaching $1 trillion a year, 
would you support reducing the number of agencies whose 
operations are considered mandatory and not reviewed each year?
    Mr. Vought. Thank you for that question.
    And it is something that we think should go through the 
appropriations process to the extent that there are agencies 
like the CFPB, like the Office of Financial Research. It is 
important that we move in a direction, and we do it in 2-year 
steps, by 2020 to be able to ensure that this committee and 
other subcommittees across the appropriations process get an 
opportunity to bring those requests before it and have Congress 
actually pass on it.
    The appropriations process is something that is very 
important. It is an important oversight. Congress has the power 
of the purse. To the extent that Congress has delegated its 
power of the purse to provide some of these automatic spending 
situations, we do not think that is a healthy scenario, and it 
is one of the reasons we have tried to reform it.
    Mr. Joyce. What progress have we made towards that?
    Mr. Vought. Well, we have had proposals in our budgets. We 
certainly need Congress to act on our budgets, and we would 
love to continue the conversation as to if there are any 
particular questions that this committee has on roadblocks that 
it sees to moving that in that direction. We would be willing 
to have that conversation.
    But Congress needs to act.
    Mr. Joyce. Once again, we are failing to do our job?
    Mr. Vought. We have many proposals that we believe that are 
important for this committee and Congress to enact on.
    Mr. Joyce. That was a softball for you. [Laughter.]
    I know the United States faces many threats, terrorist 
organizations, international criminal drug cartels, regimes in 
China, Russia, Iran, Venezuela. How does the current 
Administration's request for defense spending rebuild our 
Nation's security responsibilities?
    Mr. Vought. Well, we think it is one of the promises that 
this President is keeping with this budget, and we think it is 
absolutely vital that in a situation of $22 trillion in debt, 
$1 trillion deficits as far as the eye can see, that we do not 
take a backseat to anyone in being able to defend the country.
    This President came to office promising to rebuild the 
military. We think a 5 percent increase for defense is 
something that is justified. And we believe that we have put 
forward a strategy to be able to continue the defense rebuild 
within the current caps.
    Mr. Joyce. And what, if any, steps, just because I do not 
work in your office and I do not know what you are doing, but I 
am sure something is happening; what, if any, steps are being 
taken to use the electronic age to reduce and secure and speed 
up the way we do transitions?
    Let me give you an example. I go to the VA. The VA tells me 
that the biggest problem they have in the intake process is 
they have to refer the member back to their discipline, whether 
it is Army, Navy, get their records, come back to the VA, where 
they are then scanned in.
    That seems sort of stupid in this day and age, do you not 
think?
    Mr. Vought. It does sound that way. It is also one of the 
reasons we have invested in making sure that health records are 
electronic and portable between DOD and VA.
    One of the things that the United States Digital Service 
does is they spend a lot of time in agencies, such as VA, to be 
able to streamline these kinds of processes to make them as 
smooth for the consumer as possible.
    So that is something that we do get involved with and 
working with agencies across the government to do.
    Mr. Joyce. With all due respect, sir, these are consumers. 
I mean, these are our veterans, and they deserve better 
treatment.
    Obviously, we know who they are when they are in the 
service, and they should be transitioned properly, and that is 
something I think we all owe more attention and duty to.
    And I do not mean to be rude to get up and leave, but I 
have a 10:30 hearing downstairs in Interior, and I appreciate 
the chair's indulgence.
    Thank you.
    Mr. Quigley. Mr. Bishop.
    Mr. Bishop. Thank you very much, Mr. Chairman.
    And welcome to you, Mr. Vought.
    As you may or may not know, I come from a rural district in 
Georgia, and I am an avid supporter of USDA's Rural Development 
Programs. I also happen to serve as the chair of the 
Agriculture Rural Development and FDA and related agencies 
subcommittee of the Appropriations Committee.
    It was disheartening, very disheartening to see the third 
consecutive year a budget that drastically cuts or eliminates 
several of the Rural Development Programs. The budget cut Rural 
Development by almost 20 percent, and 29 programs are 
eliminated.
    These programs are vital to communities like mine and are 
often the only means to access credit or grant funding. They 
help unserved and underserved markets that are often forgotten 
or left behind by larger financial institutions. They are not 
duplicative of other Federal Government programs because they 
are the only ones available.
    They create private sector jobs, and they grow economies. I 
just believe very strongly that rural America needs to be 
protected. There is no reason why a child or a family in rural 
America should not have the resources and access to all of the 
necessary resources to realize their full potential.
    And of course, this budget would undermine that 
possibility. So can you tell me why the budget continues to 
drastically reduce or eliminate USDA Rural Development 
Programs?
    And please do not say it is a question of priorities 
because serving rural America should we a priority for all of 
us.
    And I just am very, very upset. And, fortunately, the will 
of Congress has not been such as to go along with those drastic 
cuts, and I just want to know what is going through the head of 
the people over in your agency that would propose such a 
drastic cut.
    Mr. Vought. Well, we would certainly agree with you on the 
importance of rural America. It is something that we have 
designed the last three budgets with an eye towards. If you 
look at our infrastructure proposal, one of the things that it 
speaks to, one of the reasons we wanted to not just be surface 
transportation is because we think that there are important 
rural needs that can be addressed through infrastructure.
    If you look at the broadband funding that we provide within 
USDA, that is another attempt to make sure that the needs that 
rural American has are being addressed.
    To the extent that we reform or eliminate programs, it is 
always done with the vantage point that we think that the 
programs do not work. I understand there would be a 
disagreement with you on that, but it is also something where 
we are willing to engage in a conversation about.
    Mr. Bishop. Just look at the USDA Reconnect Program. It was 
initially funded in the 2018 omnibus at $600 million, and in 
the 2019 omnibus provided an additional $550 million. It was 
intended by Congress to expand broadband access and facilitate 
deployment to unserved and underserved populations, which are 
predominantly in rural areas.
    And one of the features that makes this an important 
improvement over the current USDA broadband loan program would 
be to enable the energy to pay our loans with grants and to 
make projects financially viable.
    Funding projects with both loans and grants would 
significantly limit the risk to the Federal Government, but OMB 
recently calculated substantive rates for the Reconnection Loan 
Grant Program that will make it even more expensive than the 
current loan program. This means less money would be available 
to connect communities to the world that we all take for 
granted.
    Tell me why would you do something like that. It just does 
not make any sense.
    Mr. Vought. Well, we are never trying to take away. When we 
calculate loan rates and subsidy rates, what we are trying to 
do is get the best estimate that we have at the time.
    We believe that we put forward a very healthy request 
regarding rural broadband. We think that there is money in the 
system, and that needs to be spent wisely over time.
    And it is priority for the Administration, and we look 
forward to working with you on it.
    Mr. Bishop. Well, there are just too many rural communities 
that do not have access, and the programs that are designed to 
give access are being cut or at least you are attempting to cut 
them from the Office of Management and Budget.
    And it just makes no sense. You are speaking out of both 
sides of your mouth, and I find it very unacceptable.
    I yield back.
    Mr. Quigley. Mr. Graves.
    Mr. Graves. Thank you, Mr. Chairman.
    And, you know, I think it is important for all of us on 
different subcommittees to understand that what is being 
presented to us is a budget request based on a current cap 
environment that might not lead to where the Administration's 
priorities are. It just leads to the Administration to make 
tough decisions.
    And so what Mr. Vought has presented to us is a budget 
recommendation that abides by current law. I imagine if the cap 
were in a different position, then the priorities may be 
differently funded as well. So they are having to make 
difficult choices.
    Just revisiting real quick for the chairman here, my 
understanding is that it is not prohibited nor illegal for a 
White House official to use a personal device for official 
business. It is not recommended, obviously, but it is not 
illegal, but it is required that any kind of communication be 
documented and relayed to archives and such within 20 days or 
so. So just as long as the information is documented.
    So there is no prohibition against using any app or no app 
on a personal device that I am aware of.
    Mr. Quigley. Can I ask a question in response?
    If it has to be documented, how could WhatsApp comply with 
that?
    Mr. Graves. My understanding is screen shots, forwarding 
emails, forwarding text messages, things like that. Yes.
    Mr. Quigley. The time is yours.
    Mr. Graves. Mr. Vought, I am going to give you an 
opportunity. I think, as I talked about earlier, that you have 
put a lot of work into this. Your team has as well. The 
Administration has a vision for our country. You have 
recognized the difficulty of the inherited debt that you have 
had to embrace.
    But you have put together a vision for our country through 
this budget recommendation, and that really is a vision, right?
    So I am going to give you an opportunity to at least share 
with us your vision, the Administration's vision for where you 
see where the country can be and go in our economy with the 
American people, investments and such like that based on what 
has been presented to us.
    Because you had presented a really good op-ed that I 
recommend to all of the members to read and which I will quote, 
you said, ``Annual deficits are on the verge of exceeding $1 
trillion each year for the foreseeable future in interest 
payments.''
    And this is what should be shocking to everybody, that our 
interest payments on the national debt are projected to exceed 
military spending by 2025, and that is an amazing and 
astonishing quote from your op-ed.
    But we should recognize that the national debt did double, 
nearly double under the previous Administration. So please take 
an opportunity to share with us your vision and the 
Administration's vision before we get back into, I know, some 
more detailed questions.
    Mr. Vought. Sure. Thank you, Congressman.
    Our vision is to ensure that we can pay off our debt and 
deal with our trillion-dollar deficits in the years ahead; that 
this is not a way that an ordinary family across the country 
does their fiscal business.
    We want to get back in the business of balancing our 
budget. It is one of the reasons why we do it. We say we are 
going to do it within 15 years. It would have been easy to say 
that we can never balance, but we do not actually agree with 
that.
    We want to be able to engage in the conversation about 
balance and try to lower our spending.
    We also want to be able to continue to ensure that the 
American people keep the revenue that is their own, and that 
revenues coming into the Federal Government stay at their 
historical level of GDP. We do not want the American people to 
have to pay more of their hard-earned money to be able to 
support the government that we have. And that has been 
something that is part of the promises kept.
    We also think it is important that Congress needs to get 
after its spending problem. We have put forward more spending 
reductions than any Administration in history. We have put 
forward them from the beginning of the Administration.
    This is now the third budget in which we have put forward 
more spending reductions than any President's budget in 
history.
    People talk about mandatory spending. We have put forward 
more mandatory spending reforms, reforms and savings proposals, 
than any Administration in history.
    And so we do believe that this is an important conversation 
to have about how we are spending the hardworking people's tax 
dollars.
    But Congress has the power of the purse, and we need 
Congress to act on these proposals.
    Mr. Graves. That is a great point. It reminds back, I 
guess, in the first couple of months of the Administration. You 
presented through at the time, I guess, Director Mulvaney who 
was over at OMB a rescissions package of here is a lot of 
money, you know, I guess billions of dollars. Was it five, six, 
$7 billion that is not going to be spent, has not been spent?
    The programs have been fully exhausted, and here is money 
sitting here. And my recollection is that Congress' action was 
nothing.
    Mr. Vought. That is exactly right.
    Mr. Graves. Rejected cutting spending of funds that are 
just dollars that are sitting there that will not be spent and 
cannot be spent.
    So I appreciate your boldness with this proposal, and I 
think it is important for us, as Congress, to understand this 
is an Administration making a recommendation to Congress on a 
way to save money in the future and to assist the taxpayers.
    And it is really up to us to embrace it or not embrace it, 
and as history has shown, we typically do not embrace 
reductions in spending.
    Mr. Chairman, I yield back.
    Mr. Quigley. Thank you.
    Mrs. Torres.
    Mrs. Torres. Thank you, Mr. Chairman.
    And thank you, Mr. Vought, for being here.
    In your statement you state that OMB is reducing its budget 
by 11 percent below its fiscal year 2019 enacted level and that 
this demonstrates its commitment to fiscal discipline and 
efficiency as it asks other agencies to make severe cuts; is 
that correct?
    Mr. Vought. That is correct.
    Mrs. Torres. A closer look at the actual budget request 
reveals that your statement is misleading at best. In fact, 
when comparing apples to apples, the OMB budget request 
reflects a cut of just 0.4 percent, below the current level, 
nowhere near the 11 percent, as you suggest in your testimony.
    It seems to me that you are inflating the extent to which 
OMB is trimming its own bottom line by including the proposed 
reduction for the U.S. Digital Service, which is not a core 
part of OMB's statutory responsibilities.
    And in addition, your calculation counts as a cut a 
function that you are simply transferring elsewhere. If you are 
going to count the $1 million transfer of the intellectual 
property enforcement coordinator out of OMB in its own 
appropriation, you must also subtract that function from the 
figure you are using for comparison purposes.
    So, Mr. Vought, is it not more accurate to say that OMB's 
budget is really only decreased by $400,000?
    Mr. Vought. No. Here is why.
    Mrs. Torres. Do you think that it is appropriate for OMB to 
ask agencies to make 9 percent cuts, on average, without being 
willing to do the same?
    Mr. Vought. Congresswoman, we have an 11 percent cut, and 
we actually took the challenge from this subcommittee to heart 
when we put this budget together to be able to put forth 
reductions that we have asked other agencies to do.
    The OMB has both accounts, OMB's normal main budget request 
and the ITOR Fund. The ITOR Fund does not just fund USDS. It 
also funds all of our management responsibilities as it 
pertains to financial information and control.
    So from the standpoint of OMB, just think of it as two 
different accounts all within the OMB banner. We are moving $1 
million out of OMB for IPEC, and we are paying for that within 
other savings within the larger Executive Office of the 
President.
    So you are right. If we were saying that we were not going 
to absorb that cost with savings elsewhere within the EOP, that 
would be double counted. We are not doing that.
    But we are saying from the standpoint of OMB, we can find 
many, many millions in savings from areas within the USDA that 
we think in this environment we need to do less of, and we need 
to work with agencies to make sure that we are getting 
reimbursed for the essentially consulting services that we are 
providing for those agencies.
    Mrs. Torres. So OMB received $8 million more in funding 
between 2017 and 2019, an 8 percent increase; is that correct?
    Mr. Vought. That sounds about right.
    Mrs. Torres. So you propose what is essentially flat 
funding in the budget request. Does that really demonstrate a 
commitment to fiscal discipline within the agency or is that a 
case of what is mine is mine and what is yours is negotiable 
when it comes to dealing fairly with other agencies?
    Mr. Vought. Absolutely not. As I just said, Congressman, we 
have two accounts. We have an 11 percent cut for OMB. We reduce 
one of those accounts greater than the other account, but those 
are fully part of OMB. They are fully part of our 
responsibilities.
    We do think that from the standpoint of within ITOR where 
we can find savings, we have prioritized our statutory 
responsibilities under the E-Gov Act, but the work of the 
United States Digital Service is very important. They found 
about $8 billion in savings for agencies based on their 
important work. We want that work to continue.
    And that is one of the reasons that we tried to figure out 
in this environment how do we structure USDS with reimbursable 
agreements so that it is a long-term, sustained way to be able 
to do business.
    Mrs. Torres. I would like an opportunity to dive more into 
those numbers with you to see exactly where you are coming up 
with a 9 percent cut.
    On another issue, I have introduced the 9-1-1 SAVES Act, a 
bipartisan bill that directs OMB to update their classification 
for public safety telecommunicators as a protective service 
within the standard occupations classification, SOC, catalogue.
    The current version of the SOC categorizes public safety 
telecommunicators as office and administrative support 
occupations, which includes secretaries, office clerks, and 
taxicab dispatchers.
    Someone who negotiates with someone who is trying to kill 
themselves, someone who negotiates with somebody who is holding 
someone hostage, I hardly would describe them as something 
equal to a secretary or a taxicab dispatcher.
    Public safety communicators should be categorized as 
protective service occupations, which includes a broad range of 
protective occupations, lifeguards, fish and game wardens, 
parking enforcement workers, et cetera.
    On September 8th, 2016, I sent a letter requesting that 
this change be reviewed, and OMB has denied this request to 
change the classification. The rationale on this SOC Website 
stated, ``The work performed as that of a dispatcher is not of 
a first responder.''
    As I stated to you, most dispatchers are dealing with 
critical incidents at any given time.
    Mr. Chairman, I ask for unanimous consent to submit a 
letter into the record that I wrote. It is dated September 8th, 
2016, asking for OMB to review this classification.
    Mr. Quigley. Without objection.
    [The information follows:]
    
    
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    Mrs. Torres. Thank you.
    And while you may not have been working for the OMB at the 
time, can you explain that decision, making the process behind 
this response?
    Mr. Quigley. Mrs. Torres, I think we can come back. We are 
past the time.
    Mrs. Torres. Oh, I am sorry.
    Mr. Quigley. No problem.
    Mrs. Torres. I did not realize. I lost track of my time.
    Mr. Quigley. That is all right. We will come back. Thank 
you.
    Mr. Amodei.
    Mr. Amodei. Thank you, Mr. Chairman.
    Mr. Vought, I have got an issue that I would kind of like 
the opportunity to speak with your staff as a beginning thing 
at some point in time in the relatively near future, and here 
it is.
    My State is a little unique in that the Department of the 
Interior, primarily through the Bureau of Land Management, but 
also through the Bureau of Reclamation and then also through 
the Forest Service, owns about 85 percent of the State.
    Now, I am not here to lament that fact. I am just saying 
that is a fact. Regardless of who you are, what you like, what 
you do not like, they own most of it.
    So at a higher percentage than any other State in the 
Nation, the Federal Government has a Federal estate that is a 
super majority of the land.
    And as we look at this, and as I go through, for instance, 
BLM has six district offices that are over that, and as I go 
through, and by the way, this is not new. It crosses 
Administrations.
    But, for instance, I was in the district office in a place 
called Winnemucca, which is not a Yiddish swear word. It is 
really the name of a town in Nevada.
    And they have about 120 people on the books for that BLM 
district office in Winnemucca. About a third of those positions 
are empty, not positions that somebody fought to have added or 
whatever. They are part of their standard here is what it takes 
to operate that district office.
    That fact is not unusual for all of those offices, all of 
those six offices, and it is probably a fact district-wide and 
as well as the State office.
    But here is my problem. We sit there and say we did not add 
positions because somebody is trying to build an empire. These 
are consistently on the books.
    And then we look at budget, and we go there is consistently 
a budget that says you do not have money to fill a third of the 
people that somebody thinks you need to run your district in a 
State where you own 8-plus acres out of every 10.
    You say, ``Well, okay. So what is the problem?''
    The problem is, and this Administration has made no secret 
of the fact they value the Federal estate and they do not want 
to transfer much in lands bills. Okay?
    So, on the one hand, it is like we value the Federal estate 
and we do not want to be rid of a single acre. On the other 
hand, from the historical manpower things that it takes to run 
owning and managing those resources, recreation, energy, you 
name it, we are a third down the whole time.
    And then to add the final piece for your consideration, 
where you have just got to chuckle is you go, ``Oh, and by the 
way, the money sitting in that account by virtue of the 
Southern Nevada Public Lands Management Act,'' which does 
resource-related Federal estate things, which turned 20 last 
year, ``we are going to strip that to balance the budget.''
    Now, I am not going to get into with you whether that is 
legal or not or whatever, but it is like so we are taking money 
from Federal lands, using it to balance the budget, but we do 
not want lands bills, which, by the way, the Southern Nevada 
Public Lands Management Act of 20 years sold about 35,000 acres 
out of the 56 million-acre Federal estate.
    So you are getting my gist here where it is like there are 
some serious mixed messages floating around.
    So my challenge to you before I go back to Interior, 
because we have tried that before, as I sit here and look at 
continually cutting budgets for a Federal estate that grows in 
value and complexity to make all of those different land uses 
work, and at the same time saying, ``By the way, the money you 
got from those proceeds we are going to take into not even some 
resource-related account. Instead it is just going to go to the 
Treasury of the U.S.,'' and you are sitting there going, ``Do 
not sell land, but we want the money from the sales, and, oh, 
by the way, we do not want to man it.''
    Final piece. During the last shutdown when it was time to 
say who was key and who was not key, that shutdown started out 
with one person in the Bureau of Land Management, who owns two-
thirds of the State. That was the only key person.
    And so as we are sitting here looking at the policy and we 
are going, ``Wow, you control, that one agency, two-thirds of 
the land in the State and yet one person is considered key if 
you have that person's cell phone.''
    Now, towards the end of the shutdown, that got a little bit 
better, but quite frankly, I think it is time for people in 
OMB, when you talk about budget, how do you function as a 
Federal agency? Well, guess what. Budget is a fairly 
significant part of that.
    So I want to have that conversation with your folks to say, 
``Hey, listen. If it is just all bad news and that is the way 
it is, then fine, but I think it would be a good time for a 
healthy dose of (a) reality and (b) if you really need those 
people to run owning 85 percent of that sixth largest State in 
the Nation, we probably ought to fund them.''
    I will look forward to our meeting.
    Mr. Vought. I would welcome the conversation. I have got 
some responses to various of the pieces. I do not have much 
time, but I would just say I welcome that conversation, and I 
look forward to working with you on those issues.
    Mr. Amodei. Thank you.
    Thank you, Mr. Chairman.
    Mr. Quigley. Thank you.
    Mr. Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman.
    Acting Director Vought, your budget would slash non-defense 
discretionary funds by more than $1 trillion, crippling our 
economic and our national security by disinvesting in 
education, public health, energy, health care research, 
infrastructure, veterans' health care, law enforcement, food 
safety, disease prevention and control, and the list goes on 
and on.
    But I am to focus today on the massive, gargantuan cuts to 
Medicare, some half a trillion dollars, or as you have referred 
to those cuts yourself previously as savings.
    I know you have said the spending will increase in Medicare 
year over year, but it will not increase as much as is 
scheduled, as if this Administration had not taken a hatchet to 
health care.
    I have seniors in my hospitals in my district, seniors that 
come to Seniors Fairs and talk to me about they are cutting 
Medicare. How can this be? The President promised he would 
never touch it.
    So I have to ask. In calculating these cuts to Medicare, 
did you calculate for the fact that health care inflation is 
rising faster than general inflation, and the increased need 
that would create?
    Did you calculate the increase in the aging population, 
because of the Baby Boomers, and the growth in Medicare 
enrollment?
    Did you calculate the effects of these cuts and what those 
effects would be on access to care, especially in districts 
like mine in Northeastern Pennsylvania where access to care can 
often be a life or death issue?
    Those are three questions. If you forget one, let me know.
    Mr. Vought. I will let you know.
    We certain considered all of those factors. We do not cut 
Medicare in this budget. Medicare grows every year. The 
President has made no structure changes to Medicare in this 
budget.
    We do have savings in Medicare from things like trying to 
lower drug pricing, which I know this Democrat majority has an 
interest in trying to work with us on.
    Mr. Cartwright. You say ``Democratic'' actually.
    Mr. Vought. Sure. We also have proposals to take out of 
Medicare certain things that we do not think should be in 
Medicare. We do not do away with them. Uncompensated care to 
non-Medicare beneficiaries we think is something that should be 
provided for. We take it out of the Medicare Trust Fund so that 
it does not impact the solvency of that important trust fund, 
and we allow it to grow.
    Similarly, bad debt is something that in the private 
marketplace insurance companies go and make sure that they are 
getting the cost sharing of their beneficiaries. We pay for 
that at the Federal Government level, and we say instead of 
paying 65 percent of those bad debts, we are only going to pay 
25 percent of it.
    So these are waste, fraud, and abuse. Everyone wants to 
kind of malign the notion of waste, fraud, and abuse. We have 
identified specific proposals that allow us to save money in 
Medicare, push the solvency of the trust fund out 8 years, and 
keep the President's commitments.
    Mr. Cartwright. Did you calculate the increase in the aging 
population? Did you include that in your calculations?
    Mr. Vought. We assumed all of the baseline drivers of our 
mandatory spending in assessing these proposals. That does not 
mean that we did not attempt, particularly in Medicaid, and I 
could not tell from your proposal whether you were talking 
about Medicare or Medicaid.
    Mr. Cartwright. Medicare.
    Mr. Vought. On Medicaid, we are growing as well each and 
every year.
    Mr. Cartwright. Did you calculate for the fact that health 
care inflation is rising faster than general inflation?
    Mr. Vought. We are aware of that, but are also saying that 
the Federal Government's policy----
    Mr. Cartwright. That is a yes or no kind of question.
    Mr. Vought. Well, it actually is not, Congressman, because 
the Federal Government's policies have an impact on how fast 
health care expenditures grow. So to the extent that we do not 
have policies that allow for States at the Medicaid level to 
slow the growth of these important programs, we are also 
increasing the rate at which health care spending grows.
    So we think that the two are completely in line.
    Mr. Cartwright. And did you calculate the effects that 
these cuts would have in access to care, especially in 
districts like mine where access to care can be a life or death 
issue?
    Mr. Vought. We considered all of these factors in putting 
together our proposals. We do not think that it will have 
adverse impacts on the populations that depend on these 
proposals.
    Mr. Cartwright. And in your world, just so I am clear on 
it, taking a half a trillion dollars out of the planned 
expenditures is not a cut. I still have to work on that, 
grasping that whole concept, Acting Director Vought.
    I yield back.
    Mr. Quigley. We are going to go to a second round, but 
since Mr. Crist has walked in, I want to finish the first round 
where everyone gets one shot if that is okay.
    Mr. Crist, do you have questions at this point?
    Mr. Crist. Yes, Mr. Chairman.
    Mr. Quigley. Please go ahead.
    Mr. Crist. Thank you very much.
    And thank you, sir, for being here today. I appreciate 
that.
    Do you know who in America depends on Medicare and Social 
Security?
    Mr. Vought. Seniors.
    Mr. Crist. Yes, mostly seniors and disabled individuals, 
millions of seniors, the seniors that built this country and 
got us to this point.
    And let's try if you know who depends upon Medicaid.
    Mr. Vought. The elderly, the disabled, pregnant women and 
their children. Unfortunately, we are in a situation now where 
the populations that Medicaid was designed for get a lower 
match than populations it was not designed for.
    One of the proposals that we have in this budget is to go 
towards a block grant so that States would have more of an 
opportunity to design their programs to ensure that the 
populations that Medicaid was established for get the care that 
they need.
    Mr. Crist. Thank you.
    I understand that you are here to talk about and defend the 
budget request, and I appreciate that you are doing that, but 
it is hard for me to understand the Administration breaking a 
campaign promise to not cut Medicare and Medicaid and, you 
know, Social Security and programs that are so important to 
certainly my constituents and I would imagine the constituents 
of all of us on this committee.
    The proposal is over a trillion-dollar cut in Medicare and 
Medicaid. Can you explain that to me?
    Mr. Vought. Yes. I would just unpack the numbers in a 
different way. We do not cut Medicare or Medicaid. Medicare, we 
have $517 billion in savings. Medicare will keep going up. 
There are no structural changes to Medicare.
    If we make a change to lower drug pricing, that causes a 
savings for Medicare because of the fact that the government 
pays for the drug bills of seniors.
    In Medicaid, one of the things that is important to 
understand in the numbers is that we are shifting a lot of the 
spending that is currently going into Medicaid into the State 
health care block grants, and so the Medicaid number does not 
tell the story as much as the combined picture of both Medicaid 
and the State health care block grants, at which point we do 
have a $271 billion saver, but Medicaid and the State health 
care block grants are all going to go up every year if you 
compare it to 2018.
    Mr. Crist. So reported reductions in Medicare of over $800 
billion are not accurate?
    Mr. Vought. Those are false because they do not 
characterize the reforms that we are doing to take things that 
are not rightfully a part of the Medicare Program, take them 
out of Medicare Trust Fund and ensure that they grow 
separately.
    So, for instance, uncompensated care to non-Medicare 
beneficiaries, we still fund it. We do not fund it in Medicare, 
and so it shows that it is now not in Medicare, and so that the 
higher number that you reference does not take into account 
some of those reforms where we are doing it elsewhere in the 
Federal budget.
    Mr. Crist. If it is not in Medicare, where does it go?
    Mr. Vought. It still goes to hospitals. It is still 
uncompensated care. It grows at a different rate, and it is 
part of the other aspects of the Federal Government's spending.
    Mr. Crist. So you are representing today that there are no 
reductions in Medicare, no reductions in Medicaid, the reports 
that we have been provided are inaccurate, and that the 
Administration is going to increase Medicare and Medicaid this 
year?
    Mr. Vought. Yes.
    Mr. Crist. To what extent? How much?
    Mr. Vought. I do not have the Medicare figures in front of 
me or the Medicaid figures, but they are going to be going up 
each and every year.
    Mr. Crist. You are the head of OMB?
    Mr. Vought. I have a lot of numbers at my disposal. I can 
get you the numbers on a year-by-year basis as it pertains to 
those specific line items.
    Mr. Crist. Yes. I would appreciate it if you would 
prioritize Medicare and Medicaid.
    Thank you, Mr. Chairman.
    Mr. Quigley. Thank you.
    We will start a second round. Mr. Graves, we will let you 
start.
    Mr. Graves. Thank you, Mr. Chairman.
    Mr. Vought, you are probably aware one of my emphases or 
priorities has been cybersecurity and what are we going to do 
to enable and particularly the private sector to actively 
defend themselves, as individual.
    I feel like that as a country we really do not have good 
policy when it comes to this new theater that is out there, 
cyber warfare.
    In fact, the Cyber Fraud and Abuse Act really has not been 
updated in decades, and so I have been putting forward some 
bold proposals on how we might address that to allow others to 
actively engage outside of the network to help with 
attribution, to defend their own network, outside of their 
network to use beaconing technology, some other things such as 
things such as that.
    That is one silo of cybersecurity that is something that I 
am very focused on, but then there is the other silo that we 
hear about here, and that is the public sector, and each agency 
comes before us, and they will say that cyber is a major 
concern, and we all know it is, and they are all asking for 
unique proposals on funding requests as it relates to 
cybersecurity.
    Can you just share with us the overall plan as you know it 
or how we could best help and assist in not putting together a 
patchwork kind of cyber defense system for the Federal 
Government?
    But what might we do and how can we best help moving 
forward as you see it from your perch?
    Mr. Vought. Thanks for the question.
    It is a priority for this Administration. In terms of 
cybersecurity spending, we spend about $15 billion on it. That 
is a 5 percent increase.
    One of the things our management colleagues have been very 
interested in prioritizing is making sure that we have enough 
cyber security workers. We have shortages as it pertains to the 
number of people that we need in the Federal Government to 
fulfill these roles.
    So we have been working to come up with different training 
programs to make sure that we take people that might have 
different skills and then can be reskilled into cybersecurity. 
That has been a priority of the President's management agenda.
    So I think engaging where the problem is is something that 
we would love to continue to work with this committee and you 
on and trying to make sure we are doing it from a comprehensive 
way as best we possibly can.
    Mr. Graves. Sure, and I think there is a lot of overlap, 
too, and what I have proposed and I encourage you and your team 
to look at, the Active Cyber Defense Certainty Act and just 
trying to give some certainty as to what can be done to 
actively defend that works.
    In that overlap, I feel like the private sector can join 
with the public sector, and rather than be dependent on, hoping 
somebody else is doing this or somebody else is assisting 
somewhere else.
    The passive nature in which we sit as a country should be 
alarming to everyone, that we are basically in a passive 
posture when it comes to cybersecurity and the threats that 
exist out there.
    So I look forward to working with you and the team on that 
because I think that should be a priority that is bipartisan 
all the way around.
    And then with just a few seconds left here, I want to talk 
about the border security plan as proposed in this budget. I 
think it is right to come back at this and address this as a 
crisis.
    And I was a part of the conference committee that worked on 
this. We heard the facts. We heard the information in 
classified settings, and it was extremely alarming and 
disturbing.
    And had every member had access to that information, I have 
a feeling that the tone might be different because when you 
hear from the experts and you hear the true facts and you see 
the data, it should be something that we want to address.
    So maybe just take, you know, the last 60 seconds here to 
tell us about what the upcoming plan is there.
    Mr. Vought. Sure. We have put forward what we think is 
resources necessary to secure the border to keep the 
President's commitment to build the full wall.
    The situation has gotten worse on the border. I remember 
those very meetings that we would have in December where the 
Secretary of Homeland Security was attempting to get Speaker 
Pelosi's attention. She was trying to put forward the facts as 
we knew them now about the situation on the border.
    They have gotten worse. In the first 6 months in terms of 
apprehensions, we are going to exceed what we did last year. We 
are approaching the same levels that we saw 10 years or so when 
apprehensions out there were at their all-time historical high.
    Here is the difference. Ten, 15 years ago, those were 
apprehensions of single adults that would come across the 
border, and then we would typically return them within 48 
hours. The difference now is that these migrants are coming 
across as families from regions of the world that we do not 
have the ability, because of our laws, to just send them back.
    And so they end up staying here even when nine times out of 
ten they do not have a legal right to stay here because of the 
asylum laws that are in place, and as a result, we are saddling 
ICE and CBP with their responsibilities, but they do not have 
the resources and the facilities to be able to house all of 
these individuals.
    So it is a crisis. This is an area where we are tired of 
being right, and we have put forward a resources request that 
we believe is necessary to secure the border, and our hope is 
that Congress engages with us on the facts going forward.
    Mr. Graves. Thank you.
    Thank you, Mr. Chairman.
    Mr. Quigley. Thank you.
    Continuing a second round, sir, in September of 2017, OMB 
issued a memorandum reminding agency heads of existing travel 
policies for government officials and requiring the White House 
Chief of Staff to approve travel on government-owned, rented, 
leased, or chartered aircraft.
    The memo also said that OMB is reviewing the existing 
guidance on the use of such aircraft. Is the guidance requiring 
the White House Chief of Staff to approve travel on government 
aircraft still in place?
    Mr. Vought. The guidance that we put in place is still in 
effect, and we are in the midst of updating that guidance as 
well right now.
    Mr. Quigley. Well, and I want to get to the update in just 
a second, sir.
    What does the guidance say when there is a vacancy in the 
Chief of Staff at the White House?
    Mr. Vought. The Acting Chief of Staff has assumed all the 
responsibilities of the Chief of Staff in the same way that as 
Acting OMB Director I have assumed all of the responsibilities 
of the OMB Director.
    So from the standpoint of the Acting Chief of Staff, he is 
a detailee from OMB to the Chief of Staff, but he is reviewing. 
He makes all of those types of decisions.
    Mr. Quigley. Now, has the OMB collected information about 
the overall use of such aircraft since the issuance of that 
memorandum?
    Mr. Vought. I do not believe we have.
    Mr. Quigley. Is it possible for you to do so?
    Mr. Vought. I am happy to work with the committee and look 
into that.
    Mr. Quigley. Okay. And you talked about reviewing this 
guidance. Where are you in this?
    And do you have proposed changes at this time?
    Mr. Vought. It is too soon to be able to reveal where we 
are headed on that, but we are in the midst of updating that 
guidance, and it is part of the deliberative process to work 
through that.
    Mr. Quigley. This process that you are talking about began 
in September of 2017?
    Mr. Vought. Yes. I am not sure when we officially began the 
update process.
    Mr. Quigley. That is sort of a ballpark though, right?
    Mr. Vought. It is about the ballpark, yes.
    Mr. Quigley. So that is over a year and a half ago, 
roughly. Any guess on when you might be completed with that 
review and issuance of new guidance?
    Mr. Vought. I do not have a date to give the subcommittee 
at this point, but we are working on it.
    Mr. Quigley. I am going to ask you to hazard a guess just 
because it has been a year and a half. The Administration has 
about that much time left. Is it going to be done before the 
Administration is through with this term?
    Mr. Vought. We are working as quickly as we possibly can on 
it, sir.
    Mr. Quigley. All right. Mr. Amodei.
    Mr. Amodei. Thanks, Mr. Chairman.
    Mr. Vought, the chairman commented after my last question 
that that was quite a speech leaving you 8 seconds to respond. 
Therefore, if you have any thoughts that come to mind based on 
that to turn it into an actual potential question, please feel 
free to respond regarding the staffing at those Federal land 
management agencies as well as the SNPLMA raid thing, and 
``raid'' is about as nice of a word, and I have heard the South 
Carolina explanation.
    So anything new to that would be much appreciated.
    Mr. Quigley. And you get an 8 second bubble as well.
    Mr. Vought. All right. Thank you, Mr. Chairman.
    Mr. Quigley. With the account that you reference, we look 
at it there is $600 million in the fund. We have proposed to 
rescind $200 million of it. None of the rescissions that we 
have identified are geared toward anything that is specifically 
allotted for a particular project right now.
    Now, I think your point might be you have not accounted for 
the fact that new projects may arise, and that is fair. But we 
have also had a hard time, at least from our analysis, of 
seeing additional new projects that are arriving.
    So from our standpoint, $200 million is something that we 
could return to taxpayers and not hurt the intent of the 
program.
    Mr. Amodei. Well, and I appreciate that, except if you look 
at the base legislation, it does not allow that.
    Mr. Vought. And that is why it is a proposal. It is a 
proposal for Congress.
    Mr. Amodei. I have got it. I have got it.
    Mr. Vought. And it pertains to the shutdown. The length of 
the shutdown obviously caused us to update our lapsed plans in 
real time to account for the factual situation on the ground.
    So I was not aware over the situation with only one BLM 
employee working under a lapse. But I know that we were working 
with all of the agencies as they were seeing real needs and 
then by the law to make it as painless as possible consistent 
with the law and engaging in that conversation.
    And then as it pertains to the BLM staffing issues, I know 
that has been an interest of yours for a long time. I welcome 
that conversation. Our reforms to Interior are not designated 
to not have BLM fully staffed up.
    They are attempting to get at things like the fact that we 
want to put a halt on land acquisition and to ensure that the 
Federal Government does not own more than 25 percent of the 
land in this country.
    So that is the intent behind our budget proposal, and we 
are certainly willing to work with you.
    Mr. Amodei. Well, and I appreciate that, but as you can 
appreciate, and they are kind of connected, when you bring an 
agency to full stop that is doing land management in a State 
that in the Southwest basically competes for fastest growing 
State in the Nation for probably a decade or two. They compete 
with the Valley of Sun.
    And you say, ``No, we are not processing any right-of-way 
applications, even though they are an existing right-of-way. 
No, we are not doing any of the ESA stuff. We are not updating 
any of our resource management plans, our travel management 
plans. We are not doing anything for that period of time.''
    Then you go back and say, ``Okay. We are back. Well, wait a 
minute because we have got to catch up from the shutdown.''
    And so all I am saying is if it is going to end up being 
the equivalent of a double or triple shutdown by the time they 
catch back up, we probably ought to think about that before we 
say you are not key.
    Because, quite frankly, the shadow that that one month or 
whatever it was casts is much longer than a month in an 
operations sense and is exacerbated by the fact that you are 
staffed at 67 percent of what is on the books.
    Thank you, Mr. Chairman, and I yield back.
    Mr. Quigley. Thank you.
    Mr. Bishop.
    Mr. Bishop. Thank you very much, Mr. Chairman.
    Mr. Vought, the President's fiscal year 2020 budget request 
once again proposes a pay freeze for Federal employees, despite 
low unemployment and Federal law suggesting that employees 
receive a 2.6 percent raise before the locality pay is factored 
in.
    Furthermore, the budget request calls for cuts to employee 
pay through increased retirement contributions and reduced 
government contributions to employee health care.
    As the 35-day government shutdown demonstrated, Federal 
employees provide critical services that the American people 
rely on every single day. If you want to recruit and retain top 
talent, we have to provide employees, at the minimum, with a 
pay increase to keep up with the cost of living.
    Can you explain why the Administration is working so hard 
to harm Federal employee paychecks?
    Mr. Vought. We are not, Congressman. We think it is 
important to ensure that we have a healthy Federal workforce. 
It is one of the priorities of the President's management 
agenda.
    The type of data that we look at is the fact that if you 
look at the Federal employee viewpoint survey, which is 
basically a survey of all Federal workers, only 25 percent of 
the current Federal workforce thinks that pay has any 
connection with performance.
    We think that that is the wrong way to be able to align 
incentives, and so what we have said is putting forward a 
proposal in this budget to give agencies more discretion to be 
able to have bonus payments, increased salaries for recruitment 
and retention.
    What we have rejected is just to do an across-the-board cut 
because we think that that is the wrong way to align 
incentives.
    Mr. Bishop. Well, your budget proposes that agencies use 
their performance awards accounts to finance more strategic 
workforce award spending and innovative approaches to meeting 
critical recruitment, retention, and reskilling needs across 
government by using their award funding to reward their most 
critical employees with the best performance.
    Can you provide some additional details as to which you 
mean by this?
    Does it mean that only certain occupations will receive pay 
increases? An outstanding performance by attorneys, law 
enforcement officers, customer service representatives, and 
administrative staff, among others would not be recognized?
    Mr. Vought. Not necessarily. We would be working with the 
agency heads to be able to design plans that would be able to 
fill and assure high priority areas are addressed, but also 
high performance across the agency are also receiving the kinds 
of incentive payments that their merit, their performance had 
justified.
    And then I would also note that we did not have it in our 
2019 budget, but Congress gave these workers an across-the-
board cut or an across-the-board increase in their pay, and so 
that is something that is also going to be there for them to 
benefit from as well.
    Mr. Bishop. Yes, but that certainly was not at the instance 
of the Administration.
    Mr. Vought. I agree with that.
    Mr. Bishop. That was in the wisdom of Congress.
    It appears to me from where I sit and from talking with 
Federal employees that the Office of Management and Budget is 
doing everything that it can to cleverly conceal an effort to 
reduce the Federal workforce, therefore having fewer people to 
provide the services that the public requires, particularly 
those involving the health, safety, and welfare of our people, 
particularly in commercial regulations.
    It seems to me that all of this is a sleight of hand, if 
you will, with mumbo-jumbo justifications for actually cutting 
the size of the Federal workforce at the expense of the 
benefits of our Federal Government from the benefits that 
really should be inuring to the people.
    That is just the way that it appears to me, and it seems to 
be very disingenuous.
    And I yield back, Mr. Chairman.
    Mr. Quigley. Thank you.
    Mrs. Torres.
    Mrs. Torres. Mr. Vought, on the non-defense side, you have 
asked agencies to make a 9 percent cut, plus additional 2 
percent cuts year over year under your 2-penny plan. Much of 
this is based on the assumption that agencies will grow more 
efficient over time.
    Does your budget treat the Defense Department similarly?
    Mr. Vought. We do not, and I think this would get to a 
fundamental difference of visions, that this Administration 
believes it is the most critical of priorities of the executive 
branch and the Commander-in-Chief to continue to provide the 
resources that the Commander-in-Chief needs to rebuild the 
military, in addition, from the standpoint of securing the 
border.
    So from the standpoint of a different path in the out-
years, we do have different paths. We are trying to be able to 
pay for that rebuilding of the military and the securing our 
border by looking for where we can do less things at the 
Federal Government level in the out-years on the non-defense 
side.
    Mrs. Torres. The Defense Department recently underwent its 
first ever auditing process, and only five of the 21 individual 
audits checked received a fully passing grade.
    Do your estimates account for the potential savings as the 
department comes into full audit compliance?
    Mr. Vought. We do within the amounts that we have provided. 
We do ask Department of Defense to identify savings that can be 
transferred to other defense needs. They have already been 
doing that to the tune of a couple billion dollars with being 
able to change the way they buy things, to make other 
efficiencies.
    There is a lot of work that needs to be done. I mean, we 
will be the first to tell you that, but from the standpoint of 
the proposal that we have put forward, we think it is 
defensible.
    Mrs. Torres. So even though they are not compliant, you 
think it is defensible to just continue with growing?
    Mr. Vought. Personally, I think it is important to judge 
the Administration based on what we found.
    Mrs. Torres. I am not talking about the Administration. I 
am talking about these agencies, the Defense Department 
undergoing its first ever auditing process.
    Mr. Vought. Right.
    Mrs. Torres. And they were noncompliant.
    Mr. Vought. From our standpoint, that was a huge success. 
It is something that Congress had asked us to do.
    Mrs. Torres. Five out of 21 individual audits checked 
received a full passing grade. That is a complete success?
    Mr. Vought. A complete success was doing the audit and 
beginning the work so that we can make improvements each and 
every year to be fully compliant in the years ahead.
    Mrs. Torres. How are you going to do that? How are you 
going to ensure that the bulk of these individual audits the 
next time you audit, and when will you audit them again?
    Mr. Vought. We will be doing this on a regular basis.
    Mrs. Torres. What does that mean?
    Mr. Vought. All I can tell you, Congresswoman, is that the 
Department of Defense is very committed to the audit. It has 
the support of its top leaders in making sure that this is an 
ongoing process, to make sure that they have improvements in 
all the key areas.
    Mrs. Torres. So since you continue to bring up the border, 
I was not going to talk about that, but I want to just reassure 
you that some of us have been very focused on working on the 
root causes of migration, specifically from the Northern 
Triangle.
    Unfortunately, we have received very little support from 
this Administration at ensuring that we support CICIG for 
example in Guatemala, MACCIH in Honduras, and because of that, 
the rule of law continues to be ignored.
    Democracies should be moving in the right direction, but 
they have not. We have chosen to allow them and the presidents 
there to continue business as usual in a very corrupt way.
    So the current policies that we have in place to deal with 
the migrants in our southern border, it is not shocking to me 
that people are coming north.
    Current policies have put us in a position that we are 
liable for the deaths of children, several children, a 
transgender individual, people who have been blatantly denied 
health care.
    So where are you looking at fulfilling the payouts that we 
may have to be responsible for?
    Mr. Vought. Payouts in terms of what?
    Mrs. Torres. In lawsuits.
    Mr. Vought. That is something that is in the purview of the 
Department of Homeland Security and Department of HHS, but I 
would just say that any time we lose a life, it is tragic. It 
is something that is----
    Mrs. Torres. Any time we lose a life because we deny them 
medical health care is criminal.
    Mr. Vought. I do not think we have denied anyone health 
care.
    Mrs. Torres. My time has expired. So I yield back.
    Mr. Quigley. Mr. Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman.
    All right. Mr. Vought, you and I were talking before about 
cuts to Medicare, and one of the things that you said was it is 
not really a cut because we are cutting back on the unholy 
trinity of waste, fraud, and abuse. I think, and correct me if 
I am wrong, I think you said 15 percent was a figure you 
attributed to waste, fraud, and abuse?
    Mr. Vought. No, I was describing our proposal on bad debt.
    Mr. Cartwright. Let's stick with waste, fraud, and abuse. 
What would you assign to that?
    Mr. Vought. I did not do a percentage for waste, fraud, and 
abuse. I was describing one of the proposals that we have in 
the budget.
    But we have not done a kind of percentage allocation that 
is waste, fraud, and abuse.
    Mr. Cartwright. Well, you mentioned waste, fraud, and 
abuse.
    Mr. Vought. I did as it pertains to the specific proposal 
on bad debt.
    Mr. Cartwright. And so the question is how long have you 
known about the waste, fraud, and abuse as pertains to bad 
debt?
    Mr. Vought. I believe it has been in previous budgets. I 
would have to check to see whether it was in our first two 
budgets. It was not in our first budget. It may have been in 
our second.
    It is something that we made an assessment throughout the 
year that this is something we wanted to tackle. We do not 
always have each and every proposal as they change each and 
every year.
    Mr. Cartwright. Well, let's talk about that. An assessment 
is really an assumption, is it not? You are taking a certain 
amount of money that you are assuming is wasted or the subject 
of fraud and abuse, and you figure you can cut it out.
    And my question is: do you have specific instances of 
waste, fraud, and abuse that you can put your finger on?
    And if so, why have you not raised the call before this 
year about rooting out those wastes of money?
    Mr. Vought. Well, (a) we have put forward many different 
proposals about waste, fraud, and abuse when we have proposed 
historic spending reductions in each and every budget we have 
put forward.
    As it pertains to the Medicare proposals, we had Medicare 
proposals last year. We have them again this year. This 
specific proposals that I was referring to gets at trying to 
ensure that there is an incentive structure for hospitals to 
recoup the cost sharing that beneficiaries are supposed to pay 
as opposed to just saying we are going to write it off because 
we know that 65 percent of it is going to be paid for by the 
Federal Government.
    We do not actually say that it should go down to zero. We 
think it should go to about 25 percent, and we think that 
allows for the fact that hospitals are not going to be able to 
recoup all of it, but it does change the incentive so that they 
at least try.
    Mr. Cartwright. Well, here is why I am asking these 
questions, Acting Director Vought. I am very concerned when I 
hear this kind of number being attributed to waste, fraud, and 
abuse, and I want you to undertake to contact my office when 
you can drill down and tell me where you think money is being 
wasted, where you think abuse is occurring, and where you think 
fraud is occurring. Will you do that?
    Mr. Vought. I am happy to, Congressman.
    Mr. Cartwright. All right.
    Mr. Vought. Just this one proposal would save $38 billion. 
So that is real money that we think could actually go to 
extending the life of the Medicare Trust Fund.
    Mr. Cartwright. Well, in 5 minutes of questioning I do not 
think I can get out of you exactly where you think we can save 
that. So we need to talk offline about this.
    Now, I also wanted to talk about your budget slashes 
student loans by more than $200 billion, nutrition assistance 
by more than $220 billion, and completely crushes the EPA with 
a cut of more than 30 percent.
    And I am wondering: did you have a specific calculation 
model that you used to come up with those numbers?
    Mr. Vought. You asked about three different programs. I am 
going to go one by one.
    Mr. Cartwright. Exactly.
    Mr. Vought. With student loans, we feel like we have a 
reform proposal that will benefit any student in the country in 
terms of being able to have a single income-driven repayment 
plan.
    Mr. Cartwright. Is this a new proposal?
    Mr. Vought. It is not a new proposal. It has been in 
previous budgets.
    Mr. Cartwright. What is it called?
    Mr. Vought. Single income-driven repayment plan.
    Mr. Cartwright. Okay.
    Mr. Vought. It allows you to have certainty. There are all 
sorts of different programs out there. We are saying that you 
pay about 12.5 percent of your discretionary income to be able 
to then have after 15 years, you get rid of all your student 
loan debts.
    For graduate students, that would be 30 years.
    Mr. Cartwright. I want to follow up with you about that, 
too.
    How about your one-third cut to EPA? How did you come up 
with that?
    Mr. Vought. In an era of trillion-dollar deficits where we 
have a $22 trillion national debt, we think that we should make 
tough choices in agencies, and to the extent that EPA----
    Mr. Cartwright. Well, is it an indiscriminate cut or is it 
a targeted cut?
    Mr. Vought. To the extent that at EPA we found that they 
could do their statutory responsibilities to make sure we have 
clean air, clean water, and at the same time ensure that other 
discretionary activities are not done or are either done at the 
States. We thought that was something that was defensible.
    Mr. Cartwright. A subject of robust disagreement, Mr. 
Acting Director.
    My time is up, and I yield back.
    Mr. Quigley. Thank you, sir.
    Mr. Crist will wrap up.
    Mr. Crist. Thank you, Mr. Chairman.
    Acting Director, I wanted to talk to you about FEMA for a 
moment. FEMA had recently announced proposed changes to the way 
that they calculate flood risk under the National Flood 
Insurance Program. I think they call it Risk Rating 2.0.
    Rather than using just the broad 100-year flood plain, FEMA 
will instead rely on more granular data to calculate the threat 
of flooding for each individual home.
    I have concerns about the impacts that this could have on 
vulnerable communities, including the likelihood that this 
could sharply raise rates and send home values plummeting, 
exacerbating the existing affordability challenges that many 
constituents and millions of other policy holders already face.
    However, I can also appreciate FEMA's desire to obtain more 
accurate data and share that data with consumers. And while I 
take issue with the Administration's method, I think that we 
can both probably agree that accurate flood risk data is a good 
thing, right?
    Mr. Vought. Yes.
    Mr. Crist. And I think we can also further agree that flood 
plain mapping is a huge part of providing better data.
    Mr. Vought. Yes.
    Mr. Crist. Yes. So here is the question. I find it 
interesting then that the budget request for flood hazard 
mapping and risk analysis program cuts the program by 60 
percent.
    How can you reconcile these cuts with what we just 
discussed of trying to improve upon it?
    Mr. Vought. I believe it gets to the fact that we think 
that it was one-time spending that had already largely been 
committed and that we would not need that on a year-to-year 
basis.
    Mr. Crist. So you are confident that we can go forward, 
have better mapping.
    Mr. Vought. Yes.
    Mr. Crist. And cut 60 percent from it.
    Mr. Vought. Yes.
    Mr. Crist. Thank you.
    Mr. Quigley. Thank you.
    Thanks to all who participated. Thank you, Acting Director, 
for being here today. We look forward to working with you in 
the future.
    Take care.
    Mr. Vought. Thank you.
    [Questions and answers submitted for the record follow:]
    
    
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                                         Wednesday, March 27, 2019.

                              MEMBERS' DAY

                               WITNESSES

HON. ABBY FINKENAUER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF 
    IOWA
HON. SHEILA JACKSON LEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF 
    TEXAS
    Mr. Quigley. Welcome to Members' Day. We are officially 
beginning. So welcome.
    Our first witness is Congresswoman Abby Finkenauer.
    Welcome.
                              ----------                              


                                WITNESS

HON. ABBY FINKENAUER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF 
    IOWA
    Ms. Finkenauer. Thank you.
    Well, thank you, Chairman Quigley and Ranking Member 
Graves. It means a lot as a freshman to be here and have this 
important opportunity to really uplift the issues that are 
really important to Iowa and ensure that the voices are heard 
of folks all across my State, and then also folks that are 
impacted by the subcommittee that I chair on small business.
    So as a member of the Small Business Committee, I am also 
the chairwoman of Rural Development, Agriculture, Trade, and 
Entrepreneurship Subcommittee. And it is incredibly important 
to keep elevating these voices on matters affecting small 
businesses, which include our farmers and also our 
entrepreneurs.
    From the Committee's first hearing on the longest shutdown 
in our Nation's history to our first subcommittee hearing on 
the State Trade and Export Programs, to the STEP Program, we 
have heard directly from Iowa and small business owners across 
the country about the support they need, what harms their 
ability to grow, and then barriers for folks to even start 
talking about starting a new business, which is incredibly 
important.
    You know, one of the things that I have faced and have 
heard from folks all across my district is the fact that, you 
know, I am 30, and I have friends that I graduated high school 
with who maybe have moved away from Iowa, to have to pay off 
their student loans and live in Denver. Some live in Austin. 
Some live in Minneapolis and would love to be able to come back 
home, start a business, and raise their families. They are 
getting married, having kids, and want to live next to their 
parents and, again, have a good life like the one that I grew 
up with in Iowa.
    And having access, starting a small business is one way to 
do that, and so, again, this is incredibly important to me and 
why I want to make sure that we are uplifting these issues.
    And what I have found, and again, why I am here, is because 
what we know right now is that the initial support to start up 
a business and the ongoing mentoring that is needed is how we 
actually support the business' growth and find new markets. And 
it is vital to our Nation's business and job creation engines.
    I know the SBA, Small Business Administration, has numerous 
initiatives that help with this, whether it is providing low-
cost or no--assistance or no-cost assistance to help the small 
business market find new markets and manage their businesses, 
while ensuring competitive access to contracts and provide 
capital investments and loans.
    You know, I came to Congress, again, with one of my goals 
of creating conditions for businesses to succeed in Eastern 
Iowa and across the country. SBA's Entrepreneurial Development 
Programs, or EDPs, are helping to meet that goal. The suite of 
EDP is included in the small business development centers' 
microloans and, again, the STEP Program, veteran and women-
owned business centers, and the SCORE Program.
    I am happy to be leading our bipartisan Dear Colleague 
letter right now with Representatives Dr. Joyce of 
Pennsylvania, Murphy of Florida, and Stauber of Minnesota, that 
we will be sending to the subcommittee urging robust funding 
levels for these programs.
    You know, entrepreneurial development programs provide 
support to our Nation's small businesses and are key to 
increasing the number of young people who want to be 
entrepreneurs and develop start-ups. Again, as I said earlier, 
this is incredibly important for States like Iowa to grow.
    I have heard from young people about the barriers they are 
facing as entrepreneurs to retain and attract new talent to 
areas like many of the communities in Iowa. We need to invest 
in these initiatives and thereby invest in our small business 
environment.
    Unfortunately, we recently reached a 24-year low in young 
Americans starting and owning small businesses. To reverse 
these trends, I urge the subcommittee to support strong funding 
levels for these entrepreneurial development programs and 
continue the momentum of the past increases.
    In fiscal year 2018, they were collectively funded at 
$247.1 million, and $247.7 million in fiscal year 2019. 
Unfortunately, the President's budget proposes a large cut to 
these programs that will discourage entrepreneurship at a time 
where we cannot afford it.
    Small business development centers located in States 
nationwide provide critical assistance to small businesses like 
marketing and business strategy and export assistance. 
Microloans target new and early stage businesses in underserved 
markets.
    We have got women's and veterans' business centers 
supporting aspiring and existing entrepreneurs, including 
service-disabled veterans, National Guard and Reserve members, 
and military spouses. Women's business centers run evening and 
weekend hours to support entrepreneurs working full time.
    The State and Trade Export Program, incredibly important 
right now, provides States with matching grants to open new 
markets and help small business export.
    SCORE is engaged with other business owners and executives 
as volunteers at 350 chapters who serve as counselors, 
advisors, and mentors.
    Cuts to these programs are not sustainable, as we look to 
grow our economy and support new businesses. We want to signal 
to entrepreneurs right now and small businesses, again, in 
places like Iowa and across the country that we are looking out 
for them.
    These are the things I hear in my State of Iowa. They want 
common sense and someone who is going to listen to what they 
care about and what they need to raise a family and make a 
decent living.
    I know these entrepreneurial development programs are 
important to obviously not just Iowa but communities across the 
country, and I again urge you in your intention to increase 
this funding to help our entrepreneurs and small businesses.
    And I thank you for the opportunity to testify, but before 
I am done, I would be remiss if I did not ask you, you know, 
while supporting entrepreneurs is very critical, I also have to 
ask the committee to please, please pay attention to the 
devastating flooding that is happening across the Midwest and 
in Iowa.
    Our families' homes, farms, and small businesses are 
literally under water right now in Iowa, specifically Southwest 
Iowa and then parts of my district as well. In Iowa alone the 
damage is already estimated over $1.5 billion.
    The President over the weekend recognized the seriousness 
of the situation, provided an expedited major disaster 
declaration, which we are very grateful for, but I do urge the 
subcommittee and also the full committee to provide timely 
supplemental disaster aid to our flood affected States. It is 
desperately needed, and we, again, are very grateful for all of 
the support here in Washington.
    And I am grateful for the opportunity today to testify in 
front of you all, and thank you for your service.
    [The information follows:]
    
    
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    Mr. Quigley. You mentioned the barriers to entrepreneurs. 
Other than being short on capital, are there other things that 
they mention to you?
    Ms. Finkenauer. There is. You know, we actually had a young 
woman from State Center, Iowa. It is one of our small towns in 
my district, and she has an Internet business, and so she sells 
paper flowers and also wood flowers. They look very real. It is 
actually very impressive, all across the country and also 
actually internationally as well.
    And she is able to do this, and she has a husband who helps 
with the children as well. He is disabled, and she is able to 
work from home, and she is grateful for that. But the reality 
is, given that it is an Internet business, which a lot of young 
people are starting up, she needs reliable broadband.
    So that is part of it as well. So we need to make sure that 
in places like Iowa people have access to Internet, and right 
now she has it, but again, it is the reliability factor that 
can be an issue. When your business quite literally depends on 
it, you know, we have to make sure that we are fixing that and 
folks across my State and across the country have that access.
    The other thing, you know, it is talking about childcare. 
It is talking about paid family leave issues. Working family 
issues are also small business issues, and these are things 
that, you know, I was passionate about in the State House in 
Iowa and continue to be here in Congress as well, and we need 
to be looking at this in a holistic way.
    Mr. Quigley. Thank you.
    Mr. Graves, do you have any questions?
    Mr. Graves. I just want to thank you for coming before the 
committee.
    It was a wonderful presentation, very compelling, but the 
fact that you would just take time out of your day to come be 
before us and share the concerns that you have from your 
district is what this is really all about.
    So thankful that you are doing that, and as a former small 
business owner myself, I appreciate your insights and your 
advocacy for additional small businesses and the opportunity 
for individuals to be able to engage and have a dream and see 
that out.
    And then to the disaster challenges you faced, certainly we 
are very supportive of whatever we can do to be helpful, and 
you can let everybody know back in the Midwest, Republican and 
Democrat alike, that our hearts are with you.
    Ms. Finkenauer. Thank you.
    Mr. Graves. Thank you.
    Mr. Quigley. Thank you so much.
    Ms. Finkenauer. I appreciate it. Thank you all.
    Mr. Quigley. Thank you so much for your testimony.
    Our next witness is Ms. Jackson Lee from Texas.
    We are so glad you are here. Thank you.
                                         Wednesday, March 27, 2019.

                                WITNESS

HON. SHEILA JACKSON LEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF 
    TEXAS
    Ms. Jackson Lee. Mr. Chairman and Ranking Member, I thank 
both of you for this time given to members.
    I would like to ask unanimous consent for my full statement 
to be submitted into the record.
    Mr. Quigley. Absolutely.
    Ms. Jackson Lee. And I want to speak to certain elements of 
your jurisdiction and make mention of another point.
    Let me just say that I have always said in my constituency 
and coming from Texas, in Houston we are lovers of small 
business. They are everywhere we look. Both as I heard the 
previous member speak of home businesses, we have those, too. 
We have, you know, the barbecue shops or stores on the corner 
and hamburger store, and it is not necessarily the brand names. 
They are just people who are business entrepreneurs and it 
crosses various ethnic groups and certainly age groups.
    So the small business development centers are extremely 
important to us. I have a number of them in my district and 
would encourage the support of that $131 million, but I am 
always eager to see in the markup whether or not those dollars 
can be increased primarily because they provide a lifeline for 
start-ups to know the ABCs of business.
    And part of it is finance and part of it is surviving. And 
I think one of the most difficult parts for small businesses is 
to be able to survive.
    So I support that. I also support $20 million for women's 
business centers. With more and more women going into business, 
many women going into business after retiring from another job, 
I think it is extremely important.
    I support the $1.15 billion for Federal defenders' 
services. The idea, as a member of the Judiciary Committee, for 
the Federal defenders' service to provide access to counsel, 
other necessary defense services for those who are indigent, 
fully funding the defenders' services at the Judiciary request 
of $1.06 billion, which is in your appropriations more than 
what has been asked for, will help to maintain public 
confidence in our commitment to equal justice under the law and 
ensures the successful operation of the constitutionally-based 
adversary system of justice.
    Having the courthouses in my district--the Federal 
courthouses--having practiced in the Federal courts, having 
seen cases from civil rights or criminal justice cases in the 
Federal court, questions of the equal access to education in 
the courts now, of course, dealing with the Texas v. Azar case 
as it relates to health care; just overall the ability to be 
represented in the Federal courts if you happen to be on the 
short end of the stick is valuable, and the Federal defenders' 
services are enormously valuable.
    I support the $20 million for the community volunteer 
assistance, income tax assistance. People want to pay their 
taxes, but many times are not prepared, do not know how to 
prepare their taxes, and I think that is an important 
contribution to our revenue.
    I support the $9.89 million for tax counseling for the 
elderly and, as well, I support the $1.9 million for the Harry 
S. Truman Scholarship Foundation. The foundation program 
encourages exceptional young men and women to pursue careers in 
public service, celebrating its 42nd anniversary, and the 
program has seen over 3,000 Truman Scholars go on to serve in 
presidential administrations and many of them in various 
positions.
    As I said, I would like my entire statement to be in the 
record, but I do want to make a point as relates to disasters, 
and that is Texas has seen its share of disasters, and recently 
we know the terrible tornado that saw 23 lives lost in Alabama. 
I was listening to Congressman Billy Long, who reminded us of a 
tornado when he came to office, that killed 161 people in his 
congressional district.
    So we know disasters can be devastating, and they can be 
economically devastating, devastating to businesses. And so as 
we were working to fund the relief for the devastation of 
Hurricane Harvey, which hit my district head on, we are still 
attempting to recover. One of the things that I attempted to do 
and did do, but I was just curious (sic), and that is to set 
aside money for small businesses in the form of grants.
    And I had wanted the Small Business Administration to 
administer it, which they punted and indicated that they do not 
know how to give out grants. They do not even know how to give 
out loans.
    And so, of course, it got into HUD, the community block 
grant, which I am unhappy with, because it is under the large 
funding pool that is coming under Hurricane Harvey. We modeled 
it after the 9/11 disaster where monies were put aside for 
businesses.
    But I would raise the question that Small Business 
Administration needs to be creative, and whatever mechanism 
needs to be reviewed, that if this money was set aside for 
small businesses, they certainly have the skill set that I 
think is more appropriate than the block grant dollars, because 
they can make better assessments of these small businesses. 
They see them all the time.
    This means that the block grant entity in my district that 
deals with housing, trying to put people back in housing, put 
their lives back together, now has to set up a criteria of 
giving these monies to the small businesses.
    Mr. Quigley. I just want to understand. You are talking 
about disaster money being used in the form of grants for 
recovery from small businesses?
    Ms. Jackson Lee. The way they formulated the amount that we 
secured for small businesses was supported in the disaster 
funding.
    Mr. Quigley. Okay.
    Ms. Jackson Lee. And they put it under community 
development block grants.
    Mr. Quigley. And you are suggesting instead of that it 
should go through?
    Ms. Jackson Lee. Small Business, who said they could not do 
it because they are only used to loans, and they would rather 
not take the grant money.
    And I am saying----
    Mr. Quigley. So they are more used to doing this sort of 
thing, and they know how to do it better.
    Ms. Jackson Lee. My opinion, and learn how to do it in a 
grant form.
    Mr. Quigley. Okay.
    Ms. Jackson Lee. But that was their concern, that they do 
not give grants. But they know how to judge small businesses, 
and I would think they would be a faster, more expedited 
process than the process putting in the block grant.
    It is now done, but I raise this question--
    Mr. Quigley. Sure.
    Ms. Jackson Lee [continuing]. As a thought as you look at 
the agency.
    Mr. Quigley. And finally, on Harvey, your best guess the 
experts have on total recovery is complete to the extent it 
will or just do not know?
    Ms. Jackson Lee. No, we do not know. We are not complete. 
We are now using the disaster money. Thank you to all of the 
appropriators. We are just receiving it really in the last 
couple of months because we had a regulatory snap in terms of 
getting the OMB to approve the regulations that had been set by 
HUD.
    And then we had the shutdown from January 3rd, and there 
was no action going forward, and so we, you know, have finally 
moved dollars down into the State and into the counties that 
need it.
    But we had towns that were literally flattened by Hurricane 
Harvey, and so they are just coming back online. I think the 
housing is the greatest issue, and then, of course, the 
infrastructure.
    Mr. Quigley. Mr. Graves.
    Mr. Graves. I just want to thank you for your valuable 
insights and input. It is helpful for us to hear this.
    And a lot of what you have discussed we are very supportive 
of and have been in the past, but having members who are not on 
the committee come before us and to share that support is very, 
very helpful.
    But thank you for your time today. I know you are 
tremendously busy as well.
    Thank you.
    Mr. Quigley. Thanks for your years of service and your 
testimony today. Thank you so much.
    Ms. Jackson Lee. Thank you very much for giving us this 
time.
    [The information follows:]
    
    
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    Mr. Quigley. Thank you.
    I believe that concludes our witness list for today. We 
appreciate all of those involved and those who testified.
    This meeting is adjourned.

                                         Wednesday, March 27, 2019.

         TESTIMONY OF INTERESTED INDIVIDUALS AND ORGANIZATIONS

    Mr. Quigley. Good afternoon. This public witness hearing 
will come to order. We are pleased to welcome you all to the 
Public Witness Hearing Day. I believe the appropriation process 
benefits tremendously from direct civic engagement and input 
from stakeholders such as yourselves.
    Our public witnesses represent a wide array of backgrounds 
and expertise, the important issues covered in the FSGG bill. 
These testimonies help us assess the effectiveness and impact 
of our work here in Congress, and analyze the best way to serve 
our constituents and the country.
    Many of the programs and agencies in this bill have a 
direct impact on the lives and communities of Americans. The 
testimony each of you shares with us today stands to expand 
this committee's perspective as we strive to be responsible 
stewards of the American tax dollar.
    With that, I welcome all of our witnesses to the 
subcommittee, and remind them to please limit their remarks to 
five minutes.
    The ranking member, Mr. Graves.
    Mr. Graves. Thank you, Mr. Chairman. Thank you for holding 
this Public Witness Hearing. It is great to have the 
opportunity to hear from the American people who come before 
our committee and share with us what your priorities are. As 
the representative body here and being a reflection of the 
voices of our districts and constituencies, it is good to have 
folks here.
    So Mr. Chairman, thanks for doing this, and I am happy to 
yield back. And I look forward to the hearing.
    Mr. Quigley. Thank you. Our first witness is General Arthur 
T. Dean, Chairman and CEO, the Community Anti-Drug Coalition of 
America. Please step forward.
                              ----------                              

                                         Wednesday, March 27, 2019.

               COMMUNITY ANTI-DRUG COALITIONS OF AMERICA


                                WITNESS

GENERAL ARTHUR T. DEAN, CHAIRMAN AND CEO, COMMUNITY ANTI-DRUG 
    COALITIONS OF AMERICA (CADCA)
    Mr. Dean. Chairman Quigley, Ranking Member Graves, and 
other distinguished members of the Finance Services and General 
Government Appropriations Subcommittee, I thank you for the 
opportunity to testify before you to day on behalf of Community 
Anti-Drug Coalitions of America, CADCA, which is a national 
association composed of more than 5,000 community coalitions 
nationwide.
    I have had the honor and the opportunity to serve as 
CADCA's CEO and board chair for the last 20 years. CADCA 
strongly supports the funding of the DFC program in 2020 at the 
highest possible level, at a minimum of $100 million in fiscal 
year 2020, which was the final appropriation that the program 
had in 2019. And CADCA strongly supports that you let the DFC 
program and the HIDTA program remain intact in the Office of 
National Drug Control Policy, ONDCP.
    We also ask that you include a minimum of $2 million to 
continue the National Community Anti-Drug Coalition Institute, 
known as the institute, which provides all the specialized 
training and required training and technical assistance for the 
DFC program.
    Additionally, CADCA opposes the President's fiscal year 
2020 request to dramatically reduce the salaries and the 
expenses in the Office of National Drug Control Policy. We 
believe that the proposal will weaken these vital programs and 
significantly impact ONDCP's ability to carry out their mission 
in an effective and efficient manner.
    The DFC program is a tremendous program is a tremendous 
example of how a very small investment of Federal funds can 
achieve a major impact at the community level. DFC's coalitions 
are only provided up to $125,000 a year, and they must provide 
a dollar-for-dollar match, cash or in-kind, for every Federal 
dollar received.
    They must reduce youth substance use through the 
involvement of the required 12 sectors in the community that 
must be a part of their coalition. In addition, all year one 
coalitions are required to go through a yearlong training, and 
that training is provided by CADCA's institute and provides 
them the necessary training they need to be successful.
    ONDCP policy-level oversight has directly caused the DFC 
program to obtain exceptional positive results in reducing 
rates of all substance use for youth. I know from both my 
experience traveling the country as well as the national 
evaluation of this program that significant results have been 
obtained throughout the country. Just some quick examples.
    Chairman Quigley, in your district, the DuPage County 
Prevention Team in your district is a great example of a 
successful coalition. The leadership there, after four years of 
receiving DFC funding and receiving the required yearlong 
training from the institute, has obtained the following results 
I would like to share with you very quickly.
    Past 30-day use reductions in 12th grades from 2014 to 
2018: Binge drinking decreased at a rate of 28 percent. Alcohol 
use decreased at a rate of 13.3 percent. Perception drug use/
misuse decreased at a rate of 40 percent.
    Ranking Member Graves, I want to talk quickly about Floyd 
Against Drugs, the DFC-funded coalition in your district 
working in Rome, has also achieved some outstanding results as 
well. In a very short period of time--I am only talking about a 
one-year span, from 2016 to 2017--they have reduced past-month 
marijuana use at a rate of 20.6 percent, alcohol use at a rate 
of 17.1 percent.
    And quickly, the final example I want to share with you is 
a county in Kentucky called Carter County. In the early 2000s, 
some local school and faith-based leaders noticed that 
prescription drug abuse had skyrocketed, and that it had 
infiltrated into the school system. They developed a coalition. 
They obtained a grant. They were trained by CADCA. And this is 
what happened as a result of that.
    They reduced 30-day prescription drug use/misuse rates for 
8th graders, 10th graders, and 12th graders. The 10th graders' 
30-day prevalence decreased from 12 percent in 2006 to 1 
percent in 2016. At the same time, college and career readiness 
scores rose from 23 percent in 2010 to 76.5 percent, and 
graduation rates rose from 81 percent in that county to 98.8.
    I submit to you that the Drug-Free Communities Program is 
truly the backbone of a successful community-based substance 
use prevention. Therefore, we at CADCA strongly recommend that 
you keep DFC and HIDTA in ONDCP, and you fund them at the 
highest possible level in 2020. And I thank you for the 
opportunity to share this information with you, and stand ready 
to answer any questions you might have.
    [The information follows:]
    
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    Mr. Quigley. I will start with Ranking Member Graves.
    Mr. Graves. Thank you, Mr. Chairman.
    General Dean, thanks for being here, and for your 
commitment to safer, healthier communities, and for your 
investment in young folks' lives.
    Mr. Dean. Thank you.
    Mr. Graves. I know you have served in so many different 
capacities throughout your careers. But that is probably one of 
your greatest accomplishments, I imagine, as you have looked 
back and you recite some of these statistics.
    So thank you for that. Thank you for, as the chairman 
pointed out to me, your involvement in the Atlanta community 
and the Boy Scouts there.
    Mr. Dean. That's correct.
    Mr. Graves. So you have done great work. Thank you. Thanks 
for being here today. No questions.
    Mr. Dean. My pleasure. Thank you very much.
    Mr. Quigley. I want to join the Ranking Member in thanking 
you for your service for the U.S. Army, the United States of 
America, and working to keep our communities drug-free. We are 
proud of what you are doing.
    We will do our best in this appropriation bills to 
appropriately fund the programs that you talked about. Your 
testimony is an additional boost to our efforts in 
understanding these issues and promoting them and doing the 
best we can. So thank you so much for your service. We 
appreciate your having been here today.
    Mr. Dean. Well, thank you for the opportunity. And it has 
been my pleasure. Thank you.
    Mr. Quigley. Thank you.
    Our next witness is Daniel Schuman, Policy Director, Demand 
Progress. Welcome back.
                              ----------                              

                                         Wednesday, March 27, 2019.

                     FEDERAL SPENDING TRANSPARENCY


                                WITNESS

DANIEL SCHUMAN, POLICY DIRECTOR, DEMAND PROGRESS
    Mr. Schuman. It is a pleasure to be back. Mr. Chairman, Mr. 
Ranking Member, Representative Torres, thank you for the 
opportunity to testify. I am here to discuss Federal spending 
transparency, which I know is always of interest to this 
committee.
    But I actually wanted to start first by commending the 
committee for providing the public with this opportunity to 
testify. Public witness testimony provides an additional 
measure of transparency and accountability as Congress conducts 
oversight of the Executive Branch.
    Chairman Quigley, I know that transparency is a watchword 
for you, and I know for Congressman Graves there can be no 
doubt of his dedication to making Congress work better. I would 
like to thank you both for that.
    Let me briefly turn and outline an issue that would bring 
improved transparency and accountability to Federal spending. 
Each year Federal agencies submit plain English explaining to 
Congress concerning their request for appropriated funds.
    Unlike other budget documents, these congressional budget 
justifications use language that most people can actually 
understand, and they describe in useful detail each agency's 
programs and activities so you can actually get a sense of what 
they intend to do.
    The Office of Management and Budget approves the contents 
of these congressional budget justifications because they are 
submitted to Congress, and OMB also requires agencies to 
publish them online within two weeks of submission.
    While this process seemingly would provide for transparency 
and accountability, unfortunately it does not. My colleague 
Amelia Strauss and I looked at 456 agencies to see whether they 
published their congressional budget justifications online.
    We found that 21 percent of them did not publish these 
justifications online. In addition, 6.1 percent of these 
agencies published a justification online for 2018 or for 2019, 
but not for both.
    Now, OMB does not release the list of all of the agencies 
that must make congressional budget justifications. We do not 
know if our survey of all 456 agencies counted the right 
agencies. But it seems likely that the agencies that published 
only one year's justification failed to meet their obligations. 
And it is also likely that there are a lot of missing 
justifications.
    Now, right now there is no way to know which agencies must 
publish their congressional budget justifications, and there is 
no easy way to know where they can be found. This impedes both 
your ability and our ability to understand how agencies intend 
to spend these funds.
    We suggest a straightforward approach to addressing both of 
these problems: OMB, which already approves all Executive 
Branch congressional budget justifications, should publish all 
of them on OMB's website, right alongside all the other budget 
information that they already publish. This is not a new idea; 
in fact, it is probably familiar to members of this committee 
because you encouraged OMB to publish the congressional budget 
justifications on their website in your report language 
accompanying the 2018 and 2019 appropriations bills.
    And, Mr. Quigley, I remember back in 2014 when you asked 
the then-OMB administrator about this issue as well, and at the 
time, she was not able to give you a satisfactory answer, which 
is why I am back before you again on this topic.
    So what we respectfully urge the committee to do is to 
require OMB to publish all congressional budget justifications 
on their website. Requiring OMB to publish all the 
justifications in one place would make it easier for 
congressional staff and for the public to find these documents. 
It would be an important step towards improving transparency 
and accountability around Federal spending.
    Now, we submitted draft legislative language in our written 
testimony. We hope that you will consider it. And I am very 
appreciative of your making the time for me to come and testify 
today. So thank you.
    [The information follows:]
    
    
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    Mr. Quigley. Thank you for being here. Is there another way 
this could be done besides putting it on there if the statutes 
dictate it? In a perfect world, the justifications would be 
where?
    Mr. Schuman. On a central website. So either OMB can 
publish it alongside all the other budget information they 
already publish--because they publish the actual budgeting; 
they publish statistics; there is a whole slew of materials 
they have on their website. Ideally, this would be right 
alongside that.
    If you cannot publish it there, the next best place would 
probably be to give it to GPO since GPO acts as a repository of 
all Federal documents and that would be a reasonable place for 
it to exist. Appropriators could do this themselves, like 
Congress itself could have a website where you do this type of 
work. But it would be harder to do.
    OMB is already telling the agencies to publish them online 
on their websites, and to go through a process to make sure 
that what is published is appropriate. And OMB already has the 
final documents. Since they already have it all, it makes 
sense, at least from my perspective, for them to publish it 
themselves.
    Mr. Quigley. And that is why I asked the question. Thank 
you.
    Mr. Amodei.
    Mr. Amodei. Thanks, Mr. Chairman.
    Daniel, if I heard your testimony correct, which we will 
find out in a second here, is it already a requirement that 
this be available? Did you say that?
    Mr. Schuman. Yes. That's right. OMB requires all of the 
agencies to publish the congressional budget justifications on 
their websites within two weeks of submitting them to Congress. 
So they are already required to be publicly available. 
Ironically, OMB is one of the agencies that does not publish 
its own congressional budget justification online, which is 
kind of an interesting fact.
    Mr. Amodei. Thank you for putting it delicately. I yield 
back. [Laughter.]
    Mr. Quigley. Thank you so much for being here, sir. We 
appreciate your work.
    Mr. Schuman. My pleasure. Thank you.
    Mr. Quigley. Sure. Take care.
    Our next witness is Rachel Weintraub, Legislative Director 
and General Counsel, Consumer Federation of America.
                              ----------                              --
--------

                                         Wednesday, March 27, 2019.

                     CONSUMER FEDERATION OF AMERICA


                                WITNESS

RACHEL WEINTRAUB, LEGISLATIVE DIRECTOR AND GENERAL COUNSEL, CONSUMER 
    FEDERATION OF AMERICA
    Ms. Weintraub. Chairman Quigley and Representative Amodei, 
I am Rachel Weintraub, legislative director and general counsel 
for Consumer Federation of America. CFA is an association of 
nearly 300 nonprofit consumer organizations across the United 
States that was founded in 1968 to advance the consumer 
interests through education, advocacy, and research.
    CFA very much appreciates the opportunity to testify before 
you today, and today I will focus primarily on the Consumer 
Product Safety Commission, the Consumer Financial Protection 
Bureau, and the Securities and Exchange Commission.
    CFA strongly urges the House Appropriations Subcommittee on 
Financial Services and General Government to significantly 
increase funding for the U.S. Consumer Product Safety 
Commission in fiscal year 2020, and to reject the include of 
any policy riders that would undermine essential protections 
for consumers.
    The CPSC has a critical mission to protect the public from 
risks associated with consumer products, but its funding and 
staffing levels are insufficient to carry out the work 
necessary to fulfill this mission. The scope of work is 
enormous. The CPSC reviews about 8,000 unintentional product-
related death certificates each year, and is aware of at least 
15.5 million emergency department-treated injuries per year 
associated with consumer products.
    In addition, the societal costs of consumer product 
incidents amount to more than $1 trillion annually. We urge you 
to significantly increase the CPSC's funding above the fiscal 
year 2019 enacted level of $127 million.
    CPSC's budget is less than its first budget in 1974, when 
Congress appropriated $175 million in today's dollars, 
accounting for inflation. The agency then had 786 full-time 
employees and now has 539 during the current fiscal year. 
CPSC's budget also falls short of the general authorization of 
appropriations, as pathed in the bipartisan Consumer Product 
Safety Improvement Act of 2008.
    Under this language, the appropriations level for CPSC in 
2014 was authorized to over $136 million. Unfortunately, the 
fiscal year 2020 level of $127 million is obviously $9 million 
less than that authorization for the CPSC five years earlier.
    In Appendix A of the CPSC's fiscal year 2020 performance 
budget request to Congress, a list of unfunded priorities 
previously submitted by the commission was included. This list 
includes pay inflation, non-pay inflation, expansion of data 
analysis including exposure surveys and market scans; urgent 
care centers' pilot programs; e-commerce, retail reporting; IT 
systems; and security, including incremental systems 
modernization, which includes an important consumer reporting 
disburse, SaferProducts.gov; IT security, and Virginia Graeme 
Baker Pool and Spa Safety Act grant program.
    The total cost of these unfunded priorities totals $8 
million. But the commission needs significantly more resources 
to conduct research and finalize rulemaking to address emerging 
and documented hazards, and establish necessary mandatory 
standards for chronic and acute hazards associated with 
consumer products.
    The Consumer Financial Protection Bureau has proven itself 
to be a transparent, deliberative, and data-driven agency. The 
CFPB has worked closely with consumers and the financial 
services industry to develop sensible safeguards against 
harmful and discriminatory products and practices, has returned 
$12.4 billion in relief to more than 31 million harmed 
consumers, and the agency's authority, structure, and 
independent funding must be preserved.
    The CFPB's independent rulemaking authority should not be 
limited by establishing an unprecedented congressional review 
and approval authority over CFPB rulemakings. This agency is 
critical to protecting consumers in the financial marketplace, 
and we oppose policy riders that have been proposed in the past 
that limit the CFPB's ability to fulfill its consumer 
protection mission.
    The Securities and Exchange Commission, which is tasked 
with overseeing our Nation's capital markets, has had a growing 
workload in recent years but has not been provided sufficient 
resources to keep pace with that workload.
    This is particularly the case with regard to investment 
advisor oversight. In addition, funding long-term capital 
investments and information technology poses a significant 
challenge for the agency, which could and should be addressed 
by retaining the SEC's reserve fund.
    According to the SEC, its reserve fund has been critically 
important in their efforts to keep pace with the rapid 
technology advancements occurring in their regulatory areas as 
well as meeting the challenges of cybersecurity. Without access 
to these funds and the ability to make technology upgrades, 
however, the SEC will be at a continued disadvantage relative 
to industry. Constantly struggling to detect wrongdoing will 
ultimately hinder the agency's ability to protect investors 
foster market integrity, and promote capital formation.
    Thank you very much for your consideration.
    [The information follows:]
    
    
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    Mr. Quigley. Thank you. I appreciate your--we appreciate 
your testimony.
    Focusing on just the Consumer Product Safety Commission for 
a moment, I understand the areas that you are talking about of 
unfunded priorities. Has your research detailed the type of 
workers they have lost that they need most or are short of?
    Ms. Weintraub. There is definitely----
    Mr. Quigley. Researchers and----
    Ms. Weintraub. I think it is across the entire staff. And 
there has definitely been a discussion of a brain drain of 
knowledgeable, experienced staffers who are leaving, and I 
really think it is across their substantive areas.
    Mr. Quigley. And to the extent that you are aware, to what 
extent do they use outside experts to analyze the information 
they are dealing with?
    Ms. Weintraub. I think it really depends on their board and 
what money they have to contract with others. It does happen, 
but depends on the issue and the financial appropriation to 
that particular issue.
    Mr. Quigley. I appreciate that.
    Mr. Amodei.
    Mr. Amodei. Thank you, Mr. Chair. I yield back. Oh, Mr. 
Chairman--and by the way, thanks for pronouncing my last name 
better than I usually do. [Laughter.]
    Ms. Weintraub. I listened very carefully. Thank you.
    Mr. Quigley. Our next witness is Kel McClanahan, Executive 
Director of the National Security Counselors.
                              ----------                              

                                         Wednesday, March 27, 2019.

                      NATIONAL SECURITY COUNSELORS


                                WITNESS

KEL McCLANAHAN, EXECUTIVE DIRECTOR, NATIONAL SECURITY COUNSELORS
    Mr. McClanahan. Thank you for having me here. My firm, NSC, 
is a public interest law firm that deals primarily in 
information and privacy law and Federal employment law, 
especially when it pertains to the intelligence community. I am 
here with two relatively narrow asks pertaining to what should 
be noncontroversial ideas: Transparency litigation should be 
transparent, and Inspectors General should be independent.
    On the first issue, I will not explain how the Freedom of 
Information Act litigation works in any great detail because I 
presume everyone here is familiar with the process. I am here 
instead to talk about the exception to the rule. Simply put, 
sometimes an agency tells a judge that it cannot prove its case 
publicly. In those cases, it attempts to file a declaration ex 
parte and in camera so that only the judge can read it and not 
the other parties.
    There is a time and place for this, but this is greatly 
abused and judges almost never deny it. In fact, in my 
research, I have only been able to identify three instances 
since 1994 where a judge denied one of these motions. In the 
worst cases, all that the request receives is a statement from 
the agency saying that FOIA is good and FOIA should yield the 
relief of documents. And then something like the in camera 
declaration submitted with this motion will explain the rest.
    In one such case, the judge ruled not only that FBI's in 
camera declaration was proper, but that the requester, my 
client, did not even deserve a chance to file an opposition 
brief because: ``The evidence presented in camera was so 
conclusive as to the questions presented that further briefing 
and argument was clearly unnecessary.''
    Bizarrely, the judge also observed that the unredacted 
declaration is the quintessence of bureaucratic obfuscation, 
and that he thought of George Orwell ``while attempting to 
decipher its meaning.'' Nevertheless, despite this indictment, 
he ruled in the FBI's favor.
    A preliminary analysis of publicly available FOIA court 
dockets since 1994 shows that these filings have steadily 
increased over 350 percent in the past 27 years. And yet, as 
noted before, I could only find three instances of judges 
denying them.
    Additionally, my personal experience has shown that 
agencies are increasingly including information in these 
declarations that does not need to be kept secret, as evidenced 
by the fact that I have been able to get redacted versions 
through my own FOIA requests.
    Many of these filings are historically important and 
newsworthy. For instance, I obtained a declaration which had 
been sealed since 1982 which provided information about the 
NSA's ability to intercept records about the Kennedy 
assassination.
    But historians and reporters should not have to rely on 
someone like me, who has nothing better to do than chase after 
these records. These records, which often pertain to 
information later released through FOIA, should automatically 
become public after a certain time period.
    But I am not here to ask for that. Right now we just need 
data on the problem. So our ask is simple. Please appropriate 
sufficient funds to the Administrative Office of the U.S. 
Courts to discount a comprehensive survey of all such in camera 
declarations in the last 10 years or so. Find out how many 
there are and in what circumstances they are filed, and 
anything else relevant to the issue.
    And also specify that using this information, the 
administrative office should conduct a feasibility study for a 
process in which all such declarations would automatically be 
filed in the public record after five years or so unless the 
agency convinces a court at the time that they warrant 
continued secrecy by the automatic declassification review 
process for classified documents.
    The second issue is pretty simple. Inspectors General are 
supposed to be independent, they are often not. This problem 
often arises in the context of IT and information access. When 
an IG's office relies upon the agency's IT infrastructure, it 
creates vulnerabilities and conflicts of interest.
    Consider Dan Meyer, the former head of whistleblower 
protection at the Intelligence Community Inspector General. CIA 
intercepted his emails to and from Senator Grassley for the 
simple reason that the ICIG uses CIA email servers, and CIA 
claims the right to read anything on a CIA computer ``for 
counterintelligence purposes.'' As a result, and operational 
office of CIA is given virtually unlimited access to the 
confidential whistleblower files of the Inspector General 
charged with its oversight.
    Contrast this DHS and GSA. DHS OIG possesses its own 
dedicated IT staff and has established numerous firewalls and 
protocols to ensure that its files cannot be access by non-OIG 
personnel. The GSA OIG even has a separate domain, GSAIG.gov.
    Same as before, the ask is simple. Congressman Connolly is 
already working with the council--can I continue?
    Mr. Quigley. Yes.
    Mr. McClanahan [continuing]. Is already working with the 
Council of the Inspectors General on Integrity and Efficiency 
to attempt to survey OIGs to understand whether DHS and GSA are 
the norm or if more OIGs are captured like CIA and the ICIG.
    But they need support. So we are asking you to appropriate 
sufficient funds to allow them to do this, and more 
importantly, to prohibit the use of appropriated funds by any 
agency to obstruct or refuse to cooperate with this survey. 
Thank you.
    [The information follows:]
    
    
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    Mr. Quigley. Thank you for your testimony and your 
suggestions.
    Just a detail. You are talking about the fact that these 
should automatically become public record unless the agency can 
justify this. Obviously, there is a spectrum here of how 
important some of this is, and some of this is really important 
to keep public--I mean, not public. Correct? You would agree 
that there is some information out there that would span more 
than five years that is particularly important to keep 
classified. Correct?
    Mr. McClanahan. Oh, yes, Your Honor--sorry--yes, Chairman. 
This is simply--right now questions like this are things that 
we would hope the study would----
    Mr. Quigley. And who do you think should complete the 
study?
    Mr. McClanahan. I think the Administrative Office of U.S. 
Courts is best placed to it because they have the best 
accessibility to the records.
    Mr. Quigley. Okay. And has anyone else written on this 
besides yourself, or discussed these groups?
    Mr. McClanahan. Well----
    Mr. Quigley. To the extent you are aware, if you could pass 
that on to the committee, we would appreciate it.
    Mr. McClanahan. Certainly.
    Mr. Quigley. Okay. Mr. Amodei.
    Mr. Amodei. Thanks, Mr. Chairman.
    When you were talking about the hearings and you referred 
to the judges at the first part of your testimony, were you 
referring to Federal district court judges or administrative 
law judges in the Federal system? What judges were you--or 
maybe both. I do not know.
    Mr. McClanahan. Well, no. Administrative law judges do not 
generally play much of a role in FOIA cases. I was talking 
about Federal district court judges.
    Mr. Amodei. Okay. So the in camera examples that you have 
provided the committee, for an example, did those happen in a 
Federal district court judge's chambers?
    Mr. McClanahan. Well, in a courtroom. But yes, a Federal 
district judge did issue the acceptance or the denial of the 
motion. And in most cases, actually, the agency does not even 
ask leave to file something in camera. It just does it. And if 
the judge is pressed on it they generally say, I will allow it, 
after the fact.
    Mr. Amodei. Okay. Thank you. Thank you, Mr. Chairman.
    Mr. Quigley. Thank you. Sir, thank you for your testimony. 
Appreciate it.
    Mr. McClanahan. Thank you very much.
    Mr. Quigley. Our next witness is Bartlett Collins Naylor, 
Financial Policy Advocate, Congress Watch, Public Citizen.
    It is good to be a public citizen.
                                         Wednesday, March 27, 2019.

               FINANCIAL POLICY ADVOCATE, CONGRESS WATCH


                                WITNESS

BARTLETT COLLINS NAYLOR, FINANCIAL POLICY ADVOCATE, CONGRESS WATCH--
    PUBLIC CITIZEN
    Mr. Naylor. Mr. Chairman, Member Amodei, thank you for 
having me. My name is Bartlett Naylor. I am a Financial Policy 
Analyst for Public Citizen. We are a half-century-old group 
composed of about 500,000 members and supporters. I am here to 
urge you in two categories. One category is things not to do 
and one category is things that I urge you to advance on.
    And one of them is that this committee has originated 
legislation in the past that carried riders that stifled what 
we think were important reforms, such as a reform to require 
companies under the auspices of the Securities and Exchange 
Commission to disclose political spending. It is an initiative 
that is supported by something like 1.2 million investors.
    This committee has carried a rider that has stifled the IRS 
from drawing a bright line around what nonprofits can do in a 
political way. It has stifled needed reform at the Consumer 
Protection Agency that deals with off-road vehicle safety. We 
urge this committee to not carry these riders, to allow these 
agencies to continue in these needed areas of reform.
    We also urge you to fund the various agencies under your 
portfolio to do the jobs that Congress has mandated them to do. 
Mr. Chair, you were, earlier in your tenure, overseeing some of 
the financial crisis response, TARP and so forth. I think it is 
sadly revealing that some of the statutes that you authorized 
regarding executive compensation have been left unattended by 
the regulators, in particular the Securities and Exchange 
Commission.
    What caused the crash? Why did bankers crash the global 
economy? Well, they were paid to do it. Take two firms, Bear 
Stearns and Lehman Brothers. If you count the compensation of 
the top five officers of those two companies--that is 10 in 
all--over the eight or so years leading to the crash, they were 
paid $140 million each--$140 million each.
    Both of those firms failed, one in official bankruptcy, one 
absorbed with Government funding into another bank. A hundred 
and forty million dollars to crash their companies. There are 
2,000 people at J.P. Morgan that make more than a million 
dollars a year, and those employees are overseeing misconduct, 
a rap sheet that fills many pages.
    Congress understood that money was the root of the problem, 
and it passed a number of provisions in Dodd-Frank, Title IX. 
Only a few of them have been implemented. The most important 
one have not been. 953 is a simple provision that simply asks 
the relationship of the board's decision to make payments to 
senior officers and what performance metric they are using.
     J.P. Morgan spends roughly 15 pages explaining why Jamie 
Dimon deserves $30 million, but nowhere is it concrete. Nowhere 
can an investor say, well, I can tell that if the revenue goes 
up by this amount or customer base grows this amount, he is 
going to be paid. It is simply 15 pages of flattery. What is 
needed is that 953(a) and (b) are brought to the finish line.
    954 is a clawback. It says that if you actually have 
results that are based on fake results, erroneous results, that 
that money be clawed back, and that the policy be stated, and 
ideally that the public understand that. We do not understand 
that as the public or as shareholders.
    Wells Fargo has told us they have clawed back some of the 
money from some of the people accountable for the misconduct, 
but not much of it. J.P. Morgan has explained some of the 
clawbacks from the London Whale perpetrators, but not much. So 
in other words, even shareholders, even people that own the 
company, of when the money is clawed back. And this is not 
chump change. This is something like 2 percent of corporate 
profits are going to senior pay.
    Then finally and most seriously, 956 languishes. That is 
the most important provision, that says that there cannot be 
excessive payment for inappropriate risk-taking. This has been 
languishing at the SEC. Next when Chair Clayton appears before 
you, I would urge you to ask him what he is doing about this. 
Thank you.
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    Mr. Quigley. In your written testimony, you talked a little 
about the IRS?
    Mr. Naylor. Yes. I am the former chief of investigation for 
the Senate Banking Committee, so I am skillful enough to say 
that that is an area outside my expertise and I will have to 
get back to you with a follow-up question on the bright lines 
project. My colleague, Emily Peterson-Cassin, can help you with 
that.
    Mr. Quigley. Okay. And if you could pass that information 
on to the committee in terms of our interests and that, and 
getting more input from the public. I appreciate that.
    Mr. Naylor. Of course.
    Mr. Quigley. Mr. Amodei.
    Mr. Amodei. Thanks, Mr. Chairman. I yield back.
    Mr. Quigley. Thank you, sir, for your testimony and for 
your work.
    Mr. Naylor. Thank you.
    Mr. Quigley. Our next witness Jacque Simon, Director of 
Policy, American Federation of Government Employees.
                              ----------                              

                                         Wednesday, March 27, 2019.

              AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES


                                WITNESS

JACQUE SIMON, DIRECTOR OF POLICY, AMERICAN FEDERATION OF GOVERNMENT 
    EMPLOYEES
    Ms. Simon. Thank you for the opportunity to testify. I will 
focus on three issues today: Federal pay, the outsourcing of 
Federal Government work to private contractors, and the 
proposed acquisition of OPM by GSA.
    Federal pay is extremely important to Federal employees, 
for obvious reasons. But it should be important to everyone 
because how Federal employees are paid, as well as how much 
Federal employees are paid, is important to the maintenance of 
an apolitical civil service.
    Opponents of Government and Government employees often hurl 
unfounded insults against the Federal pay system. They work 
hard to undermine trust in the numbers, and try in various ways 
to argue that it needs replacing. The truth is that the Federal 
pay system is extremely well-designed, and its only really 
problem is that it has never been properly funded.
    Federal pay systems share two important characteristics: 
They are market-based, and they assign pay according to the 
duties and responsibilities of the job, not the characteristics 
of the individual who holds the job. As a result, there is very 
little discrimination in pay in the Federal Government.
    According to the most recent study by OPM, women earn 95.6 
percent of what men earn in the Federal Government, and most of 
this small 4.4 percent gap is explained by occupational 
differences. Among Federal executives, the pay equity gap----
    Mr. Quigley. Let me interrupt you and ask you: How does 
that compare to the private sector?
    Ms. Simon. I do not have data with me from the private 
sector, but it something like 56 percent, which is quite 
different.
    Mr. Quigley. So this better.
    Ms. Simon. It is drastically better.
    Mr. Quigley. I understand.
    Ms. Simon. I was going to tell you that among senior 
executives in the Federal Government, the pay equity gap is 
just 0.8 percent, even though there are far fewer women in the 
SES than men. But I am not here to represent SES.
    The market comparability gap, however, is far larger. The 
most recent pay agent report, using BLS data, shows the average 
pay gap still 33.7 percent. Although you will hear critics say 
the Federal pay system is antiquated and rigid, the only 
antiquated thing about it is that it does not produce extreme 
inequality between the top and the bottom. The rigid part has 
no truth to it at all.
    The current system was designed to close pay gaps on a 
local basis, and thus the law requires the Government to 
measure pay gaps by city and provide a two-part pay adjustment 
each year: a nationwide ECI adjustment and a localized 
adjustment. Once local gaps are closed to within 95 percent of 
the market, there would be no more increases in locality pay.
    In the years since locality pay was enacted, little 
progress has been made in closing local pay gaps. That is why 
we are asking Congress for a 3.6 percent increase for 2020 to 
help raise Federal salaries so they will be a positive factor 
in recruitment and retention.
    We ask further that the Federal workers in the skilled 
trades who are paid on an hourly basis receive the same 
adjustment as their GS coworkers, and that Congress pass 
legislation to align the local pay area boundaries between the 
two pay systems, the one for salaried and for hourly Federal 
workers.
    Regarding the Federal Government's process and policy for 
outsourcing Government work, we ask that Congress extend the 
moratorium on the use of OMB Circular A-76. A-76 sets forth a 
cost comparison process for agencies to use prior to deciding 
whether to contract out Government work. The flaws of A-76 are 
quite serious and include systematic over-counting of in-house 
costs.
    The moratorium is meant to prod OMB to address the 
circular's flaws. But it also requires agencies to inventory 
their service contracts so that these enormous costs are no 
longer hidden in the budget process. Since neither of these 
things have occurred, fiscal prudence dictates that the 
moratorium stay in place.
    Finally, I would like to address the administration's plan 
to abolish OPM and merge most of its operations into GSA. OPM's 
policy function would go to the Executive Office the President. 
Both of these moves are ill-conceived and potentially 
dangerous.
    We have seen no analysis of the impact on operations, jobs, 
risks, or even costs or benefits. No good rationale is 
apparent, but a bad one does come to mind. GSA manages office 
space and fleets of vehicles. The administration, in its effort 
to degrade the Federal workforce by turning all Federal jobs 
into temporary positions with low pay, no rights, and few if 
any benefits, seems to see its workers in the same terms as a 
fleet of vehicles: Lease them, abuse them, and then dispose and 
replace. If you think of it like that, the merger starts to 
make a strange kind of sense.
    We believe the merger poses a danger to the apolitical 
civil service. Moving the policy function of OPM into the White 
House is a blatant attempt to politicize the Federal civil 
service.
    The administration has questioned the political loyalties 
of Federal employees, and it has tried to eliminate, restrict, 
or otherwise undermine due process and collective bargaining 
rights. Abolishing the agency that has primary responsibility 
for upholding the merit system facilitates this agenda.
    Thanks for the opportunity to testify. I would be happy to 
answer any questions you may have.
    [The information follows:]
    
    
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    Mr. Quigley. Sure. You talked about the moratorium that is 
going on that OMB is handling. Are you aware of where OMB is 
at, analyzing this, if there seems to be any progress? Has 
there been anything made public about that?
    Ms. Simon. We have had very little conversation with OMB 
recently. And as far as I know, no progress has been made.
    Mr. Quigley. And how long has that been----
    Ms. Simon. Well, it was last rewritten----
    Mr. Quigley. How long has the moratorium been put in place, 
again?
    Ms. Simon. The moratorium has been in place for----
    Mr. Quigley. Roughly?
    Ms. Simon. Six years? Eight--six years. About six years. 
The last time A-76 was revamped was 1999.
    Mr. Quigley. Very good. Thank you.
    Ms. Simon. So these laws have been apparent since the 
George W. Bush administration, when it was used very heavily. 
And in my written statement, I talk to you about the scandal at 
the old Walter Reed Medical Center that occurred as a result of 
very, very long and expensive A-76 competition.
    Mr. Quigley. Thank you. Mr. Amodei.
    Mr. Amodei. I yield back.
    Mr. Quigley. Thank you. Thank you so much for your 
testimony.
    Ms. Simon. Thank you.
    Our next witness is Sean Moulton, Senior Policy Analyst, 
Project on Government Oversight.
    I am reading these resumes and there are cum laudes 
everywhere. I am reminded of the president of the Cook County 
Board once said to me--he was ``thank you, Lord'' getting out 
of college. [Laughter.]
    Mr. Quigley. Mr. Stroger is well remembered.
    Thank you, sir, for being here.
                              ----------                              

                                         Wednesday, March 27, 2019.

                    PROJECT ON GOVERNMENT OVERSIGHT


                                WITNESS

SEAN MOULTON, SENIOR POLICY ANALYST, PROJECT ON GOVERNMENT OVERSIGHT
    Mr. Moulton. Thank you for having me. Chairman Quigley, 
Member Amodei, I appreciate the opportunity to testify today. I 
am a Senior Policy Analyst with the Project on Government 
Oversight, which is a nonpartisan, independent watchdog that 
investigates and exposes waste, corruption, and abuses of 
power.
    I am here to talk about steps this subcommittee can take on 
two important issues: improving data quality for Federal 
spending information collected and posted under the Digital 
Accountability and Transparency Act, or DATA Act, and improving 
the public availability of work done by Inspectors General.
    It is my hope that this subcommittee will require agencies 
with poor quality financial data to file improvement plans and 
regular progress report; that you will provide dedicated 
funding for Oversight.gov, the central repository for Inspector 
General reports; and will help create best practices for 
posting information about those reports.
    The Data Quality Act--sorry, the DATA Act was passed to 
significantly expand and improve the Government spending data 
available for public examination on USASpending.gov. While this 
implementation has moved forward, serious data quality problems 
have emerged.
    Inspectors General completed audits required under the DATA 
Act of agency data submissions in 2017 and revealed widespread 
problems. POGO reviewed 41 of these audits, including nine for 
Cabinet-level agencies, and discovered that 25 agencies 
submitted significantly incomplete information and 30 agencies, 
about 75 percent, submitted significantly inaccurate 
information.
    If the data cannot be relied upon, then the public and 
policy-makers cannot use the information to draw conclusions or 
make good decisions. As the old saying goes, garbage in, 
garbage out. Given many agencies' poor starting point on data 
quality, we believe the subcommittee should take three steps.
    First, instruct agencies whose IG audits identify 
significant data quality problems to file public data quality 
improvement plans with the Department of the Treasury, and 
regularly report on their progress until data quality issues 
are considered resolved.
    Second, Treasury should report to the subcommittee on a 
semiannual basis on the current data quality efforts by those 
agencies and recommendations for any additional steps needed.
    Finally, the subcommittee should also encourage the 
Inspectors General to continue to audit agency implementation 
of the DATA Act until the agencies have sufficiently addressed 
any outstanding data quality issues.
    The DATA Act audits are just one example of the critical 
work that Inspectors General produced, but not all of their 
work is so readily accessible to the public or even to 
lawmakers. In 2017, the Council of the Inspectors General on 
Integrity and Efficiency, or CIGIE, established Oversight.gov 
as a central repository for all Federal agency Inspector 
General reports, a major step forward for improved 
accountability of Inspectors General and for public 
accessibility of their work product.
    Recently this subcommittee provided its first funding, 
dedicated for Oversight.gov, to CIGIE. However, this effort 
requires a steady funding stream to continue its operation, 
improve functionality, and provide expanded services. We urge 
you to continue to support a robust Oversight.gov by providing 
at least $1 million in dedicated fiscal year 2020 funding to 
CIGIE.
    We ask that this support be accompanied by report language 
that outlines some of the expectations for how best to use this 
funding. Congress should also request that CIGIE articulate 
best practices for Inspectors General on the publication and 
public notification of reports.
    Individual IGs do not have consistent rules for reporting 
on and providing access to classified or unclassified but 
sensitive reports. Even Congress could remain unaware of a 
nonpublic report as there is no consistent method among IGs for 
how to make nonpublic reports known to Congress.
    The best practices guideline from CIGIE should be modeled 
on current practices by the Department of Defense Inspector 
General, which publicly posts the topic, the title, and the 
report identifier for all of its classified and sensitive 
reports.
    We have prepared suggested report language to accomplish 
all the goals I have mentioned, which I am happy to provide to 
the subcommittee. Thank you for the opportunity again to 
testify on these important issues, and I am happy to answer any 
questions.
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    Mr. Quigley. I appreciate your bringing up the DATA Act, a 
rare victory for transparency in our world. A little tip of the 
hat to Mr. Issa, who was involved, the transparency caucus, 
transparency community. And I just encourage you and others in 
the community, in terms of making sure as you are talking about 
that we move forward appropriately on this, if there are 
changes and additions that need to be made, that we move 
forward appropriately. Thank you.
    Mr. Amodei.
    Mr. Amodei. Thanks, Mr. Chairman. I yield back.
    Mr. Quigley. Thank you so much for your testimony, sir.
    Mr. Moulton. Thank you.
    Mr. Quigley. Thank you. Our final witness today is Rion 
Dennis, Legislative Advocacy Specialist, Americans for 
Financial Reform. Thank you, sir.
                              ----------                              

                                         Wednesday, March 27, 2019.

                     AMERICANS FOR FINANCIAL REFORM


                                WITNESS

RION DENNIS, LEGISLATIVE AND ADVOCACY SPECIALIST, AMERICANS FOR 
    FINANCIAL REFORM
    Mr. Dennis. Thank you, Mr. Chairman, thank you, Mr. Amodei, 
for the opportunity to testify before you today on behalf of 
Americans for Financial Reform. AFR is a coalition of more than 
200 National, State, and local organizations who have come 
together to advocate for stronger and more effective oversight 
of the financial industry. Members of our coalition include 
consumer, civil rights, investor, retiree, community, labor, 
and faith-based groups.
    I would like to focus my testimony on the importance of 
keeping poison pill policy riders out of appropriations bills. 
Unfortunately, our organization has had the experience of 
seeing destructive policy riders affecting financial stability 
and informative protection inserted into budget deals in 
conference committees or closed-door negotiations.
    A particular risk in the area of financial regulation is 
that legislation which may seem obscure or technical to non-
experts can have dramatic negative impacts on the financial 
system in areas ranging from investor or consumer protection to 
protecting the public from another financial meltdown.
    This is a particular danger of managing such items of 
legislation through the appropriations process, where they are 
not fully vetted by the policy subject matter experts in 
committees and experts in public interest organizations that 
track these matters.
    The most dramatic example of this in recent years was in 
the 2014 budget deal, when legislation was inserted that 
effectively eliminated the so-called swaps push-out provision 
in Section 716 of the Dodd-Frank Act. Section 716 placed a 
critical firewall between taxpayer-insured deposits and complex 
swaps-dealing activities of the kind that helped cause the 2008 
crisis.
    The Section 716 firewall would have prevented the mingling 
of the riskiest kinds of swaps-dealing activities and the 
activities of the taxpayer in insured depository banks. Such 
activities could still be continued but would have to have been 
segregated from deposits and independently funded, a change 
that would have prevented big banks from benefitting from 
taxpayer subsidies in this segment of their business.
    However, Section 716 never went into effect because it was 
eliminated in the appropriations process at the behest of major 
swaps-dealing banks such as Citigroup and J.P. Morgan, language 
effectively gutting this firewall that was placed into the 
budget deal.
    Press reporting demonstrated that the language placed into 
the appropriations bill was actually written by Citibank 
lobbyists. Lobbyists had previously tried to pass this 
legislation through the normal process but had failed. The 
firestorm of negative publicity that ensued what the public 
realized that legislation of this significance had been placed 
in an appropriations back room demonstrated that they could not 
have succeeded without taking advantage of the appropriations 
back door.
    Unfortunately, this kind of gaming of the appropriations 
process was not an isolated incident. Just last year a 
provision was inserted into the omnibus to benefit business 
development companies, which you can think of as a kind of 
private equity fund sold directly to retail investors.
    This provision allows BDCs to double their permitted fund 
leverage from the current one-to-one level, one dollar of 
borrowed money for each dollar of investor equity, to two-to-
one. BDCs are already the beneficiaries of regulatory 
exemptions since conventional closed-end mutual funds can only 
leverage one-to-two or borrow one dollar per two dollars of 
investor equity.
    This increase in permitted leverage will boost returns to 
the managers of the funds, but represent a massive and 
unjustified expansion in risk to ordinary BDC retail investors, 
particularly since this fund level leaving in addition to the 
leverage that already exists in risky BDC portfolios.
    This is not a provision that could have been passed in the 
light of day. In fact, the BDC provision was so unjustified on 
the face of it that the lobbyists were unable to insert it even 
into the highly deregulatory S.2155 legislation, which passed 
last year.
    AFR considers it critical that the new leadership of this 
committee close that back door. It is entirely inappropriate to 
insert complex technical provisions that create massive 
benefits to industry into a must-pass appropriations process 
with limited, if any, debate, public visibility, and expert 
vetting of the public interest considerations.
    In sum, we urge you to resist adding poison pill financial 
services policy riders in any appropriations bill or omnibus 
packages passed through this committee. The appropriations 
process should not be an opportunity for Wall Street to 
supercharge its insider advantages to sneak through dangerous 
measures that serve their narrow interests while putting the 
financial and economic security of the broader public at risk. 
Thank you.
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    Mr. Quigley. Thank you, sir. Your message is delivered. I 
encourage you and your organization and all others to stay 
involved as the process begins for another cycle. We certainly 
appreciate your interest.
    Mr. Amodei.
    Mr. Amodei. Thanks, Mr. Chairman.
    Mr. Dennis, I hear what you are saying and it is like, 
well, so who is not for that? Actually, you probably have a 
list. But anyway----
    [Laughter.]
    Mr. Dennis. I actually do.
    Mr. Amodei. In my experience, it is not like there is a 
huddle, with most of the members going, ``Okay, how are we 
going to upset the policy committees?'' What are we going to 
yank from? I mean, there is a rule against, hey, you are 
legislating in an appropriations bill.
    So absolutely you have cited instances where, hey, guess 
what? They legislated in an appropriations bill. But in my 
experience, if you are trying to do that, somebody goes, ``Hey, 
wait a minute.'' And one of the somebodies is the committee 
with the policy jurisdiction.
    So the instances you are citing, I am assuming that either 
that committee did not say, time out, or the committee said 
time out, and leadership time in. Is that correct?
    Mr. Dennis. Exactly. Most of the--these, especially last 
year, that was put in during the conference committees. It was 
after it had passed both houses.
    Mr. Amodei. Okay. So I am not going to ask you the hard 
question, which is, so is that a Senate problem? Not that they 
watch these things so nobody will know I said it. So I guess 
the message is there is no cooking like home cooking, huh?
    Mr. Dennis. Well, I will say I think now, with the change 
of the leadership with this House, I think you all have a much 
stronger voice in your negotiations with the Senate. And so we 
are just asking that you all use that stronger voice.
    Mr. Amodei. Well, and I appreciate that. As a guy closer to 
the bottom end, closer to grown level, than up there wherever 
the planets travel, I can assure you that I had no voice with 
either one. But on that happy note I will yield back, Mr. 
Chairman.
    Mr. Quigley. And I appreciate that.
    Sir, thank you so much for your testimony. And I want to 
thank everyone for their testimony today. We appreciate it. And 
I again encourage you to stay involved in the process and stay 
in touch with all of us.
    Before we adjourn, I ask unanimous consent for the written 
testimony submitted by our witnesses who appeared today to be 
included in the record, and for the following additional 
testimonies: Number one, Consumer Reports. Two, Fix the Court. 
Three, National Coalition for History. Four, National Congress 
of American Indians. Five, National Treasury Employees Union. 
And finally, six, Project Management Institute.
    Without objection, it shall be. Thank you so much. We are 
adjourned.
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                                          Wednesday, April 3, 2019.

            FEDERAL COMMUNICATIONS COMMISSION BUDGET HEARING

                               WITNESSES

AJIT PAI, CHAIRMAN, FEDERAL COMMUNICATIONS COMMISSION
JESSICA ROSENWORCEL, COMMISSIONER, FEDERAL COMMUNICATIONS COMMISSION
    Mr. Quigley. The subcommittee meeting will come to order.
    Good afternoon. Thank you for joining us today. Sorry for 
the delay. This pesky constitutional requirement of voting 
always gets in the way, but I would like to welcome Federal 
Communications Commission Chairman, Ajit Pai, and Commissioner 
Jessica Rosenworcel.
    The toughest challenge of the day having been completed, I 
am glad to have multiple commissioners here again, unlike 
recent years, because this is always an interesting and 
impactful hearing. The FCC oversees a sixth of the U.S. economy 
and its work touches our lives every day. An FCC decision paved 
the way every time we look something up on a smartphone, send a 
text message, or use Wi-Fi. In fact, for better or worse, the 
FCC is one of those rare agencies that has become a household 
name.
    For the better. The FCC's work is key to winning the race 
for 5G, which is essential for our economy and national 
security. The U.S. led the world in 4G because of the winning 
playbook the Congress and the FCC developed of opening up new 
spectrum bands and letting companies innovate. Former Chairman 
Wheeler started us down the path in 5G with the Spectrum 
Frontiers Proceeding, which aims to get huge amounts of high-
frequency spectrum onto the market.
    Chairman Pai, I know you and Chairman Wheeler didn't always 
see eye to eye on many things, but I'm glad to see you 
continuing the important work he started with frontiers. We 
also appreciate the progress the commission has made on 
bipartisan basis on wireless issues, whether by exploring new, 
unlicensed options or potentially repurposing mid-band airwaves 
for 5G and you know from previous hearings that I had serious 
concerns about the proposed merger of Sinclair and Tribune, so 
I was glad to see the FCC took the action it did.
    Now, for the worse. Unfortunately, the commission continues 
to advance policies that tend to favor large industry players 
at the expense of consumers and small businesses. We saw it 
with the innovation ban. There, the FCC replaced a unique 
licensing scheme, carefully crafted to foster innovation and 
experimentation, but the more traditional system, favored by 
big wireless carriers.
    I am also concerned the commission is moving too quickly to 
auction spectrum and the 24 gigahertz band. Agencies have 
raised significant concerns about the potential impact to 
weather radars essential to public safety and national 
security. I am disturbed to see the FCC take such a heavy-
handed approach on cell tower siting by preempting the ability 
of state and local officials to make decisions in the best 
interest of their communities, but nowhere was this more 
apparent when the commission decided as one of the first 
actions under the Chairman to undo the 2015 net neutrality 
order. That was wrong, both on the law and policy. It hurt 
small businesses and consumers.
    Poll after poll shows overwhelming public support for net 
neutrality and I continue to be concerned with the process the 
FCC filed to get there. The net neutrality proceeding has been 
the subject of numerous controversies and investigations, some 
of which are still ongoing. Just a couple weeks ago, the FCC 
agreed to pay over $43,000 in attorney's fees over a four-year 
request on fraudulent comments and the agency's own IG found 
the Chairman made an inaccurate statement about a denial of 
service and tech, yet the commission still managed to plow 
ahead in just 7 months.
    This is a distressing pattern. Time and again, the 
commission has fast-tracked proposals favored by industry, 
while important consumer issues remain in limbo. It took just 
three months after the Chairman took over to reinstate the UHF 
Discount, paving the way for more consolidation in the 
broadcasting market and the commission deemed most of the 
business broadband market competitive after three months as 
well. That is roughly $50 billion, part of the economy. Yet, 
the FCC has not yet adopted a long-term broadband funding plan 
for Puerto Rico and The Virgin Islands that was proposed last 
May.
    Nowhere has the FCC clarified what rules apply to the sale 
of phone tracking data, even after multiple stories about how 
easy it is to buy this information. The FCC hasn't finalized a 
proposal after a year to prohibit the use of broadband 
subsidies to do business with companies that might pose a 
national security risk and robo calls have reached crisis 
levels. Yet, the FCC is relying on industry to figure out a 
system for authenticating calls rather than issuing strong 
rules with firm deadlines.
    The FCC is reviewing two major mergers. Now, the Spring T-
Mobile deal could harm working families and minorities that 
rely on these companies for affordable care cell service, and 
Nexstar Tribune is another broadcast merger that once again 
could hurt media diversity and choice. The commission's actions 
today raise serious concerns about whether the commission will 
put consumers ahead of corporations on these and other issues. 
Getting this right couldn't be more important. These issues 
touch every aspect of our lives. It could undermine the 
benefits of broadband and hinder our competitiveness in 5G.
    I look forward to discussing in more detail how the 
commission can best use its resources.
    Mr. Quigley. Before I turn to the witnesses, I would 
recognize that playing the role of Ranking Member today for now 
is Mr. Amodei, who has informed me that there are no opening 
remarks. Is that correct, sir?
    Mr. Amodei. That is correct, Mr. Chairman. Thank you for 
acknowledging that, and I yield back.
    Mr. Quigley. Thank you so much. Thank you. I would now like 
to recognize Chairman Pai for his testimony.
    Sir?
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    Mr. Pai. Thank you, Mr. Chairman. Chairman Quigley, Ranking 
Member Amodei, members of the subcommittee, thank you for 
inviting me to present the FCC's Fiscal Year 20 Budget Request. 
Our OMB designated spending level for fiscal year 20 is 
$335,660,000, derived from regulatory fees for regular FCC 
operations and an auction spending cap of $132,538,680.
    But first, I would like to thank you for providing us with 
generous funding in the omnibus as well as permission to 
complete internal reorganizations to advance agency reform 
efforts. The additional auction funds are allowing us to 
implement Congress' expansion of the TV Broadcaster Relocation 
Fund to reimburse low-power television, TV translator, and FM 
radio stations for costs related to the post-incentive auction 
spectrum repack.
    We have also been able to establish a dedicated call center 
and launch public education campaign to assist consumers who 
were affected by the relocation of broadcast stations and we 
greatly appreciate your authorization to create the Office of 
Economics and Analytics. As a result, we are making great 
strides expanding and deepening the use of economic analysis in 
our decision-making.
    Our budget proposal for next year for operations is 
slightly below what we received for fiscal year 19 and our 
auction cap is only adjusted upward for inflation, so we will 
maintain our FTE level and those 1,448 FTEs during the next 
fiscal year will be focusing on four important priorities.
    First, we will continue to implement our 5G FAST plan so 
that the U.S. continues to lead the world in the next 
generation of wireless connectivity. Our plan has three 
components, two of which are infrastructure deployment and 
regulatory modernization but this afternoon, I would like to 
focus on the third: the critical task of pushing more spectrum 
into the commercial marketplace.
    Our 28 gigahertz auction concluded last month and yielded 
about $702 million in gross bids for the U.S. Treasury. Our 24 
gigahertz auction is underway and so far has more than doubled 
that amount, but more importantly, we are making essential 
spectrum available for 5G and we will keep it up.
    Later this year, we will hold a single auction of the upper 
37, 39, and 47 gigahertz bands. Next year, we will auction mid-
band spectrum in the 3.5 gigahertz band. These auctions will 
free up over 5 gigahertz of spectrum for commercial use. Now, 
for perspective, that is more spectrum than is currently used 
for mobile broadband by all mobile providers in the United 
States combined.
    Second, we will continue our work to close the digital 
divide. Because of the groundbreaking Connect America Fund 
phase two reverse auction, we are awarding about $1.5 billion 
to over 713,000 homes and businesses nationwide. This 
represents $3.5 billion in savings from the $5 billion price we 
initially thought would be required to connect these unserved 
areas.
    Moreover, 99.7 percent of the winning bids will provide 
consumers with service of at least 25 megabits per second. We 
have also increased funding to provide connectivity to rural 
health care institutions and soon, we will offer many small 
rural carriers the opportunity to opt into model-based 
universal service support, tying greater funding to greater 
accountability and increased deployment of high speed 
broadband. We also expect to move forward with additional 
funding for broadband deployment in Puerto Rico and the U.S. 
Virgin Islands and to complete a proceeding to ease the 
deployment of fiber for schools and libraries participating in 
our ERE Program.
    Third. We will continue our work to protect public safety. 
Last year, we strengthened wireless emergency alerts, which 
play a critical role in notifying Americans when disaster 
strikes. We proposed rules to implement Kari's Law. That law 
requires multi-line telephone systems which commonly serve 
office buildings and hotels to let people dial 911 directly and 
it requires the notification of building staff in order to get 
first responders inside ASAP and just last month, we proposed 
rules to improve our ability to locate wireless 911 callers in 
multi-story buildings. In a multi-story building, emergency 
personnel need to know a caller's vertical location in order to 
provide assistance. Our 911 location accuracy proposal aims to 
supply that information and in the year to come, we plan to 
adopt final rules here.
    Fourth and finally, we will continue to highlight the 
importance of a diverse communication sector. For example, 
after over two decades of debates, the FCC last year adopted a 
broadcast incubator program to encourage employment and 
ownership for underrepresented communities. We continue to rely 
on our advisory committee for diversity which is focusing among 
other things on the lack of representation in Silicon Valley 
and we established Supplier Diversity Conferences to ensure the 
capital and expertise are matched with talent and ambition.
    Let me conclude by thanking the FCC's terrific career staff 
for their work advancing the public interest and thank this 
committee for the work they do to provide us the resources 
necessary to discharge that responsible.
    Mr. Amodei. Thank you, Mr. Chairman.
    Mr. Quigley. Thank you, Chairman. Committee chair 
Rosenworcel. I had it.
    Ms. Rosenworcel. Good afternoon, Chairman Quigley, Ranking 
Member Amodei, and to the members of the subcommittee, thank 
you for the opportunity to appear here today.
    As you heard from the start, communications technologies 
power about one sixth of our nation's economy and every 
American needs access to these technologies to have a fair shot 
at 21st century success, and that is why the work of the FCC 
matters. It is also why the budget request from the 
administration that is before you is so striking. It asks for 
less than the $339 million the agency is set to spend in the 
current fiscal year, and it is about $4 million less than the 
budget level authorized by Congress.
    If adopted, it would result in the smallest payroll in 
decades at a time when communications technologies loom larger 
than ever before in all of our lives. So many people think that 
Washington is rigged against them. It saddens me that with this 
budget and with the actions of the FCC during the past two 
years, it appears they are right. That is because too often, 
the FCC has acted at the behest of the corporate forces that 
surround it, shortchanging the American people and undermining 
our digital future.
    This is a problem that requires resources to fix. Plus, 
Congress entrusted the FCC with significant new work in the RAY 
BAUM'S Act. We have mergers to review, spectrum auctions to 
hold, and a tremendous increase in equipment authorizations to 
oversee with the growth of 5G wireless and the internet of 
things. On top of this, we have a digital divide in this 
country we sorely need to address.
    I believe budgets are not just about accounting. They are a 
statement of values and I believe the four basic values in 
communications laws--consumer protection, universal service, 
competition, and public safety--need refocus and attention.
    First, consumer protection. Consumer protection requires 
the FCC to be nimble because the communications industry 
changes at a breakneck pace, but our efforts to stem the 
growing tide of robo calls have been anything but. At the start 
of this administration, American consumers received roughly two 
billion robo calls a month. That number now exceeds five 
billion a month. That is crazy.
    The FCC has responded with a series of fines for bad actors 
responsible for robo calls, but according to the Wall Street 
Journal last week, the agency has collected no more than a 
grand total of $6,790 in fines. That's insane. It is clear the 
agency's current approach is not working. It is like trying to 
empty the ocean with a teaspoon. We don't have time for that.
    So, let me propose three things. First, it's time for the 
agency to require in its rules call authentication technology. 
Second, I have written the major carriers, calling for them to 
make free tools to avoid robo calls available to every 
consumer. I think it is time for my colleagues to join me in 
this quest. Third, it is time for the agency to create a new 
division to focus on robo calls. Robo calls are the largest 
single source of consumer complaints at this agency. It is time 
for the FCC to organize its work to reflect that.
    The second value is universal service and as I said at the 
outset, no matter who you are or where you live in this 
country, you are going to need access to modern communications 
to have a fair shot at 21st century success but the fact of the 
matter is that today, millions and millions of Americans lack 
access to broadband and it is becoming increasingly clear that 
the FCC does not know exactly where they are.
    That is unacceptable. The way to fix this mess is to 
develop honest and accurate broadband and wireless maps that 
detail where service is and is not in every community in this 
country. After all, we will never manage problems that we do 
not measure.
    The third value is competition. Of course, it yields lower 
prices and higher quality services, but today, too few American 
consumers have any competitive choice for broadband service and 
that is one of the reasons why in 2015, the FCC adopted net 
neutrality rules. With net neutrality in place, your broadband 
provider does not have the right to block websites, throttle 
online services, or censor online content, and that sounds good 
to me. In fact, it sounds good to most of the American public 
because a study from the University of Maryland found that 86 
percent of the public supports net neutrality but over my 
objection and theirs, the agency rolled back its net neutrality 
rules in 2017.
    A few weeks ago, I was the only FCC commissioner to sit 
through the oral argument at court reviewing the FCC decision 
to eradicate net neutrality. What's obvious to me is that some 
part of our decision, if not all of it, will be remanded. When 
that happens, I don't think the agency should be allowed to 
waste another dime of taxpayer money to sustain its flawed 
rollback with additional appeals to the courts.
    Finally, the fourth value is public safety and to this end, 
I believe the FCC needs to update our policies to reflect new 
cybersecurity challenges, modernize emergency alerting, and 
improve location accuracy with 911 and I worry that our current 
budget is not substantial enough to allow for those things.
    Now, in closing, I want to make a quick note about 911 
operators and offer my support for Congresswoman Torres' 
bipartisan work to give 911 operators the regulatory 
classification they deserve. Right now, the Office of 
Management and Budget classifies them as clerical workers and 
it does not reflect the public safety duties they have taken 
on.
    In closing, thank you, and I look forward to any questions 
you may have.
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    Mr. Quigley. Thank you. It's as if we had this planned. I'm 
going to let Ms. Torres go first because she has to go to the 
floor. Thank you.
    Mrs. Torres. Thank you so much for your patience, Mr. 
Chairman. I do appreciate going first. And Commissioner 
Rosenworcel, thank you so much for visiting the 911 center 
where I spent 17-and-a-half years of my life working as a 911 
dispatcher.
    Chairman Pai, I invite you to come. And, trust me, you'll 
have a great time with these ladies learning about the work 
that they do every single day. 911 Saves Act, I think, is a 
critical step in the right direction at ensuring that when we 
continue to send more work, more critical work, to these 911 
dispatchers, text to 911, video to 911, having to deal with, I 
would call it, unimproved location accuracy, we are demanding 
so much of them.
    Certainly they deserve to be classified as anything other 
than taxi cab dispatchers. That is offensive to the nature of 
the work that they are doing every single day, and I hope to 
get your support on this bill and thank you, Commissioner 
Rosenworcel for being one of the first champions to champion 
this issue for 911 dispatchers.
    Improved 911 location accuracy--let me speak a little bit 
around that with my experience. Unregistered phones are a 
hazard. They are an incredible hazard for children. We teach 
our kids to dial 911 whenever they come across danger and they 
do. At my 911 center, we had a call. I did not take that call, 
but one of my colleagues did. We think it was a five-year-old 
boy. We think it was his mother. All we could do is listen to 
the assault in progress.
    He was taught to dial 911 when he needed help. 
Unfortunately, his cell phone had ran out of minutes. Because 
his cell phone was--ran out of minutes, there was no mandate 
for that phone company to provide the accurate location 
information from where that victim was calling from. So we sat 
there and we listened to him cry, scream while he was being 
kicked, while he was being slapped, while he was being cursed 
at.
    To this day, I don't know what happened to that child, but 
I will live with that forever. It's a failure of the system 
like that where we teach our children--we teach our population 
to call 911. And when they do, we are not able to help them. I 
think 911 dispatchers are critical to the first responder 
communities. Without them answering the phone, you know, you 
can't get a police officer, a paramedic or a fire truck to the 
scene. So we have to do more to ensure that we are empowering 
these individuals with the proper training that they need.
    The attrition rate for this group of people is horrific. It 
used to be 70 percent at my 911 center until we improved 
training and conditions, working conditions, for them. I would 
like for you to talk about where you see ensuring that 911 
surcharges that are collected at the state level are truly 
being utilized not as a--or as a personal checkbook, you know, 
to phone companies but the delivery of a 911 call does not stop 
at the door of the 911 center. It actually does not stop until 
you get the emergency personnel to the location where it's 
needed. Would you comment on that, please?
    Chairman Pai. Thank you for your comments, Congresswoman, 
and for your leadership on these public safety issues. I could 
not agree with you more. Having visited public safety answering 
points in big cities like New Orleans and NewYork--
    Mrs. Torres. Yes.
    Chairman Pai [continuing]. And in small towns like rural 
West Virginia where a two-woman PSAP literally was the only 
thing keeping a community together when floods were ravaging 
that center, it is heroic work. And I think often about Tyrell 
Morris, who was the head of the New Orleans 911 Call Center, 
who told me the story about a dispatcher who was handling a 
call that somebody had been shot in a particular neighborhood. 
She had to continue handling the call professionally once she 
realized her brother was the one who had been shot and killed. 
Just think about--because we----
    Mrs. Torres. It's not unusual.
    Chairman Pai. It's a very common story. And so I'm very 
sensitive to the fact that a lot of these dispatchers work 
longer shifts. Oftentimes, the shifts are--go from eight hours 
to twelve hours to cover the shortages. Many times, it's very 
stressful as it is. There are no avenues for them to get some 
of the help they need. The training is very difficult.
    You have to be trained across a variety of areas. In 
addition to that, as you pointed out, the classification for 
these workers is not necessarily where it needs to be. And so I 
stand four-square behind you on making sure that we heighten 
the importance of preserving this public safety system that 
we've got, including recognizing the tremendous value the 
dispatchers bring to the table.
    Mrs. Torres. Thank you. I yield back. Please join me in my 
district and tour one of my centers.
    Chairman Pai. I would love to do so. Thank you.
    Mr. Quigley. Thank you.
    Mr. Amodei.
    Mr. Amodei. Thank you, Mr. Chairman. I yield my time to Mr. 
Stewart, who has requested it.
    Mr. Stewart. No.
    Mr. Amodei. Mr. Chairman, I rescind that and yield my time 
back to the committee to make up for my lateness, which I 
should just be just about back to even by now, huh?
    Mr. Quigley. In the interest of going back and forth, Mr. 
Stewart?
    Mr. Stewart. Thank you to my friend, Mr. Amodei, and to the 
chairman for holding and to both of you for being here. 
Commissioner, it's good to see you and, Chairman, thank you 
too--again to both of you. You can guess what I'm going to ask 
about, the Suicide Prevention Hotline number that you and 
your--the people that work with you have been so helpful 
working on this, working with us on that. We are grateful for 
that so a couple questions.
    When will the final report be delivered to Congress? As you 
know, the legislation required for you to deliver us a report. 
Will it include a number recommendation? And, of course, you 
know, I'm hoping that it's 611 and that we don't have to share 
a number, at least. And then will you, the FCC, move 
unilaterally to declare that number? And, sir, if you would 
answer those questions, then I would like to follow up, if I 
could, with one other concern.
    Chairman Pai. Thank you, Congressman Stewart. I appreciate 
the hospitality you and Former Senator Hatch gave me to talk 
about the importance of this issue, and it's something I 
recognize the importance of as well. In terms of timing, we 
will meet the statutory deadline of getting that report out. We 
have been working with our public safety staff to make sure 
that we do. In terms of a number, we've been working with 
various stakeholders, taking meetings and the like on the 
wisdom of this particular number versus another. We haven't 
made a determination on that front because we're still taking 
meetings.
    And in terms of moving unilaterally, there might be some 
concerns where we would like to work through with you, if you 
and your staff would like to do so. But we recognize the 
importance of this legislation and are on track to implement 
the directives that you have given to the FCC.
    Mr. Stewart. Well, we appreciate that. I mean, look, it's 
dramatic to say--and we hear it often. You know, this 
legislation will save lives or, in some cases, the lack of this 
legislation will cost lives. But this literally is true. I 
mean, this idea that you can have this universal, national, you 
know, three-digit number for suicide prevention is such a 
necessary thing.
    And if I were to ask people in this room, you know, in a 
moment of honest and being candid, how many of us have been 
impacted either in our family or people that we love, people 
close to us, by suicide or attempted suicide? It would be a 
startling number. It's many of us, and this is a very helpful 
thing for that. And again, we would like to thank you and the 
rest of the Commission for working with us on that. Now, a 
concern that we have, not only--not only the number--I'm not 
sharing the number--is this similar to what has been raised 
here, the geolocation. And that is, you know, if I called the 
suicide prevention hotline number on my phone here, it would be 
routed to Utah and provide me a resource in Utah. Have you 
looked at that and considered the importance of geolocation 
like they do with the regular 911 call? And can we have that 
important option on this as well?
    Chairman Pai. Absolutely, Congressman. We have taken a 
number of initiatives in terms of geolocation, making sure that 
the call actually tracks back to where you are as opposed to 
where someone in a 911 call center might think you are. That 
disjunction can mean the difference between life and death in 
many cases. And so we are working on a number of different 
fronts.
    For example, we have an initiative to make sure that when 
your cell phone--if you're calling from one state and your cell 
phone pings a tower in an adjoining state, we are working to 
make sure that that 911 call is properly routed to the PSAP to 
which you are--that is closest to you, that effectively can 
handle your issue. In addition to that, in terms of things like 
wireless and emergency alerts and the like, we are moving to 
more granularity so that you can get the information that is 
necessary for you in an emergency in a way that you can't 
currently. And so a variety of different things we are doing on 
that front. But the key is to make sure that we can accurately 
help our 911 call center takers figure out where you are more 
quickly.
    Mr. Stewart. Okay. Thank you, Chairman. So then I'm going 
to ask, you know, just simply would it be our expectation--
would it be fair to expect that when we implement this three-
digit National Suicide Prevention Hotline number that we would 
have geolocation attached to that, and we would know where that 
person was actually located?
    Chairman Pai. That is certainly a goal that we share. And 
so we look forward to working with you to see if that goal can 
be incorporated too.
    Mr. Stewart. Okay. So it sounds like it may be--may be a 
hope. It's a goal, but it's not necessarily a conclusion yet; 
is that true?
    Chairman Pai. There are some issues of technical 
feasibility that we would like to work through and----
    Mr. Stewart. Okay.
    Chairman Pai [continuing]. Work through with you if that's 
possible.
    Mr. Stewart. Well, we look forward to working with you on 
that because, as you have expressed already, it would be 
important to do so. And let me just not necessarily ask a 
question but just maybe make a point in the few seconds I have 
remaining. You have worked with us. And we appreciate your 
prioritizing the low-power TV translators with some additional 
funding that we gave you last year.
    I come from a very mountainous region. I actually have more 
transmitters in my district than any other place in the country 
and not a small number, hundreds and hundreds of transmitters 
in Utah. And these are rural areas. And, frankly, most of them 
rely on local television for their news and information and 
weather and other things. So I guess my question to you just 
very briefly is, is there sufficient funding, do you think, for 
us to assist the lower power translator stations as they go 
through this transition.
    Chairman Pai. I do believe there is, Congressman. I want to 
thank you, the entire Congress, for providing that funding 
because there was a gap in the original funding stream that 
would have left a lot of your folks out in the cold, 
essentially. So we are moving aggressively to use that funding 
to benefit some of those low-power translator and FM radio 
stations that otherwise wouldn't have been protected. And I 
have met with a variety of Utah broadcasters. And we have 
developed decisions in order to make sure that they are kept 
whole.
    Mr. Stewart. And you think we are okay on that funding 
then?
    Chairman Pai. I do. But if that changes, we will make sure 
we contact you.
    Mr. Stewart. Please do. Let us know. We want to assist in 
that. And, Mr. Amodei, thank you, sir. And, Chairman, thank 
you.
    Mr. Quigley. Thank you. I think fortuitous that I follow 
you in this regard because it's important to win the race to 
5G, but it's just as important as an economic issue. It's 
crucial to our national security. But as members of the 
intelligence committee, the news about potential 
vulnerabilities from Chinese equipment is extremely concerning. 
So it's important to win, but it's more important to win the 
right way by making sure our networks are secure and resilient.
    First, Commissioner Rosenworcel, you've mentioned that the 
FCC should update its policies to reflect new cybersecurity 
challenges. Do you think the FCC is doing enough to address 
these security issues, and what else should we be doing?
    Ms. Rosenworcel. Thank you for the question. Cybersecurity 
has never been more important. We are looking at a future with 
billions of devices with the internet of things that can trace 
and track us wherever we go. We have got to make sure FCC 
policies are wholly up-to-date. We face challenges with 
equipment supply chain. We face challenges with spectrum 
security, and we are going to have to figure out how to update 
our policies. But if I had to identify three things I would 
like us to do most, the first is I'd like us to reinstate the 
Communication Security Interoperability and Reliability Council 
and make it focus on 5G security. I think we have challenges 
with supply chain dynamics, and we have to figure out how to 
use our resources to fix that.
    In addition, the Department of Homeland Security has an 
interagency advisory committee on the security of next-
generation networks. The FCC is not present at the table in 
that discussion. I think that's an oversight. And as the 
nation's regulator that oversees communications networks, we 
should fix it.
    And finally, the FCC's equipment authorization process 
reviews millions and millions of devices every year. We should 
figure out how to standardize a certification in that process 
that ensures that all sorts of equipment going forward that 
require software updates will get them regularly because that 
will increase all of our security.
    Mr. Quigley. Thank you. Mr. Chairman. A year ago the FCC 
proposed to ban the use of universal service fund subsidies to 
purchase equipment from certain companies for national security 
reasons. Addressing those potential vulnerabilities in our 
communication supply chain is essential to ensuring the 5G 
networks are not turned into a weapon against the American 
people.
    Can you explain where that proposal is at this time?
    Chairman Pai. Thank you for the question, Mr. Chairman. We 
have made that proposal. We have developed a record. We are 
working with the National Telecommunications and Information 
Association, a component of the Commerce Department, as you 
know, to finalize what that proposal will look like in terms of 
the agencies responsible for determining which entities might 
present a security threat in terms of our ICT networks.
    And so we hope to move forward quickly. But we share the 
sense of priority that you attach to this issue, and I hear 
about it every day, and I discuss it with some of my 
counterparts around the world whenever I have a chance.
    Mr. Quigley. And let's dig into that. You have been working 
with other agencies to press the case with our allies, and as 
you just described, talking to our allies. Can you talk a 
little bit more about how that is working, the reaction you are 
getting?
    Chairman Pai. In terms of the interagency cooperation, it 
is extremely strong. We have worked very well with our State 
Department, for example, Department of Homeland Security, 
Cybersecurity and Infrastructure Security Agency, and others to 
make sure that we are all on the same page. And we are, about 
the need to recognize the importance of security in our own ICT 
networks.
    Going abroad as well, I have had many discussions with 
other countries. And while I am not at liberty to discuss 
exactly what is said in those meetings, what I can tell you is 
that our counterparts in other countries do recognize the 
importance of preserving the security of their own networks and 
having a framework to evaluate the risk profile of equipment 
and services that is incorporated into 5G networks.
    Unlike 4G networks, one of the things that is unique about 
5G is, number one, that in terms of the technical standards 
that are being set, security is being incorporated at the get-
go, as opposed to 4G, when it was more of an afterthought.
    And secondly, they recognize that to the extent that you 
lock yourself in, so to speak, with respect to a particular 
infrastructure, there may be longer-term risks that have to be 
addressed. And so I think those conversations are going very 
well, and ultimately we stand united on this issue about the 
need to preserve the security of these networks here and 
abroad.
    Mr. Quigley. Thank you. Mr. Bishop.
    Mr. Bishop. Thank you very much, and let me welcome both of 
our witnesses today. Let me address this first to Ms. 
Rosenworcel, then to Chairman Pai. You can both comment on 
this.
    As you are likely aware, T-Mobile and Sprint announced a 
potential merger on April 29, 2018, which is currently 
undergoing a review process at the Justice Department and the 
FCC. The day after the merger was announced, nine T-Mobile 
executives checked into the Trump Hotel located in the 
Government-owned Old Post Office Building here in D.C. And 
since then, nearly $200,000 has gone from the coffers of this 
international telecommunications company to an organization run 
by and benefitting the President and his family.
    Reports indicate that T-Mobile's CEO took pains to make his 
presence known, that he milled around in the lobby of the 
building taking pictures in a conspicuously branded outfit, met 
with multiple persons associated with the Trump campaign, and 
deleted several old tweets criticizing the Trump Hotel from 
2015.
    Especially in light of the President's personal 
intervention into the previous merger proceedings, I am very 
concerned about the conflict of interest or even simply the 
appearance of a conflict of interest that such a business 
relationship creates.
    Is this the way that our country should be conducting its 
antitrust policy? Would you please respond to that, both of 
you, yes or no and then would you comment on it?
    Ms. Rosenworcel. Without getting to the merits of the 
underlying transaction, which is presently before us, I will 
say that that does not look good. And it leaves me concerned 
that this is the way that mergers are taking place in this 
country today.
    Mr. Quigley. Mr. Pai.
    Chairman Pai. Congressman, my decision on this transaction, 
as with any transaction that is presented to the Federal 
Communications Commission, will be driven by two things and two 
things only: the facts and the law, nothing more, nothing less.
    Mr. Bishop. Okay. Prison phone calls. In recent years the 
FCC has opposed and backed away from implementing rate caps in 
intrastate prison calls, which is essential for the rehab of 
inmates by allowing them to feel connected to their communities 
and their communities.
    Can you explain to me why the FCC refuses to mitigate the 
predatory practices of companies that are charging excessive 
rates to inmates?
    Chairman Pai. Thank you for the question, Congressman.
    Mr. Bishop. It is my understanding that the FCC did have a 
rule in place that had some regulation on that.
    Chairman Pai. That is correct, Congressman. Unfortunately--
--
    Mr. Bishop. And I would direct it to Ms. Rosenworcel first 
and then to you.
    Ms. Rosenworcel. There are 2.7 million children in this 
country who have a parent in prison. Regular contact with 
family and kin is not just good for them, it helps all of us 
because it reduces recidivism. But most prisoners and their 
families pay as much for a single call as everyone in this room 
pays for a monthly unlimited plan.
    That is not right. We need to fix it. And the FCC over the 
last several years has made several efforts to do so, with 
intrastate rates, interstate rates, ancillary fees, site 
commissions. Our work has been remanded to us, and it is 
distressing that the agency refuses to continue to work on this 
problem because rates just keep going up, and it is unfair, and 
it is not right.
    Mr. Bishop. Now, Chairman Pai.
    Chairman Pai. Congressman, my position on this issue is 
pretty simple. We need to do everything within our authority to 
address this problem. I was the first to point out many years 
ago, almost 5 years ago--6 years ago, rather--that there was a 
solution in terms of rate caps for interstate fees as well as 
ancillary fees that would have survived judicial review.
    Unfortunately, the previous FCC disregarded my 
recommendation and the results----
    Mr. Bishop. Did you say interstate or intrastate?
    Chairman Pai. Interstate. Under the law, as the D.C. 
Circuit unfortunately held, as you pointed out, we do not have 
authority over intrastate fees. That is part of the reason why 
I have consistently said let's attack the problem to the extent 
that the D.C. Circuit has said we could.
    Moreover and number two, I would bring your attention to 
the fact that recently, as a result of the FCC staff's very 
careful review of a potential transaction between two of the 
major players in the Inmate Calling Services field, a net 
recommendation--they made a recommendation to me, and I agreed 
with that recommendation, to disapprove that transaction 
specifically because it would present competitive concerns in 
terms of potential price increases.
    So this is an issue that we are very sensitive to. And 
those parties recently dismissed their application to merge. So 
this is an indication of the fact that we look forward to 
working with you on this problem to solving the statutory gaps 
identified by the D.C. Circuit and to doing the other things 
necessary to address an issue that we agree has gone on for far 
too long.
    Mr. Bishop. Rebuttal?
    Ms. Rosenworcel. I appreciated the Chairman acknowledged 
that in an effort to combine two of the largest prison pay 
phone providers, the agency decided to say no. He is right 
about that.
    But what I do not believe he is correct about is that we 
lack any authority going forward. We can do work on site 
commissions, on ancillary fees. We can continue to look to 
structure incentives for intrastate rates. We can do better 
than just allow the existing system to continue because it is 
charging prisoners and their families absolutely usurious 
rates.
    It is not fair, and it is not right, and we should be 
looking for every way we can to fix this problem.
    Mr. Bishop. Thank you. My time is expired.
    Mr. Quigley. Mrs. Kirkpatrick.
    Mrs. Kirkpatrick. Thank you, Mr. Chairman. And thank you, 
witnesses, for being here today, and thank you, Commissioner 
Rosenworcel, for the opportunity to talk with you yesterday.
    We need quality coverage data to ensure that we are 
spending Federal funds for broadband wisely.. But companies 
have financial incentives that could influence the data 
provided. What can the Commission do now to improve the quality 
of data collection? Would you support the use of other data or 
measurements to help validate and improve the information the 
commission collects?
    Ms. Rosenworcel. Thank you for the question. We need to 
have better broadband maps. I do not care where you live in 
this country, we should know if you have service or if you do 
not have service because if we do not know that fact, we will 
take scarce Federal dollars and we may not necessarily direct 
them to the right places.
    But right now with the FCC's map, I mean, listen. There was 
a Cabinet official who just last month, testifying before the 
House, called them ``fake news.'' That is a loaded term, but 
there is truth in this. Our maps do not honestly reflect where 
service is and is not.
    So we are going to have to stop acting like we can do this 
all in Washington. We need to start figuring out how 
crowdsourcing can be part of this, how the FCC's field offices 
can do spot checks, how we can work with universities, how we 
can work with postal authorities, anyone who traverses rural 
areas, to help us identify where service is and is not.
    Because if we know that with precision, we can start 
targeting our funds with precision and fixing this problem.
    Mrs. Kirkpatrick. I want to ask a question about the 
proposed USF cap, again for Commissioner Rosenworcel. Do you 
think the FCC can make sufficient progress on addressing 
broadband access if it caps the overall USF budget?
    Ms. Rosenworcel. The answer is no. We should be doing three 
things. First, we should be figuring out where service is and 
is not in this country. Second, we should come to Congress with 
the price of serving all of those areas that do not presently 
have broadband and wireless service. And third, we have to 
develop a plan. We are doing this backwards if we are capping 
ourselves before we even start the process.
    Mrs. Kirkpatrick. I agree with you. Thank you very much.
    Commissioner Pai, I have a question for you. You have said 
that addressing the digital divide is one of the most important 
priorities for the Commission under your leadership. How is 
this proposal consistent with that statement?
    Chairman Pai. Thank you for the question, Congresswoman. 
Each one of the four component programs within the Universal 
Service Fund currently has a cap or a budget. And so it is 
reasonable then to think about the issue of whether there 
should be a cap for the overall Universal Service Fund.
    The proposal on the table involves a cap that is 
significantly above the current disbursements through the 
Universal Service Fund, and in addition, this is an issue that 
was very important to one of my colleagues. And so we wanted to 
tee up the idea: Should we have this conversation about what 
the overall cap should be?
    That is in part a way to ensure that there is public 
confidence that every single dollar spent through the Universal 
Service Fund is going to be spent wisely. This is a measure of 
fiscal responsibility that people can know when they are paying 
into the fund.
    There is a cop on the beat, the FCC, to make sure those 
funds go to closing the digital divide to places that I have 
visited that are on the wrong side, like Navajo Nation. If you 
drive from Phoenix to Flagstaff, you will find many spots where 
you cannot get that coverage. We want to change that.
    Mrs. Kirkpatrick. A follow-up question on that. Under your 
proposal, how will the Commission determine what programs will 
not receive additional funding if the cap is breached?
    Chairman Pai. That is one of the issues that is teed up in 
the notice of proposed rulemaking. And I can assure you that we 
will not act on that proposal without soliciting public comment 
on it.
    Mrs. Kirkpatrick. When do you expect that rulemaking to be 
finished?
    Chairman Pai. Well, the notice of proposed rulemaking has 
not yet been approved, so I cannot forecast how long that 
record would take to develop.
    Mrs. Kirkpatrick. So we are years away from having that 
information in place?
    Chairman Pai. I don't know about years. But what I can say 
is the NPRM has not yet been approved, and so we cannot 
forecast what the record would be.
    Mrs. Kirkpatrick. Commissioner Rosenworcel, do you want to 
comment on that?
    Ms. Rosenworcel. Yes. I think one of the problems here is 
that Congress developed several programs for universal 
services, programs to support service in rural areas, programs 
to support telemedicine, programs to support kids in schools 
getting internet, and programs to support low-income 
households.
    And with a cap like this, we are going to make telemedicine 
providers fight with kids in schools for funding. I do not 
think that is right.
    Mrs. Kirkpatrick. Thank you very much. My time is about to 
expire. I yield back.
    Mr. Quigley. Mr. Graves.
    Mr. Graves. Thank you, Mr. Chairman. Good to see each of 
you. Just a couple quick questions.
    First, on 5G, there is a lot of talk about that. I know you 
have addressed it. Maybe you have addressed a timeline, how you 
see that developing out. I think you have addressed some of the 
threats.
    What more can we be doing to assist? I understand you have 
a rulemaking process in place about procurement and other 
things. But what are some other things we have not asked about 
that we should be looking into?
    Chairman Pai, I will start with you, and maybe you can just 
bring us up to speed. I think we want to make sure we are 
providing the necessary resources to keep up with this.
    Chairman Pai. Thank you for the question, Congressman, and 
I appreciate your longstanding interest, in these issues. I 
think one of the things that would be helpful would be to have 
additional congressional support for essentially repurposing 
spectrum that is not currently used for commercial purposes and 
either allocating it for commercial purposes or at least 
allowing it to be shared with the commercial sector.
    One of the difficulties we have had has been trying to find 
out bands that are potentially useful for 5G, low band, mid 
band, and high band, and then working with other industry 
stakeholders in other public sector agencies to repurpose it.
    The second thing, although it is not the first thing that 
people think about when they think about 5G, is infrastructure, 
about getting those small cells up at scale, about getting the 
fiber in the ground that is necessary for us to be able to 
carry that 5G traffic back into the core of the network.
    And here it would be terrific if Congress could speak with 
a unified voice about the need to streamline the process for 
regulatory approval. When we are competing against countries 
like China, which has a national priority on 5G infrastructure 
deployment, it is difficult for private sector entities here 
today. We have to jump through Federal, State, local, and over 
500 federally recognized tribes in order to get these 5G----
    Mr. Graves. So the resources are there?
    Chairman Pai. Right.
    Mr. Graves. Infrastructure, in order to get it in place, 
just needs some regulatory easing.
    Chairman Pai. Absolutely. And if I could make one quick 
pitch on fiber, in terms of fiber deployment, one of the things 
that would be very helpful is filling the gap that currently 
exists in the FCC's authority. We have authority over the poles 
that are owned by utilities. We do not have jurisdiction over 
the poles that are owned by railroads or by municipal 
governments.
    And that is one of the biggest cost elements to building 
out a fiber network, especially if you are a smaller 
competitive provider. That gap would be traffic to see filled.
    Mr. Graves. Great. Thank you.
    Mr. Quigley. Thank you. Would you like to respond as well, 
please?
    Ms. Rosenworcel. Sure.
    Mr. Quigley. Thank you.
    Ms. Rosenworcel. It may surprise you, but I think my 
colleague actually did a really good job laying out those 
things, so I agree.
    Mr. Graves. As have you in each response, too.
    Ms. Rosenworcel. But I----
    Mr. Graves. You have----
    Ms. Rosenworcel. But I want to recommend one other thing. I 
think Congress should require that we have a spectrum calendar 
so we identify to companies, manufacturers, bidders, when we 
are going to make airwaves available to market. Right now, we 
have a blitz of spectrum bands that are under consideration.
    We've got 2.5, 3.5, 3.7 to 4.2, 5.9, 4.9, 6. I mean, I can 
just keep on going on. It's like, 10 to 30 of them that are 
under active consideration. We should put them on a calendar, 
because the entire marketplace, the entire ecosystem would be 
more organized, and I think it would result in services getting 
to consumers faster.
    Mr. Graves. So, is there a timeline--a goal timeline, or is 
that what you're suggesting----
    Ms. Rosenworcel. I am----
    Mr. Graves [continuing]. Should be developed out? Okay.
    Ms. Rosenworcel [continuing]. Suggesting it should be 
required of this agency.
    Mr. Graves. So, there's no goal of 2021, 2022, or 2023 when 
it's----
    Ms. Rosenworcel. I believe there are goals, but I think 
when Congress writes a law and we have to respond to it, we 
tend to actually abide by those obligations.
    Mr. Graves. Okay, so you need a little motivation it sounds 
like. One last quick question. The New York Times today, you 
might've seen it, was talking about the pay to track issue 
that's developed. You know, cyber and privacy are something 
that we've worked on a lot, I've worked on a lot, and as has 
the Chairman here, but this indicates that there's a delay in 
response from the FCC, and as a result of that, that tracking 
is occurring by individuals who will pay for cellular data, or 
geopositioning. Help us understand why there's a delay of a 
year or so or more. What are the challenges with this? Chairman 
Pai.
    Chairman Pai. I appreciate it, Congressman. I mean, the 
allegation of delay is flatly false. When we got word of this 
issue last year, I immediately instructed our staff to initiate 
an investigation. They have done that.
    I am hamstrung by the fact that I do not comment publicly 
on enforcement investigations, other than to say that the FCC's 
career staff is actively working on this issue within the 
relevant statute of limitations, and that's simply all I can 
say.
    I understand that it's an issue that has generated a lot of 
public interest, but I can tell you that our staff is working 
very hard on this issue, and I have to leave it at that.
    Ms. Rosenworcel. I'm not totally satisfied with that. I 
think people need to know more. Everyone in this room has a 
wireless phone in their palm, or their pocket, or their purse, 
wherever they go.
    And it is disturbing to learn that wireless companies were 
selling that data to third-parties who in turn would sell it to 
bail bondsmen and any other shady middlemen who could just 
purchase for a few hundred dollars your location within a few 
hundred meters.
    I've asked the agency's enforcement bureau to explain to me 
just what we're doing. I've asked for letters of inquiry. They 
have refused to share with me information. This is an issue of 
national and personal security, and I think that the agency has 
to do more than just offer this quiet response.
    Mr. Graves. So, you mentioned cell phone, pockets, hands, 
is it possible for an individual to turn off their privacy 
settings at any given time and their cell phone not be detected 
where they are?
    Ms. Rosenworcel. No.
    Mr. Graves. Is that something that the FCC should address, 
or is that possible?
    Ms. Rosenworcel. The reality of owning a cell phone that's 
on is that as you walk around, it is regularly pinging a tower 
nearby in order to ensure that you have continuous service.
    Now, the FCC's customer proprietary network information 
rules are associated with that, and there are limits on what 
can be used if there's information gleaned from your location 
when you make a call, but we've got to update things for the 
internet of things, because we got to--by the end of the 
decade, 50 billion wireless devices all around us that are all 
going to be conveying geolocation information. We're behind 
things. We need to start developing a plan, and we should be 
public about it.
    Mr. Graves. So, it's being abused by certain individuals, 
or companies?
    Ms. Rosenworcel. The opportunities for abuse are 
substantial. We need to start figuring out how to develop 
better cyber hygiene, and cyber security geolocation practices 
for every device, and for everyone.
    Mr. Graves. Thank you. Thank you, Mr. Chair.
    Mr. Quigley. Thank you, sir.
    Mr. Crist.
    Mr. Crist. Thank you, Mr. Chairman. Thank you, Chairman 
Pai, and Commissioner Rosenworcel for being here today. We 
appreciate your attendance. Commissioner Rosenworcel, as I know 
you know, night and day, Americans are being inundated by spam 
calls.
    It's more than an annoyance, it's an invasion of privacy, 
and it's being used to deceive and take advantage of 
unsuspecting victims. In fact, experts predict that this year 
alone, nearly half, half of all calls, will be spam. What is 
the FCC doing about this?
    Ms. Rosenworcel. Thank you for the question. As I said in 
my opening statement, what's going on with robocalls is insane. 
At the start of this administration, there were two billion a 
month. It's now up to more than five billion a month. If you 
think it's getting worse, it is.
    And while the FCC has tried to approach this with a few 
fixes and some bad actor fines, the Wall Street Journal last 
week said that we've collected less than $7,000 from bad actors 
and robocalls. We need to step up our game and make some 
changes. We need call authentication technologies that are 
required.
    I've written every major carrier and ask that they make 
free tools available to every consumer to block robocalls. I 
hope my colleagues will join me in that quest.
    And in addition, I think that it is necessary for us to 
reorganize the agency. As John Oliver recently said, 60 percent 
of FCC complaints are about robocalls. We should just have a 
division to help address those problems, and go after this with 
vigor. I feel like the agency should be organized around the 
problems that consumers call in and tell us about.
    Mr. Crist. What can Congress do to help you?
    Ms. Rosenworcel. Congress, I believe the agency has 
adequate authority to require call authentication technologies 
tomorrow, but we've had an open rule making since 2017 on this 
subject, so were you to require it by a firm date, that would 
be helpful. I know you've done some work to try to suggest that 
we should have contests to come up with better robocalling 
technologies. I know the Federal Trade Commission had some a 
few years ago, and they produced positive results.
    I think you should compel us to reorganize our activity at 
the agency to have a division that is dedicated to fighting 
robocalls. We don't have that today, and we need it.
    Mr. Crist. Did you say in response to my first question 
that the FCC only ushered in $7,000 of fines?
    Ms. Rosenworcel. A little less than $7,000 according to the 
Wall Street Journal. We have assessed over 200 million since 
the start of this administration, but I do not believe we've 
actually collected on any of that.
    Mr. Crist. What's wrong? What's--why isn't that being 
collected?
    Ms. Rosenworcel. To be clear, the Department of Justice has 
these fines referred to them, and it's not that anyone sitting 
at this table or my colleague included don't want to see those 
individuals fined, but if we proceed with this approach at this 
pace we are not going to solve the problem. We need to be far 
more aggressive, because what we're doing today is not good 
enough. The problem is growing rather than getting better.
    Mr. Crist. So, we have laws on the books. We have over $200 
million of fines you have sent to the DoJ, and it's not being 
pursued?
    Ms. Rosenworcel. It's not. It's very hard to collect 
against these bad actors. The bottom line is this theory of how 
to solve the problem is not working.
    Mr. Crist. Right.
    Ms. Rosenworcel. We need to be more aggressive and develop 
others.
    Mr. Crist. Well, thank you. Chairman Pai, I know that the 
FCC has a lot on its plate between the roll out of 5G, 
addressing rural broadband, as well as spectrum auction. That 
is why my bill directs the FCC to lead other agencies in 
fighting the scourge of spam calls. Would you find it useful to 
have the input of agencies like the Federal Trade Commission, 
Department of Justice, DHS, FBI, to name a few, in ending this 
plague?
    Chairman Pai. Congressman, thank you for the question. I 
think that your bill, which I did have a chance to review, 
would set a useful marker in terms of establishing inter-agency 
coordination.
    This is one of the issues that we hear about all the time, 
that the Federal Trade Commission's do not call list has not 
been effective, and other agencies might have equities here. To 
get us all on the same page would be very useful, and my 
understanding is that legislation that was passed just today in 
the Senate would incorporate some of the core concepts in your 
bill. So hopefully, this is not an abstract conversation, but 
something that could become a practical reality, and relatively 
soon.
    Mr. Crist. Great. Thank you, Chairman. And then finally, 
Commissioner Rosenworcel, it's come to my attention that the 
FCC received a deluge of comments on the net neutrality repeal. 
22 million or so, is that correct?
    Ms. Rosenworcel. That's correct. The problem is that work 
from the state attorneys general have identified that many of 
them were fraudulent. As many as nine-and-a-half million 
involved stolen identities.
    In other words, they took the name and address of someone, 
and just wrote to us with their false opinions. These things 
were filed in our public document. This is identity theft. We 
need to be taking it seriously, because there's fraud that 
supported this outcome, and that's a problem, and I regret that 
the agency has just turned a blind eye to this identity theft, 
but I am relieved to know from press reports that the FBI is 
now looking into this, because this is the channel for public 
comment. This is how Americans tell Washington what they think 
of policies we're pursuing, and the FCC's net neutrality docket 
indicated that that channel is flooded with fraud.
    Mr. Crist. Thank you both very much. I appreciate it. Thank 
you, Mr. Chairman.
    Mr. Cartwright. Thank you, Mr. Chairman, and I'd like to 
pick up on the last discussion from my colleague from Florida. 
Is there any reason to think that stolen identity comments and 
rulemaking are limited to the FCC rule making?
    Ms. Rosenworcel. No, there's not. The Wall Street Journal 
in a substantial investigative piece about a year and a half 
ago identified similar problems before the Department of Labor, 
the CFPB, as well as the Securities and Exchange Commission, 
and there has been some evidence in the press of problems 
before the Federal Energy Regulatory Commission. The 
Administrative Procedure Act is from 1946.
    Mr. Cartwright. Sure.
    Ms. Rosenworcel. It's aging.
    Mr. Cartwright. Yeah.
    Ms. Rosenworcel. It's getting creaky, and in the digital 
age, we're going to have to figure out how to make sure that 
this channel for public comment in Washington is bolstered, and 
more secure, and more open to what people think so that we 
don't see this kind of identity theft and fraud going forward.
    Mr. Cartwright. Well, that's what I'm talking about. You 
know, we're talking about HR1 going after--cleaning up American 
democracy, but so many--so many of the rules and regulations 
that we operate under here in America were formulated under the 
APA, the Administrative Procedures Act, and they depend for 
public comment on these--nowadays on the internet for that. So, 
that's a huge topic that we really need to wrap our arms 
around.
    I wanted to ask you, Commissioner Rosenworcel, about 
broadband internet for rural places. I represent a couple of 
wonderful counties in Pennsylvania, Wayne County and Pike 
County, and they're gorgeous places, and places you want to 
spend a lot of time with your family at, but they don't have 
broadband internet anywhere, and you know, you think about what 
that means. It means there are, you know, limited opportunities 
that people have to communicate with the outside world compared 
to every other place that has those things.
    It means limited opportunity for children to learn about 
the world through the internet, but maybe worst of all, it 
really hampers the ability of areas like this to attract 
outside businesses coming in, because outside businesses, who 
can choose any place in the world to locate, probably aren't 
going to want to locate someplace where the families of the 
workers don't want to live there because they can't go online, 
unless it's, like, with one bar on their cell phone, which is 
what they get in Wayne County. 48 of the 67 counties in 
Pennsylvania are considered rural. There are 800,000 
Pennsylvanians lacking access to high speed internet, and two-
thirds of them are in rural areas. I appreciate your comments, 
Commissioner Rosenworcel about the need for better mapping, and 
I couldn't agree more.
    You know, people in Wayne and Pike Counties have told me 
it's a priority of theirs to get broadband internet access, but 
this points to the problem. Laying lines over vast amounts of 
territory, lots of land, with relatively few people--that's 
what rural territory is--it's just not a profitable proposition 
for private sector internet service providers.
    Last year, Congress made what some have called a ``down 
payment,'' quote unquote, on investing in rural infrastructure, 
broadband infrastructure by creating the $600 million reconnect 
program to be administered by the USDA Rural Utility Service, 
and an additional $550 million was added in the fiscal year 
2019 omnibus. With all the work on broadband networks currently 
underway pursuant to FCC's universal service programs, how do 
we ensure that these additional infrastructure--broadband 
infrastructure resources are coordinated with other programs to 
prevent duplication of effort, Commissioner Rosenworcel?
    Ms. Rosenworcel. Well, thank you for the question. You're 
absolutely right. The only way that we are going to get our 
bang for the buck is if we coordinate all of these federal 
programs. You know, it's a strange fact, but the Department of 
Agriculture, which received those funds, is up the street from 
the FCC, and yet I fear that we don't regularly have 
conversations about what they're doing, and what we're doing, 
and if we want to maximize our scarce dollars, we need to do 
more of that.
    Mr. Cartwright. Now when it comes to helping fund broadband 
networks, how do we ensure that investments made leveraging 
federal resources won't be outdated and can actually deliver on 
the promises being made and the dollars being awarded?
    Ms. Rosenworcel. Something that we're going to have to be 
mindful of. I can't speak specifically to the Department of 
Agricultural Rural Utilities Services' choices, but certainly 
the FCC makes choices about its Universal Service Fund, and for 
instance, right now mandates that those funds for broadband are 
generally used for 25-megabit service. The idea is not to fund 
service that is too slow and backward looking, but to try to 
fund services that are forward-looking.
    Mr. Cartwright. Well, I think you to both of you for 
appearing today, and I yield back.
    Mr. Quigley. Mr. Graves.
    Mr. Graves. Mr. Chairman, just maybe if you can just give 
us an update. I know this committee appropriated a billion 
dollars over two years to help with the T.V. Broadcaster 
Relocation Fund. Can you give us an update? Are we on track, on 
schedule? And things going as you expected?
    Chairman Pai. I appreciate the question, Congressman. We 
are on track so far. We completed phase one successfully. My 
recollection is that 193 stations transitioned during what was 
called phase one. We're now in the midst of phase two, which is 
scheduled to close soon, and we'll have already had 115 
stations that have transitioned. In addition to that, we have 
taken the authority that you gave us and we have started 
establishing a framework for identifying how non-protected 
stations, low power T.V., translator and FM radio stations can 
get reimbursement through the additional money that you 
allocated for this purpose. So in addition to that, you also 
allocated money for consumer education, so we set up a call 
center dedicated to this purpose. We put out alerts in English 
and Spanish. We've additionally created some web content that 
people can access on our website if they have questions about 
rescanning and the like. So this is one of our top priorities. 
I said from my earliest days as commissioner we wanted to make 
sure this transition was a smooth one, and thanks in part to 
the resources you've given us, I can report to you that as of 
today, that transition is, in fact, going well.
    Mr. Graves. That's good. I appreciate the entire 
commission's work on that. I know that's something the entire 
commission is very supportive of. From a reimbursable cost 
perspective, do you have a process in place to make sure that 
the proper expenses are being reimbursed? Can you help us 
understand that, how that works?
    Chairman Pai. We do. We don't want it to simply be a case 
of anyone can submit paperwork and we immediately send out a 
check without looking at it. There are certain categories of 
costs, some of which are reimbursable, some of which are not. 
At the end of the day we want to make sure that we're able to 
report to you that we did not spend a single dollar in this 
process on something that more properly should have been the 
province of the broadcaster itself. But that core promise of 
the incentive auction that we would transition broadcasters and 
hold them harmless, they wouldn't have to pay out of their own 
pocket for a relocation that was out of their control, that 
continues to be the case.
    Mr. Graves. Great, thank you. Ms. Rosenworcel, how do you 
feel about the program? Going well? Anything else we can be 
doing?
    Ms. Rosenworcel. You know, I agree with the chairman. I 
think it's proceeding thoughtfully. It's a big task.
    Mr. Graves. It is.
    Ms. Rosenworcel. And we are still in early days so I think 
it is incumbent on the agency that if we identify problems 
going forward, we come to you and try to identify how to fix 
them.
    Mr. Graves. Thank you. And I just want to thank the 
commission. I know you have a lot of difficult tasks in front 
of you, and I know you do the best you can to work together to 
find solutions, and this was one in which I think everybody 
worked together to help guide us with the proper steps to take. 
And even for us, authorizers and appropriators working together 
to get to the final product and end was very productive, so 
thanks again for joining us today, for your good work, and I 
look forward to visiting with you again in the future. Thank 
you, Mr. Chairman.
    Mr. Quigley. Mr. Bishop.
    Mr. Bishop. Thank you. The issues under FCC's jurisdiction, 
from spectrum sharing to auction implementation to consumer 
protection are becoming more and more complex each and every 
year, but it appears as if the Administration is requesting 
less funding, particularly than we provided in 2019. 
Commissioner Rosenworcel, do you support the funding level for 
the commission? If not, where do you believe the commission 
needs additional resources?
    Ms. Rosenworcel. Thank you for the question, Congressman. I 
believe considering that the FCC fully pays for itself through 
fees, this funding level is too low. We have the lowest level 
of employees in decades at a time when our services that we 
oversee are more important in every aspect of civic and 
commercial life. If we want to lead the world in 5G service, 
run multiple spectrum auctions, manage the scourge of robocalls 
and deal with the growing threat of cybersecurity issues, we're 
going to need more resources to do that well. And I think that 
this budget falls short.
    Mr. Bishop. Do you need more fees or you need Congress to 
appropriate more funds?
    Ms. Rosenworcel. I think we need more employees to carry 
out those important tasks.
    Mr. Bishop. So we need to fund that. Chairman Pai, do you 
believe that the requested funding provides adequate resources 
for the commission to continue its ongoing and its planned 
work? We have concerns about the state of the commission's 
information technology, particular the systems that support 
auctions and licensing. Or does the level of requested 
resources allow you to upgrade all of your critical systems?
    Chariman Pai. Thank you for the question, Congressman. This 
level that we have submitted on behalf of Administration, $335 
million itself, represents a $13 million-dollar bump from when 
I first got into office, and so we do recognize the additional 
resources Congress has given.
    Mr. Bishop. The question is, is it enough?
    Chairman Pai. So in that regard, to the extent that 
Congress seeks to allocate additional resources, I can assure 
you that we will use them wisely, in part to upgrade those 
legacy IT systems.
    Mr. Bishop. Do you want more?
    Chairman Pai. That's one of the things we'd be happy to 
work with you on, Congressman, this number is of course----
    Mr. Bishop. I'm asking you, do you want us to appropriate 
more than you ask for?
    Chairman Pai. Congressman, should you see fit to give us 
the $339 million that you gave us in the previous years----
    Mr. Quigley. We can do this all day, gentlemen. [Laughter.]
    Chairman Pai. But I do want to, in all seriousness, I do 
want to assure that whatever number you pick, we will use 
wisely.
    Mr. Bishop. No, no, I want you to tell me do you need more 
money?
    Chairman Pai. We would not complain with the level of 
funding----
    Mr. Bishop. I didn't ask you whether you would complain, 
just tell me do you need more resources to do the job that 
you're asked to do, that you're required to do?
    Chairman Pai. Congressman, I believe----
    Mr. Bishop. Effectively.
    Chairman Pai [continuing]. We went with the $339 million 
that we submitted to OMB. Again, we could discharge additional 
responsibilities we've identified.
    Mr. Bishop. Thank you, Mr. Chairman. A key part of the 
FCC's analysis with regard to net neutrality was the claim that 
net neutrality harms investment, yet the evidence supporting 
that is not clear. And I asked the executives who said that net 
neutrality did not affect their business decisions. 
Commissioner Rosenworcel, during the rulemaking process, the 
chairman stated that he would only change his mind on net 
neutrality if presented with economic analysis that shows 
credibly that as infrastructure investment that has increased 
dramatically. In your opinion, is that position consistent with 
FCC's rulemaking requirements, or is that, in your opinion, 
good policy?
    Ms. Rosenworcel. I think that the record reflects that 
capital expenditures have decreased since the FCC's 2017 net 
neutrality rules went in place at the major providers. But I 
would also argue that this is a subject that needs peer review. 
It's not something where we should simply accept data that's 
from the carriers themselves. We need to think thoughtfully 
about long-term infrastructure in this country and not just 
broadband providers, but the great digital ecosystem. I think 
the record reflects that net neutrality rules were no damper on 
investment, but I will respect the idea that we have to 
continue to watch this issue.
    Mr. Bishop. Chairman Pai, the FCC's order dedicated 18 
paragraphs discussing the impact of ISPs and only two to 
content and service providers. Why did you find that sufficient 
given the enormous size of impact on an economy? This committee 
recently approved the creation of the new Office of Economics 
and Analytics. Will this allow the FCC to conduct independent 
economic analysis in cases where economic record is ambiguous 
like with net neutrality?
    Chairman Pai. Congressman, that's precisely the reason why 
we established this office is to centralize that function of 
economists and data analysts and others who previously had been 
sprinkled throughout the agency, without any workflow 
coordination necessarily. They were sometimes left out of the 
equation altogether. So we wanted to create a central office 
where they have a seat at the policy-making table to tell us 
this is what the costs and benefits are, these are the gaps in 
the data sets that we've got, these are things we're seeing in 
terms of geographic information mapping and the like. And that 
way we can make better decision-making at the front end as 
opposed to the way it's been done historically.
    Mr. Bishop. Ms. Rosenworcel.
    Mr. Quigley. Well, we'll see if where timing is, sir, when 
we get done with this segment. Mr. Amodei.
    Mr. Amodei. Thank you, Mr. Chairman. So as I look around 
probably as the oldest guy in the room, I'm not going to be 
talking 5G and 4 triple-S, double-reverse Johnson and all that 
other sort of stuff, so if anybody thinks I'm trying to 
impersonate a tech person on communications you are mistaken.
    With that said, first of all, I want to thank you both 
because in the stuff that we've worked out on the Spectrum 
Repack and all that other sort of stuff for T.V. stuff through 
your chairmanship and the previous chairmanship, your staff has 
been very responsive. We want to talk to you about it, what's 
going on my neck of the woods, that sort of stuff, and so I 
think regardless of where you think we ought to be or what, the 
agency has been phenomenally cooperative and a standout in my 
experience in eight years here. You didn't always tell me what 
I like, but you always responded and told the truth and did it 
in a timely manner and worked well. So I want to say thank you.
    Then the next thing I want to tell you is this: There are 
parts in northern Nevada, and if those people in Wayne County 
want to see rural, let me just tell you this, I'll show you 
rural and we don't even have trees there it's so rural. 
Obviously he's doing some security stuff over there on his 
device right now so we won't bother that because that's very 
important. But having said that, there are few spots where when 
you talk about driving from Phoenix to Flagstaff in Arizona, 
it's like I don't want you to do anything to change some of 
those spots in Nevada because people go there because there is 
no coverage, okay?
    The final thing is this: I know we're talking about the 
coming, you know, 5G and all that stuff and that's where most 
of the future is and that, but in talking with broadcasters in 
my neck of the woods, some of that old technology is kind of 
the doomsday infrastructure, if you will. We spend a lot, as we 
should, to say we want these networks to be as bulletproof as 
possible and blah, blah, blah and failsafe and all that, but at 
the end of the day, there's that old, you know, I'm not going 
to say rabbit ears stuff because I know most people in here 
don't remember that, but having said that, it's like I would 
like to follow back up with your staff and say, so what are 
doing for the doomsday infrastructure. Because it seems to me 
that this is such a lucrative target that there's always going 
to be people out there trying to defeat you, because online is 
such a rich place for wonderful things, but also for evil, and 
so you're going to deal with that and I don't envy you a it, 
but could you just briefly, it's like is there any thought 
going on in all this stuff that's going on there to go, hey, 
wait a minute, if that goes down in that region because of 
whatever, we can still switch over to those folks that we took 
care of when we were repacking spectrum and stuff like that, to 
where if we have to, it's like tune your radio to blah, blah, 
or turn on to the emergency broadcast network old-style. 
Anybody looking at that?
    Chairman Pai. Certainly we are, Congressman, we share that 
concern. For example, one of the things I do regularly is get 
briefed in our classified facility about some of the risks 
we're seeing to critical infrastructure and elsewhere, and I'm 
sure you get these briefings, too. It's a danger given how open 
our society traditionally is and how reliant we are on some of 
those kinds of infrastructure. So the other thing we do is work 
regularly with federal partners. I personally worked, for 
example, with the head of the Cybersecurity and Infrastructure 
Security Agency over at DHS. We're coordinating now with the 
Federal Energy Regulatory Commission to make sure we're on the 
same page in terms of the energy grid. And this is a cross-
cutting effort because all of these industries, from energy to 
healthcare, you name it, rely on technology at the end of the 
day. So we've got a seat at that table, I can assure you.
    Mr. Amodei. Well, if might just briefly, and then Madam 
Commissioner, you can--but it's like, listen, especially when 
you add the rural element into it, when push comes to shove 
sometimes it's the only thing is that old technology sitting on 
the mountaintop that gives you something. So that's why it's 
something that's kind of floating around in our thought 
process.
    Ms. Rosenworcel. You know when we have fires in northern 
California and floods in Nebraska and Hurricane Sandy, we do 
have to remember that most people turn to their broadcasters to 
learn what's going on. And when the power goes out, your 
phones--they're hard to charge--we've got to be mindful that a 
radio with batteries, which feels awfully old school, may be 
one of the most important things we all have around----
    Mr. Amodei. They're comfortable to some of us.
    Ms. Rosenworcel. All right, I'll take old school. But I 
think we have to remind ourselves in this digital world that 
there are some analog technologies that can continue to help 
keep us safe, and we've got to make sure that our systems 
protect them.
    Mr. Amodei. Thank you both. Thank you, Mr. Chairman.
    Mr. Quigley. Mr. Amodei mentions rabbit ears. For those who 
don't remember, they were actually on top of your T.V. set. 
when you had to walk over and turn the channel. And they were 
kind of a small antennae that you would move around, and the 
problem with it is that once you touched them you became part 
of the antennae, you immediately got new reception. So being 
the youngest in the family they would make me just sort of hold 
it so they can watch a decent T.V. show.
    Mr. Quigley. I don't know how to follow with that, Mr. 
Cartwright, but it's up to you. [Laughter.]
    Mr. Cartwright. On behalf of the committee, may I think the 
Chairman for revealing what life in antiquity was like. 
[Laughter.]
    Mr. Quigley. Rural Indiana.
    Mr. Cartwright. Chairman Pai, you heard Commissioner 
Rosenworcel and I talking about mapping, and I wanted to give 
you a chance to weigh in. The shortcomings of current broadband 
mapping data are obvious; they're widely publicized and 
acknowledged. The Rural Utilities Service employs a review 
process to help verify which areas are unserved, and ensure 
that, as she said, scarce resources limited loan and grant 
dollars will go to where the need is greatest. The FCC has 
employed a similar process for certain USF mechanisms in the 
past, but not always.
    Chairman, do you agree that a challenge/evidentiary process 
is a good way to improve the accuracy of maps before funding 
decisions are made?
    Chairman Pai. I couldn't agree more, Congressman, and 
that's why last year, two years ago rather, I set up, and my 
colleagues agreed, with a challenge process that involved not 
just competitive providers but opening up to others, farm 
bureaus, for example, legislators and others who might want to 
challenge those maps. And in addition to that, we started an 
investigation into one or more of the carriers that we thought 
submitted inaccurate maps because we wanted to make sure there 
were submitting accurate data to us at the end of the day. And 
that's on the mobility side.
    On the fixed broadband side, I share your frustration, 
coming from a rural part of the country myself where it's hard 
to get coverage. One of the problems I encountered when I first 
got in office two years ago is the FCC's process for getting 
information from broadband providers was created in 2000. Now I 
mean just think about how long ago that was, 17 years--19 years 
is an eon in this area, and so we started to proceeding to 
upgrade that Form 477, as it's called. We've been meeting with 
stakeholders, we've been encouraging private sector actors to 
start mapping initiatives of their own, but the bottom line is 
we want to get better data in because that ensures, and we 
would be able to report to you, that every dollar going out in 
the universal service fund, is, in fact, closing that digital 
divide in Pike County or Parsons, Kansas, wherever it is.
    Mr. Cartwright. How much right now are you relying on 
service, you know, private sector service providers for giving 
you the information about where the areas are that are 
unserved?
    Chairman Pai. That has traditionally been the process that 
they submit this Form 477----
    Mr. Cartwright. One hundred percent?
    Mr. Pai. A fair amount, yes, except for the challenge 
process with respect to Mobility Fund, II.
    Mr. Cartwright. So what else can be done to improve 
broadband coverage maps?
    Chairman Pai. I think making sure that mapping process is 
robust--Congress obviously allocated resources to the Commerce 
Department now in part to address this issue--continuing to 
work with non-traditional stakeholders, as I might call them, 
encouraging farmers and others to participate in that process 
either through their farm bureaus or on their own. I mean there 
are so many things that we're doing right now to upgrade the 
granularity and meaningfulness of that data we're getting in.
    Mr. Cartwright. I'm glad you used that word 
``granularity''. I am curious to learn more about the recent 
announcement that the FCC and internet service providers will 
work to develop are more granular broadband data and mapping 
approach. Tell us more about that.
    Chairman Pai. Yes, thank you for the question, Congressman. 
We have encouraged some of the trade associations working on 
this issue to develop mapping initiatives, and some of them are 
starting to do that. I recently spoke at an event where one of 
those trade associations representing essentially phone 
companies announced an initiative to get that mapping 
initiative underway. Other providers and trade associations are 
doing that as well. But this issue is so important in terms of 
granularity. Last week, for example, I found myself on the 
Muller Ranch, which is in a rural part of Yellow County, 
California. They're not far from Sacramento, one of the biggest 
cities. But Frank Muller, who's the owner of the ranch said if 
you look at----
    Ms. Rosenworcel. Different Muller.
    Chairman Pai. Oh, so sorry. Yes, Frank, just if I did not--
--
    Ms. Rosenworcel. You had us all very confused. [Laughter.]
    Chairman Pai. I thought I said Frank, but in case I 
didn't--But one of the things he showed me was essentially this 
metal rod that he's been using that his father might have used, 
his grandfather might have used, to measure soil moisture, and 
he said essentially he'd just take out a chunk of soil and feel 
it to feel how moist it is. Then he showed me this very 
advanced tool and he said all I have to do is stick this thing 
in there and it monitors soil moisture, and Ph, and nitrogen 
and all the rest of it, but I can't use it because it relies on 
4G LTE.
    And if you look at a map you would think, oh, he's in 
Sacramento, he's a big city guy; but just a few miles away from 
Sacramento he's essentially in another geographic zone. And so 
we wanted to change that to make it more granular so we 
understand the Muller Ranches that are out there and target our 
funding to people like him and to places like his so that they 
can get on the grid.
    Mr. Cartwright. And working with the trade associations as 
you mentioned, it sounded like you're encouraging them to do 
that, is that correct?
    Chairman Pai. Absolutely. This is an all-hands on deck 
effort. We want all of them to be foremost thinking about how 
to give the FCC the----
    Mr. Cartwright. Not to interrupt but I'm almost out of 
time, you're encouraging them but you're not requiring them, is 
that it?
    Chairman Pai. Well, we do require them to participate in 
our Form 477 process, in the mobility fund mapping data 
collection initiative that we've got. Those are mandatory 
efforts. But we also want to encourage them to think about 
developing tools as well because ultimately it's beneficial not 
just to us but to consumers to understand where broadband is 
and where it isn't.
    Mr. Cartwright. Thank you, Mr. Chairman, I yield back.
    Mr. Quigley. Thank you, Mr. Cartwright. Chairman and 
Commissioner, I'll say this, I think the ranking member will 
join me. We may agree, we may disagree; you two may agree and 
disagree, but I will say you two are very well prepared and 
forthcoming and we appreciate your participation and your 
service, and this meeting is adjourned.
    [Questions and answers submitted for the record follow:]
    
    
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                                            Tuesday, April 9, 2019.

     DEPARTMENT OF THE TREASURY BUDGET REQUEST FOR FISCAL YEAR 2020

                                WITNESS

HON. STEVEN MNUCHIN, SECRETARY, U.S. DEPARTMENT OF TREASURY
    Mr. Quigley. Good morning, everyone.
    This morning we welcome Secretary of the Treasury, Steven 
Mnuchin, to testify on the Department's fiscal year 2020 budget 
request.
    Mr. Secretary, thank you for being here today.
    The fiscal year 2020 budget for the Department of the 
Treasury is $12.7 billion, which is $62 million below the 
fiscal year 2019 enacted level.
    In addition, the budget proposes $362 million in BCA cap 
adjustment funding for IRS program integrity activities.
    As in prior years, the request again proposes cuts to IRS 
that will reduce the resources available to support taxpayers 
and weaken the agency's ability to protect the integrity of our 
tax system.
    The request again proposes to eliminate funding for 
discretionary grant programs within the Community Development 
Financial Institutions Fund, and goes a step further by 
proposing to rescind $25 million in CDFI funding that Congress 
restored in the fiscal year 2019 bill.
    And it again slashes funding for the Special Inspector 
General for TARP by 24 percent, despite the continued 
obligation of billions of dollars for TARP programs that will 
continue into 2023.
    While there are many areas of concern in the 
Administration's request, I do want to call attention to one 
bright spot.
    I am pleased to see the budget includes increases for both 
the Office of Terrorism and Financial Intelligence and the 
Financial Crimes Enforcement Network.
    I look forward to hearing from you today on how the 
Department plans to use these funds, in addition to the 
significant increases that Congress appropriated in fiscal year 
2018 and fiscal year 2019, to enhance efforts to combat 
terrorist financing and money laundering and to enforce 
economic and trade sanctions.
    Lastly, I must take this opportunity to comment on the 
Department's plan to divert up to $601 million from the 
Treasury Forfeiture Fund to pay for the construction of 
physical barriers along the southern border.
    I understand $242 million has already been transferred to 
the Department of Homeland Security. This is $242 million that 
could have been used to augment IRS Criminal Investigations; 
$242 million that could have been used to support Homeland 
Security Investigations into financial crimes, money 
laundering, human trafficking, and intellectual property theft; 
$242 million that could have been spent on tools to help Coast 
Guard teams search for illegal drugs onboard vessels at sea.
    The decision to redirect these funds towards border fencing 
recklessly undermines the ability of Treasury and Homeland 
Security to address known threats and instead uses it for a 
symbolic campaign promise.
    Before I turn to our witness for his statement, I would 
like to recognize Mr. Graves for his opening remarks.
    Thank you, Mr. Graves.
    Mr. Graves. Thank you, Chairman Quigley.
    Welcome back, Secretary. It is good to have you back with 
us.
    The last time you were with our subcommittee, Congress had 
just passed the Tax Cuts and Jobs Act. 15 months later, GDP 
continues to grow. The unemployment rate is at the lowest rate 
it has been in over 50 years. The economy has added more than 5 
million jobs since the President took office and your team has 
been put to work.
    Eighty percent of individuals are now paying lower taxes 
this year. Businesses have lower regulatory and compliance 
costs, and it is easier for families and business owners to 
file their taxes, thanks to your leadership and the 
administration. We appreciate all you have done to get us to 
this point.
    I do want to commend you along with Treasury and the IRS 
staff who have worked so hard to implement tax reform for this 
filing season. I know it has been a tremendous amount of work 
for everybody. And Congress did not make it much easier for you 
when we had just a little bit of a lapse of funding for 30-plus 
days. I know that made it a little bit more challenging.
    But so far it seems tax filing season is proceeding without 
any notable problems, and if there are some, maybe you can 
highlight them for us today.
    But regarding the administration's budget proposal, I 
appreciate that you are making some important investments in 
the military and border security, while making tough choices to 
reduce spending. That is across the board when we have seen 
this budget proposal.
    The debt nearly doubled under the previous administration. 
We sometimes forget how that occurred and when it occurred, but 
it did. It is a debt that has been inherited by this 
administration, and I appreciate what you have been doing as 
well as the entire team with the Trump administration working 
within the budget limitations that Congress has placed on you.
    Now, I understand the request for the Treasury Department 
includes important investments in sanctions enforcement, 
national security reviews for foreign investments, 
cybersecurity, and IT infrastructure at the IRS, all very 
important investments, and thank you for you focus on that.
    And I look forward to working with Chairman Quigley in the 
days ahead as we formulate a budget that we know your 
department will have the sufficient resources necessary to 
carry out your mission.
    And, Mr. Chairman, I will be happy to yield back at this 
time, but thanks again for holding this hearing today.
    Mr. Quigley. Thank you, Mr. Graves.
    Secretary, I thank you so much for being here today. 
Without objection, your full written testimony will be entered 
into the record.
    With that in mind, we would ask you to please summarize 
your opening statement in 5 minutes.
    Secretary Mnuchin. Thank you. It is a pleasure to be here 
with you today.
    Chairman Quigley, Ranking Member Graves, and members of the 
subcommittee, I am pleased to join you today to discuss the 
President's fiscal year 2020 budget and the priorities for the 
Treasury Department.
    I am proud to report that President Trump's program of tax 
cuts, regulatory relief, and improved trade deals is resulting 
in the strongest economic growth since 2005 and the best job 
markets in generations.
    I would like to highlight some key issues for you today. I 
would note that Opportunity Zones are a key component of the 
Tax Cut and Jobs Act. They will help more Americans benefit 
from our strong economy. Opportunity Zones offer capital gains 
tax relief for investments in businesses in distressed 
communities. We are seeing a great deal of enthusiasm for this 
policy across the country.
    The administration is making trade a top priority. I urge 
all members of Congress to support the passage of the U.S.-
Mexico-Canada Agreement. It will create the highest standards 
ever negotiated to protect intellectual property rights, 
provide strong support for small and medium-size businesses, 
encourage manufacturing, open markets for American agricultural 
products.
    We are also making progress in negotiating with China to 
rebalance our economic relationship and unfair trade practices, 
open their economy to American companies, and protect our 
critical technology.
    Turning to the President's 2020 budget for the Treasury 
Department, it reflects our key goals of maintaining strong 
economic growth as well as protecting America's national 
security and technology infrastructure.
    We are requesting $35 million to continue implementing 
FIRRMA Modernization Act. This legislation, which passed 
overwhelmingly with bipartisan support, modernizes the 
Committee on Foreign Investment in the United States, known as 
CFIUS, review process.
    FIRRMA enhances CFIUS' ability to analyze transactions for 
national security while preserving our commitment to an open 
investment environment.
    The budget provides for increased funding for TFI and for 
the Financial Crimes Enforcement Network, FinCEN. These funds 
will be used to continue to protect the financial systems' 
abuse by rogue regimes and actors, including terrorists, 
transnational organized crime, proliferators of weapons of mass 
destruction, and other threats to our country.
    The funding includes critical investment in information 
technology and mission support capabilities.
    It also supports the Terrorist Financing Targeting Center 
and implementation of the Countering America Adversaries Act 
known as CAATSA.
    It also further expands FinCEN's ability to combat 
cybercrime and prevent the illicit exploitation of emerging 
payment systems, including cryptocurrency.
    I would like to highlight two other initiatives which are 
modernizing the IRS and the proposed integrity cap adjustment. 
Our 2020 request for $290 million for the Business Systems 
Modernization Account is the first installment that go towards 
upgrading IRS systems and operation.
    This plan will reduce long-term costs of maintaining these 
systems and dramatically improved taxpayer service.
    We are also requesting a program integrity cap to allow the 
IRS to efficiently collect taxes, enforce our tax code, prevent 
fraud, including by modeling compliance risks, and prevent 
identity theft.
    We anticipate that a $15 billion investment over 10 years 
would generate over $45 billion in additional revenue.
    Finally, I would note the budget includes additional 
support for the Office of Critical Infrastructure, which is the 
protection and compliance policy to help Treasury identify and 
reduce emerging threats and vulnerability to our financial 
systems.
    I look forward to answering your questions, and thank you 
very much. It is a pleasure to be here with you.
    [The information follows:]
    
    
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    Mr. Quigley. Thank you, sir. We appreciate that.
    So yesterday I was asked what questions I would ask you 
today. It just seemed humorous to me at the time, suggesting it 
was not going to be about how your NCAA brackets had done, but 
how did they go?
    Secretary Mnuchin. I am a bigger fan of professional 
basketball.
    Mr. Quigley. I have got it.
    Secretary Mnuchin. So I am not an expert at NCAA.
    Mr. Quigley. All right. So that the press does not think I 
totally misled them, let me get to the point. Last week we are 
well aware that the chairman of Ways and Means under 6103 of 
the Tax Code requested the President's tax returns.
    And we can get into the issue of what that answer should 
be, but at first I think it is more important that we talk 
about who should make that decision and, with respect, whether 
or not you, Mr. Secretary, should be involved in that decision.
    We are aware of a longstanding delegation order that the 
Secretary does not get involved in taxpayer specific matters, 
and that the IRS Commissioner has that responsibility. Quote, 
``the Commissioner of Internal Revenue shall be responsible for 
the administration and enforcement of the internal revenue 
laws.''
    In addition, this is not a delegation that is easily 
revocable. Federal law provides that if you decide not to 
delegate such a power, that decision, that determination shall 
not take effect until 30 days after you, Mr. Secretary, notify 
the tax writing and other specified committees.
    So it raises the question as to whether a decision to 
decide this by yourself is appropriate and legal. So let me 
begin with that and get your reaction as to whether or not you 
should be the one making that sort of decision, sir.
    Secretary Mnuchin. Well, first let me comment that I do 
look forward to talking about our budget.
    Mr. Quigley. We are going to get there, sir.
    Secretary Mnuchin. I am not surprised on this question. So 
better we get this out and----
    Mr. Quigley. I wanted to surprise you with that first 
question, but it did not work.
    Secretary Mnuchin. You did surprise me on the first 
question.
    Let me just comment that, first of all, I wanted to 
acknowledge that we did receive the request, and as I have said 
in the past, when we received the request it would be reviewed 
by our Legal Department, and it is our intent to follow the 
law, and that is in the process of being reviewed.
    Now, in regard to your specific question----
    Mr. Quigley. Well, let me just interject. I apologize. What 
part of a review, whether or not your office should be the one 
that makes the ultimate decision?
    Are they reviewing whether or not you should make that 
decision, as well, sir?
    Secretary Mnuchin. It would be premature for me to comment 
specifically what they are reviewing on or what they are not 
reviewing on, but I would highlight, okay, I think as you know, 
the law calls for a request to me. As you have said, there is a 
tradition of delegating certain responsibilities.
    I would just comment that it is my responsibility to 
supervise the Commissioner, but again, I think it would be 
premature at this point to make any specific comments other 
than, as I have been consistent before in saying it is being 
reviewed by the Legal Departments, and we look forward to 
responding to the letter.
    Mr. Quigley. Well, in case they are curious, we can 
reference Treasury Order 150-10 and Section 6103, which talks 
about the disclosure to committees of Congress on these points, 
and we go back. That was April 22nd, 1982. The previous order 
dates back to St. Patrick's Day 1955.
    So it would seem that the matter of who makes decisions is 
pretty clear. My concern is that we are going to get past that 
point, and the decision as to whether to pass these on will 
have already been made.
    But let me ask you in the meantime. The White House Chief 
of Staff made his thoughts on this pretty clear. Have you 
spoken to the White House Chief of Staff or the President about 
this decision?
    Secretary Mnuchin. I have not spoken to the White House 
Chief of Staff or the President about this decision.
    Mr. Quigley. Has anyone from the White House talked to you 
about this decision?
    Secretary Mnuchin. To me personally or to other people 
within my Department?
    Mr. Quigley. Well, you personally first and to other people 
second.
    Secretary Mnuchin. I have not had any conversations with 
anybody in the White House about this issue personally.
    Mr. Quigley. Any communication.
    Secretary Mnuchin. I personally have not had any 
communication with anybody in the White House, although I want 
to be specific that relates to me and not everybody at 
Treasury.
    Mr. Quigley. Okay. So to your knowledge, has anybody in the 
administration communicated with anybody in your office about 
this decision?
    Secretary Mnuchin. Our Legal Department has had 
conversations prior to receiving the letter with the White 
House General Counsel.
    Mr. Quigley. And did they brief you as to the contents of 
that communication?
    Secretary Mnuchin. They have not briefed me to the contents 
of that communication. I believe that was purely informational.
    Mr. Quigley. You believe what was purely informational?
    Secretary Mnuchin. I believe that the communication between 
our Legal Department and the White House General Counsel was 
informational, that we obviously had read in the press that we 
were expecting this.
    Mr. Quigley. So they communicated just to say, ``Expect 
this,'' or did they talk about their views in any way, shape, 
or form as to how you should respond?
    Secretary Mnuchin. Again, Mr. Chairman, I want to be clear. 
I personally was not involved in those conversations. Again, I 
want to be very clear and not be misleading. I acknowledge that 
there were conversations. I am not briefed on the full extent 
of those conversations.
    And I would also just comment those have been prior to us 
receiving the notice.
    Mr. Quigley. Yes, because they saw the handwriting on the 
wall. We are going to----
    Secretary Mnuchin. I think, as you know, it was widely 
advertised in the press beforehand.
    Mr. Quigley. Sure.
    Secretary Mnuchin. So this was not exactly a state secret 
that we thought we would be getting it.
    Mr. Quigley. I think this committee would like to know if 
in those communications the White House expressed their desire 
to you or anybody else at Treasury what their views or how you 
should act on this matter.
    So if you could pass that on, sir, we would greatly 
appreciate it.
    I will pass on to Mr. Graves now.
    Mr. Graves. All right, Mr. Chairman.
    Mr. Mnuchin, Secretary, it is interesting how these 
committee meetings at Appropriations have turned into 
investigative hearings, putting different individuals from the 
administration on trial it seems at times.
    And so, Mr. Chairman, it is, I think, fair for the 
Secretary to respond that they are going to fully comply with 
the law when I think we all know this is a political stunt by 
the new majority that just could not wait to get a gavel and to 
scour through all of the rules of the Ways and Means Committee 
into how they might use their political power and influence to 
retaliate against a political opponent that they just disagree 
with. That they do not like.
    They did not like the outcome of the Mueller report. So now 
we have got to issue a subpoena and request that the Attorney 
General break the law and reveal classified information and 
other things. It is remarkable to watch this occur.
    So, Mr. Secretary, I appreciate your good work, what you 
have done, as I said in my opening statement, all that you have 
done to assist the economy to make sure that there are plenty 
of jobs being created, 5 million new jobs since the 
administration took place.
    The GDP is growing strong. Unemployment is at a 50-plus 
year rate of the lowest ever in the 50-plus years.
    And yet what do we want to talk about? Tax returns. Why? I 
am sure the President has filed the financial disclosures as 
required by law, and I do not see any questions about that. But 
for some reason the new majority just wants to peek in, peek in 
a little bit further because they are just determined to prove 
something that they think might exist somewhere, and each time 
they get turned down and it is proven false.
    In fact, there was no collusion. There is no obstruction. 
But that is not enough, and here we go again with something 
else. It might not ever end.
    But halfway through this administration, you all are doing 
a fantastic job. I will go to something more pertinent to the 
day, and that is tomorrow we understand that in the House 
Financial Services Committee there is going to be the Chairman 
and CEO, Jamie Diamond, who is going to testify, and he is 
hopefully going to speak a little bit about cybersecurity. That 
is one of your priorities, and I am grateful for that.
    But the Chairman and CEO said that the threat of 
cybersecurity may very well be the biggest threat to the U.S. 
financial system, and that they spend about $600 million every 
year just to ward off cybersecurity attacks.
    You have made a request in your budget for a $7.7 million 
increase to strengthen the financial sector's cybersecurity 
infrastructure. You are taking that threat seriously, and we 
appreciate that.
    Just give us a little bit of a glimpse. Is the financial 
sector sufficiently prepared in your mind to manage large-scale 
business disruptions, data disclosures, and other cyber events?
    Talk about that for a second.
    Secretary Mnuchin. Sure. Well, thank you very much.
    I mean, let me just comment that cyber issues specifically 
relate to the financial infrastructure, which is a 
responsibility of the Treasury Department, working with DHS.
    It is something that we take very, very seriously, and this 
requires an ongoing investment. This is not just a one-time 
investment. This will focus on a continuing investment.
    I am actually hosting a meeting tomorrow afternoon of those 
CEOs at the Treasury Department, specifically with our 
cybersecurity experts. I will be having representatives of both 
DHS and the intelligence community there with me, as well as a 
session with the regulators.
    So this is one of the highest priorities for the 
department, and this is something we will continue to work with 
the private sector. The private sector has the primary 
responsibility, but this is an area where we need to improve 
the effectiveness of the U.S. government working with the 
private sector to prevent what could be both state actions and 
non-state actions, attacks to our infrastructure.
    Mr. Graves. The additional $7.7 million that you are 
requesting, share with us a little bit about how you expect to 
use that, how that might help with that goal.
    Secretary Mnuchin. That is to staff-up our internal 
department to do this. I think, to be honest with you, this is 
a rather modest request, given the size and the significant 
risk, and this may be something that we will come back in the 
future and ask for more money just as we appreciate we have 
asked for more money for TFI. I think that has been very 
effectively used. We appreciate it.
    This is a modest investment and something we may come back 
to you because it is one of the most important areas.
    Mr. Graves. Right. Thank you, Secretary. Thanks for being 
here and joining us today.
    Secretary Mnuchin. Thank you.
    Mr. Graves. Thank you, Mr. Chairman.
    Mr. Quigley. Mrs. Kirkpatrick.
    [No response.]
    Mr. Quigley. Mrs. Torres.
    Mrs. Torres. Secretary Mnuchin, I understand that a total 
of $9.6 billion has been provided for the Hardest Hit Fund 
since its creation. How much of that funding is left?
    Secretary Mnuchin. I am not aware of that specific number, 
but I can get back to you on that.
    Mrs. Torres. In the past two years, what are the main 
purposes for which the funds have been used?
    Secretary Mnuchin. The Hardest Hit Funds, I believe, as you 
know, was money that was----
    Mrs. Torres. I know what it is. Just answer my question 
please.
    Secretary Mnuchin. Can you repeat your question?
    Mrs. Torres. In the past two years, what are the main 
purposes for which those funds have been used?
    Secretary Mnuchin. They have been allocated to different 
States for various different purposes, as the funds are 
specified. It is not an arbitrary situation.
    Mrs. Torres. Exactly what were they being used for? You do 
not know, but can you follow up with my office and let me know?
    Secretary Mnuchin. Absolutely.
    Mrs. Torres. Thank you.
    Secretary Mnuchin. It is for various mortgage related 
issues in different parts in the States, but we are happy to 
give you a more detailed update.
    Mrs. Torres. I appreciate that.
    With the President's decision to spend up to $601 million 
on the border wall out of TFF, can you tell me what other law 
enforcement activities will not be supported in fiscal year 
2019?
    Secretary Mnuchin. I do not know the answer to that. The 
request for the funding was a request that came from DHS for 
law enforcement purposes. DHS has prioritized the different 
things. I cannot tell you. It is not within my domain.
    Mrs. Torres. Okay. So law enforcement purposes, only a 
priority at the border, but not in our communities?
    Secretary Mnuchin. Again, law enforcement purposes are not 
within the Treasury's domain as it relates to these issues. We 
transferred the funds, and DHS has prioritized them.
    Mrs. Torres. In prior years, Treasury has sought to 
maintain a minimum of $100 to $150 million in the TFF for 
operating expenses for the subsequent fiscal year. Treasury's 
latest reporting to the subcommittee projects that there will 
only be $71 million remaining in the TFF at the end of fiscal 
year 2019.
    Are you concerned that the project balances will be 
insufficient to fund essential operations for fiscal year 2019?
    Secretary Mnuchin. I am not. That was somewhat of an 
arbitrary number.
    I am sorry. I thought I answered. I said I am not 
concerned. The $100 million was somewhat of an arbitrary 
number.
    Mrs. Torres. Is that enough, $71 million, that number that 
you have that is projected to be left? Is that enough to fund 
current activity?
    Secretary Mnuchin. I believe it could, but we will look at 
that in the context of our overall funding.
    Mrs. Torres. Okay. Moving on to CDFI, in California's 35th 
District, which I represent, there are 252 loans and 
investments that were made using resources supplied by CDFI 
funding, totaling nearly $37 million. This means more for 
small, family-owned businesses.
    In crafting the fiscal year 2020 budget, you had a 
fantastic opportunity to change the fact that there are cuts to 
this program, but you did not. You are proposing a 94 percent 
decrease.
    Can you tell me why?
    Secretary Mnuchin. Sure. Well, let me just acknowledge that 
I do believe that the CDFI program does make significant 
contributions to certain communities, and I have seen this 
first hand both in my role at Treasury and my prior experience.
    This was just a difficult decision of allocating money 
between different priorities within the Treasury, and we look 
forward to working with you and the committee as you ultimately 
decide how we spend the money.
    Mrs. Torres. I just want to clarify. Certain communities 
are the communities that I represent, which are made up of the 
working poor. These are people that are working two or three 
jobs, that do not have a checking account that can match yours 
or anyone else in this room probably.
    So these programs are critical, and I hope that we can find 
a way to make it work so that these programs do not have to 
suffer a 94 percent cut.
    Secretary Mnuchin. I appreciate that, and as I said, I have 
acknowledged I have seen first-hand the benefit of many of 
these programs. So we look forward to working with you and the 
rest of the committee.
    Mrs. Torres. I only have 5 minutes, and I do not have time 
for niceties. So I apologize for just getting on.
    Mr. Quigley. Thank you.
    Mr. Stewart.
    Mr. Stewart. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here. We appreciate the 
time you take and look at the oversight by Congress as a 
fundamental constitutional prerogative. It is something that is 
important, and these hearings are an important part of that.
    I do have a few questions I would like to bore down on. 
Before I do, I cannot not address the elephant in the room, and 
that is the conversation already. I have expressed my view and 
concerns about this, and that is to push for tax returns, which 
I just think is political nonsense.
    I think most Americans can see it for what it is, and that 
is it is just politically motivated intrusion into basic 
fairness and basic privacy.
    And if that is not true, then I would ask did the chairman 
of the Ways and Means release his tax returns. Have other 
members and chairmen and chairwomen of other committees 
released their tax returns?
    Did the Clinton Foundation or former Secretary release 
their tax returns? Why is not every member of Congress and 
every Senator required to release their tax returns?
    And the answer is that because we have an expectation of 
right, and a right of privacy, and you are right. The chairman 
of the Ways and Means has in a confined way the authority to 
request these, but it has got to be for a legitimate 
legislative purpose.
    And I would challenge anyone when asking for these tax 
returns to define what that legislative purpose is. What are 
they investigating?
    And I think it is exactly what the ranking member said. 
This is nothing more than they disagree with an individual on 
their policies and their programs and their politics, and they 
want to punish that person. And this is the only way they can 
do it.
    They have been trying for 2 years, and it has failed and 
failed and failed, and so they will say, ``Well, let's try tax 
returns. Maybe there is something there. We have no evidence 
that there is anything nefarious. We have no evidence that 
there is any wrongdoing, but maybe we will find something.''
    And if you are going to have that be your standard, then 
have that be your standard for every member of Congress or for 
any other American citizen.
    And I think most Americans reject that. The only way this 
works is if the American people trust the IRS and trust that 
this information will be held private, and if it is not, if 
that is violated, then people will quit complying.
    And as we rely on voluntary compliance, by and large, for 
our tax policy and those programs being implemented, that will 
dissolve underneath us if people lose that basic sense of 
fairness.
    And that is the only thing this will do, is dissolve that 
basic sense of fairness that people are treated the same 
regardless of what position they may have or regardless of 
their politics.
    So once again, what is the legislative purpose of 
requesting these tax returns?
    What are you investigating?
    What crime or misdeed are you alleging here?
    And if you do not have the answer to that question, then 
you have no right to pursue this.
    We sent you a letter, and I know you have received 
hundreds, I suppose, letters. I do not expect you to recall 
this off the top of your head, but I would like you to answer 
back if you could and maybe follow up with us.
    I have supported sanctions against Russia in almost every 
fashion. I think they are a very important tool for us to 
punish them and to change their behavior regarding America's 
interest.
    The Countering America's Adversaries Through Sanctions Act 
was one I supported. It includes sanctions on financial 
services, energy and defense. We have vigorously sanctioned in 
those areas.
    It also authorizes sanctions in metals and mining, and we 
have not done any of that at all.
    Mr. Secretary, we sent you a letter last fall requesting 
that you look at sanctioning Russian potash. Now, this is 
important to me because the only potash producer in the entire 
country is in my district.
    And I was wondering if you could give us an update on a 
response to that letter and what your views are regarding our 
concerns in that letter.
    Secretary Mnuchin. Sure. Well, first of all, let me just 
say I actually do make a point of trying to read all of the 
letters that come in, and I cannot always recall all of them. 
So that is why my staff appropriately just gave me copies of 
this.
    But let me just first acknowledge sanctions are a very 
important tool. We have used them, I believe, very effectively 
against Russia. We will continue to use them against Russia for 
bad behavior, to try to change behavior.
    I want to be careful in a public setting that we do not 
comment on future sanctions, but I can assure you that my 
office will follow up. You requested something we are taking 
very seriously, and without implying we are going to do 
something or not do something because I do not want to 
publicize it, I can assure you we are taking your request very 
seriously.
    Mr. Stewart. Okay. My time has expired, but I would add 
this. Thank you for taking it seriously. We sent this letter 
nearly six months ago. Whether you agree or disagree, I do 
think that you owe us a response on this.
    So we would look forward to your formal response to this 
request.
    And, Chairman, thank you, and I yield back.
    Secretary Mnuchin. I think we actually did respond to it. 
So I apologize if there has been some confusion on that, on 
March 11th, but we will get you another copy.
    Mr. Quigley. Thank you, Mr. Secretary.
    I am sure that President Obama is relieved that the 
Republicans did not use their oversight authority and committee 
structure to analyze and dissect any part of his 
administration. So I am sure he is relieved that that never 
happened. [Laughter.]
    Mr. Quigley. Mr. Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman.
    And thank you, Secretary Mnuchin, for joining us again this 
year. Just down the hall we have Attorney General William Barr. 
Did you guys take the same cab over?
    Secretary Mnuchin. We did not, but as I referenced before, 
I am sure his is even more interesting than ours is this 
morning.
    Mr. Cartwright. Do not sell yourself short, Secretary.
    And if you do happen to bump into the Commerce Secretary, 
we are still waiting for him to show up. We are waiting by the 
telephone. We would still love to hear his testimony this year.
    I wanted to ask you about the Community Development 
Financial Institution Fund, and you are aware of what that is, 
right?
    The administration has proposed essentially eliminating 
that fund by reducing funding from $250 million in fiscal year 
2019 down to $14 million for the year going forward.
    That is a 94 percent decrease, and by my way of thinking, 
it represents pretty much a complete abandonment of that 
program by the administration.
    In previous years the administration has justified these 
kinds of drastic cuts by stating that the CDFI industry, quote, 
has matured, unquote, and that, quote, ``these institutions 
should have access to private capital needed to build capacity, 
extend credit and provide financial services to communities 
they serve,'' unquote.
    The question for you is I would like to know the basis for 
your conclusion regarding the relative maturity of the CDFI 
industry.
    Has there been a report or a study done by your agency that 
assesses the likelihood of private investors filling that gap 
left by defunding CDFI?
    Secretary Mnuchin. Mr. Cartwright, Mrs. Torres just asked 
me a similar question on this. So, again, I apologize. You did 
not hear, but let me reiterate what I said, which is, first of 
all, I do want to acknowledge that I do think the CDFI funds 
provide many benefits to many communities; that our decision 
here was based upon making difficult decisions on funding 
various different programs across the Treasury Department.
    And we look forward to working with you and the rest of the 
committee on specific allocations.
    Mr. Cartwright. I did miss your answer before. Did she ask 
you whether you had done a report or study to analyze whether 
there is a likelihood private investors fill the gap left 
behind de-funding CDFI?
    Secretary Mnuchin. I did, and I apologize. I did not answer 
that specifically for you. I do not believe we have done a 
report, although I will check.
    But as I have said, I want to acknowledge that we look 
forward to working with the committee on this funding.
    Mr. Cartwright. And I want to encourage you to commission 
such a study or report so that we are basing our decisions on, 
you know, facts and evidence.
    Secretary Mnuchin. I think that is a good idea, and I will 
encourage the staff to review this and do additional research 
on it either internally or externally.
    Mr. Cartwright. Perfect. The National Association of 
Federally Insured Credit Unions issued a statement opposing 
that elimination of CDFI funding. Did you see that?
    Secretary Mnuchin. I have not seen it specifically, but I 
am not surprised.
    Mr. Cartwright. Not surprised.
    Secretary Mnuchin. In my previous life, I was a banker, and 
I am familiar with, again, as I have said, I have seen 
specifically in certain communities where these have helped. So 
we look forward to working with you on this.
    Mr. Cartwright. Glad to know you have been paying 
attention.
    They said this. ``Without the CDFI fund grant program, many 
CDFI credit unions would not have been able to offer new 
products and loans that provide financial stability for members 
and their families,'' unquote.
    And this statement seems to contradict your position that 
the CDFI industry has fully matured. What do you know about the 
CDFI industry that the NAFCU apparently does not know?
    Do you believe that you are in a better position to judge 
the maturity of the CDFI industry than CDFI credit unions 
themselves?
    I suppose the answer to that is all wrapped up in the study 
that I hope you are going to commission.
    Secretary Mnuchin. Yes. And let me just acknowledge whether 
the industry has matured or the industry has not matured, like 
many other programs, even if it has matured, there could still 
be benefits of certain things.
    Again, this was a difficult decision on funding across 
various different programs, and we look forward to working with 
you and perhaps given the popularity of this program within 
certain areas of Congress, we will reconsider it if it is 
funded in how we propose it in next year's budget.
    Mr. Cartwright. Okay. So operating without studies or 
analyses, you are working assumptions, and my question is: how 
many other aspects to the Treasury's proposed budget are also 
based only on assumptions?
    And how much credence should we be putting in this 
administration's budget based on assumptions and not facts in 
evidence?
    Secretary Mnuchin. I would be happy to discuss any of the 
specifics with you on any of the requests. Obviously with an 
entire department, there are certain things I am personally 
very involved with.
    If you want to talk about IRS modernization, that is 
something I am very interested in, the TFI funding. There are 
many things I can comment on the specifics of and how we have 
reached the decision.
    But obviously, not every single line item itself.
    Mr. Cartwright. Well, thank you, Mr. Secretary, and my time 
is up.
    I yield back, Mr. Chairman.
    Mr. Quigley. Thank you.
    The gentleman from Ohio, Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman.
    And thank you very much, Secretary Mnuchin, for taking the 
time to be with us this morning.
    Last year I was not a member of this subcommittee, but 
during a subcommittee hearing on the budget, I had discussed an 
issue which the next day you came out and talked out. I really 
wish we would have flipped it by a day. It probably would have 
been very helpful, but it is regarding the issue of access to 
banking for the cannabis industry.
    And you described that conflict as untenable. Just last 
year you stated that reviewing the existing guidance, referring 
to the 2014 policy memo meant to provide direction for banks on 
how to service cannabis businesses.
    If I can quote you for a moment, ``We do want to find the 
solution to make sure that the businesses that have large 
access to cash have a way to get them into a depository 
institution for it to be safe.''
    I could not agree with you more, sir. In my 25 years as a 
prosecutor, I think it is a horrible situation that is sitting 
out there, and we need to get that.
    But I have taken to introduce some legislation to clarify 
the existing discrepancy between State and Federal cannabis 
laws. While I am not asking you for an official position on my 
bill, I would like to hear your thoughts on how this body can 
be more helpful when it comes to banking access for legitimate 
cannabis businesses.
    And I would really like to work with you because I believe 
you are right on this, and the current situation is untenable.
    So who on your senior staff could we work with to try to 
find some solutions for both of us?
    Secretary Mnuchin. I would be pleased to follow up with you 
directly and bring a team up.
    Again, without having a policy view on the conflict of 
Federal law versus State law, for many areas that fall under 
the Treasury Department, this creates a significant conflict, 
everything from the IRS, which wants to collect taxes and has 
to build specific cash rooms to hold cash, to me working with 
the banking regulators where there are conflicts.
    So I would encourage this as something that we are not 
taking a policy position on the conflict of Federal versus 
State, but this is something that does create a conflict in our 
ability to administer many areas.
    Mr. Joyce. Certainly if you went and spent $20,000 cash on 
a car, you would kick of a SARS, and if you come in to pay your 
taxes with $100,000 in cash, please come on in. You know, we 
will gladly accept it.
    That to me does not make any sense and needs to be 
something we need to work to cure, and I look forward to 
working with you on that.
    But Treasury has issued guidance clarifying that certain 
tax-exempt bonds maintain tax-exempt status when refinanced, 
but has not yet issued such guidance for the Tribal Economic 
Development Bonds. Tribes are beginning the process of 
refinancing their bonds now, and in the absence of such 
guidance will face significant and unanticipated costs 
increases.
    Does Treasury still intend to issue such guidance?
    And if so, will you please do so and expedite its 
completion?
    Secretary Mnuchin. We are in the process of issuing, as you 
can imagine, an enormous amount of guidance as it relates to 
the Tax Act. So I am not aware of this specific, but I assure 
you I will check with the staff, and we will follow up with you 
to see where that is.
    Mr. Joyce. We have many hearings on today, and I am ranking 
member in Interior where these Indian issues will come up, 
tribal issues will come up more often. So that is why I have an 
interest in making sure that we can fix those.
    Secretary Mnuchin. I completely understand. Thank you.
    Mr. Joyce. And you know, another one was that the Treasury 
Tribal Advisory Committee was authorized in 2014 to advise the 
Secretary in all tax matters related to Indian Country. 
Appointees to the committee have been chosen by Congress and 
Treasury, and the charter is written. Unfortunately, Treasury 
has never convened a meeting of this committee.
    Is it your intent to convene a meeting of this committee?
    And if so, when?
    Secretary Mnuchin. I was not aware that we had not done 
that. So I appreciate you bringing it to my attention. I have 
no idea why. It sounds like we should convene that. So we will 
follow up with that.
    Thank you for bringing it to my attention.
    Mr. Joyce. Thank you for following up.
    And lastly, the Opportunity Zone Program creates tax 
incentives for investment in designated census tracts which are 
economically challenged. Many of these Opportunity Zones 
include lands held in trust by the Federal Government for 
tribes.
    But because Treasury's draft regulations require funds to 
be used to purchase and improve property in designated zones, 
they inadvertently exclude these lands held in trust, and also 
inadvertently exclude tribal governments from being eligible.
    Will you look into this matter? And if the exclusion was, 
in fact, inadvertent, could you do what you can to ensure that 
the final regulations include tribal governments and lands held 
for these tribes in trust?
    Secretary Mnuchin. Yes. That issue I am somewhat more aware 
of, and let me just comment. In general, I think the 
Opportunity Zones are a very important program, and this is 
something that I hope that people can work across party lines 
as we continue to implement this.
    There are some technical issues, as you have said. This is 
a highly technical issue that we are trying to figure out how 
we solve. We do not yet have resolution to.
    Mr. Joyce. I certainly appreciate your time in being here 
today, and in behalf of my other members who might have gotten 
up and left, there seems to be only four of us on every 
committee, and as you know, there are other hearings that are 
taking place today. So they have left to hit ten other 
hearings.
    I will be leaving, and it has nothing to do disrespect for 
you, sir. It is just the fact that I have other hearings we 
have to attend as well.
    I yield back.
    Mr. Quigley. Thank you, sir.
    The gentleman should be commended for his clear, 
consistent, ongoing concern for the issue related to cannabis 
banking and related issues that go with it.
    Mr. Secretary, I want to touch on before we go where we 
started this, but you are correct in discussing the issues of 
FY 20. Let me let you take some time to address an area of 
concern that has come to our attention, and that is the reports 
and the quote is ``mass exodus'' of staff due to internal 
disagreements and lack of direction.
    Can you address the concerns within Treasury of loss of 
staff?
    Secretary Mnuchin. I do not believe we have. So if there 
are specific questions you have, but we have not lost staff due 
to issues or anything else. So despite what may or may not be 
written in the press, it is just not factually correct.
    Mr. Quigley. I just want to get your answer, sir, on the 
record.
    But toward that end, fiscal year 2020 proposes to cut 
funding for the Treasury Inspector General for Tax 
Administration by $4.25 million and to hold the Treasury 
Inspector General at flat funding, despite the extraordinary 
growth in funding for other Department offices, including a 
$41.4 million increase for Department salaries and expenses and 
a $7.7 million increase for the Office of Terrorism and 
Financial Intelligence.
    So there are parts of the agency that are growing, except 
for those that oversee and do inspections of how you are doing. 
Can you justify at this point in time cutting the watchdog 
parts of the agency that are otherwise growing?
    Secretary Mnuchin. All right. Again, we would be happy to 
follow up with your staff on the specifics of any of this.
    So I think when you drill down into the numbers, you cannot 
just look at the headline number. You have to look at, in the 
case of the departmental office, as I said, its specific 
increases in areas like CFIUS and others that are for national 
security.
    As it relates to the Inspector Generals, I fully support 
the role of the Inspector Generals in the Department both in 
taxes and other areas, and again, we would be happy to go 
through the specifics of how these were built and the 
recommendations.
    Mr. Quigley. But your initial reaction to the fact that at 
least one of those Inspector General offices is going to be cut 
and the other one will get flat funding, I cannot imagine 
anyone believes that their agency is of a mind that it cannot 
be inspected and should not have a hardy inspection of those 
issues that they are working on.
    Secretary Mnuchin. Well, the significant reduction, the 
only significant IG reduction is the area of TARP, and the 
reason for that is that program is discontinued. So----
    Mr. Quigley. It still has programs that are going to be 
operating, funding through for some period of time though, 
right?
    Secretary Mnuchin. And, again, we are happy to go through 
the specifics, but those ongoing programs are overseen by other 
people, okay, outside of the Treasury Department and have very 
specific reporting requirements.
    So, again, we are happy to sit down with your staff and go 
through any of the specifics.
    I want to acknowledge we think that the IG's role, 
particularly I would comment in the area of tax administration, 
is very important.
    Mr. Quigley. Sure. Well, and TIGTA is cut, but obviously 
the IRS is growing, and hopefully growing a significant amount 
to be able to continue its job.
    But thank you.
    Mr. Joyce.
    Mr. Joyce. I would certainly defer if Mrs. Torres has a 
question at this time.
    Mr. Quigley. Mrs. Torres.
    Mrs. Torres. Thank you.
    And thank you for bringing up the issue of cannabis. When 
there is so much cash around, it creates a lot of problems, and 
when I look at crime around facilities that sell cannabis, it 
is a big issue in our committees, and I hope that you will take 
some time to look into that.
    I want to go back to the issue of forfeiture funds. I just 
want to get clarification that the funds required to operate 
the TFF, the amount that you gave us, $71 million, is adequate, 
is an adequate amount to leave in the fund that we should 
consider.
    Secretary Mnuchin. I believe it is, but since you have 
asked me the question twice, what I would say is let me go back 
and just confirm that with my internal group because you 
obviously have raised some concerns about this, and we will 
follow up with your staff to make sure that we are 100 percent 
comfortable on that and can update you on why we feel that is 
the case.
    Mrs. Torres. I appreciate that, and I apologize. I usually 
like to send my questions in advance so our guests are prepared 
to answer my concerns.
    Secretary Mnuchin. It would have been helpful if the 
chairman had sent me the question about the NCAA in advance.
    Mrs. Torres. So I want to talk about the Northern Triangle 
countries, Guatemala, El Salvador, and Honduras. Obviously, you 
know, we have a humanitarian crisis at the border with hundreds 
of people coming north, a very difficult situation there not 
only with crime, but very, very corrupt governments.
    It is unfortunate that we have provided very little 
political support for CSIG, which is, you know, the UN 
investigative body, commission, that is there to help provide 
support to the Attorney General, and in Honduras as MACCIH.
    Last Wednesday, April 3rd, the Department of State provided 
Congress with a list of corrupt officials from the Northern 
Triangle countries, which was required by my amendment in 
fiscal year 2019 in DAA. As I have already said publicly, I was 
very disappointed with that list. I was very disappointed to 
see many officials that we know are dealing in narcotics and 
very much involved in narco trafficking were not on that list.
    So, Mr. Secretary, given the very short list that we have, 
do you see any reason why those individuals on such a list, 
which was created by the Department of State, should not be 
sanctioned under the Magnitsky Act?
    Secretary Mnuchin. In general, let me just comment. I work 
very closely with Secretary Pompeo and the State Department on 
many issues and the sanctions. I am not familiar with this list 
per se.
    I will follow up with the Secretary both to understand the 
list and review, if it is appropriate, for sanctions. It does 
sound like it is something we should look at and take into 
consideration.
    As I said, we have used these obviously in many other 
areas. I am more familiar with them in the case of Mexico and 
Venezuela, of drug trafficking and other issues, but I will 
follow up on that.
    Mrs. Torres. Again, if you want to deal with the issues 
that we have at our southern border, you know, we cannot be 
negligent and not pay attention to the very corrupt governments 
in the Northern Triangle.
    The reason why these people are fleeing is because there is 
no justice. There is no access to justice, and their 
governments are stealing funding that should be available to 
create programs for education.
    I hate to continue to devastate other budgets that are 
critically needed in our community, like the forfeiture 
funding, to build the wall when the answer is right in front of 
us, and that is dealing with the corrupt people. They should 
not have a visa, and they should not have access to our 
financial institutions here in the U.S., not when we know and 
we are very clear that they are dealing and they are known 
narco traffickers.
    Secretary Mnuchin. Well, let me again agree with you 
completely that Treasury and this administration in no way 
wants to look the other way when we are aware of corruption in 
foreign governments, and these sanctions work, and we will 
follow up with your office to make sure that corrupt officials 
do not have access to our financial system.
    Thank you.
    Mrs. Torres. I appreciate it.
    My time is up, and I yield back.
    Mr. Quigley. Thank you.
    Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chairman.
    I am at a point, Secretary Mnuchin, can you explain what 
you are doing to help Federal, State and local law enforcement 
develop the intelligence to understand how drug organizations 
and laundering their drug proceeds or how they are laundering 
their drug proceeds?
    And what are you doing with the Government of China to stop 
the flow of fentanyl into this country?
    Because obviously we have a tremendous amount of overdose 
deaths that exceed car accidents and everything else now.
    Secretary Mnuchin. Sure. Let me answer your second question 
first because that is something that I am very, very familiar 
with. I participated in the meeting between President Trump and 
President Xi where President Trump specifically asked President 
Xi to change the classification of fentanyl so that it would be 
illegal in China.
    That is something that President Xi said was very difficult 
to do, but because the request came from President Trump, that 
was a commitment he made on the spot. I understand that a lot 
of that is in the works and has changed.
    And that is a specific area where we appreciate China 
working with us on that because I think, you know, fentanyl is 
a very significant issue in this country and a big concern of 
President Trump's.
    As it relates to your first question, our specific role at 
Treasury is obviously where we have any specific intelligence 
in enforcing the sanctions as it relates to money laundering.
    We also work very closely through FinCEN with all of the 
banks on money laundering. As it relates to specific State and 
local areas, that is obviously something that we do on an 
interagency basis. We are not always the primary lead on, but I 
assure you money laundering is one of our top priorities that 
we focus on.
    Mr. Joyce. Thank you for the work that you are doing there.
    Secondly, I know that when we were in the majority that we 
took great pleasure in cutting the amount of money that was 
going to the IRS every year, and I know that you have taken it 
under your wing and the budget request proposes investments to 
implement your integrated modernization business plan, to 
modernize IRS systems, which I applaud, and taxpayer services 
in two three-year phases beginning in 2019.
    How would this modernization plan improve the long-term 
operations of the IRS and the service provided to taxpayers and 
businesses alike?
    Secretary Mnuchin. Well, thank you for raising that issue 
because I would say if there is one of the most important 
things that I think this committee can do is to give us the 
funding to invest in modernization at the IRS.
    The IRS has underfunded their technology for years and 
years. This is not a Republican or a Democrat issue. This has 
crossed multiple administrations. It is somewhat embarrassing 
that we are operating at the size and scale we are. The IRS is 
under attack all the time for cyber issues, and that we are on 
dated technology.
    I think, as you know, we had a problem last year, not this 
year, on Tax Day because of this dated technology, and I would 
also say that taxpayers deserve to have capabilities of online 
customer service that are consistent with other big financial 
institutions.
    Taxpayers are paying the government significant amounts of 
their hard-earned money, and they should be able to have access 
to information. They should be able to communicate.
    In this day and age, calling up and asking to speak to a 
person on the phone is not necessarily the most efficient thing 
to do.
    And let me just comment. This has to be multi-year funding. 
So for this to be effective, we need multi-year funding. This 
cannot be turned on and off. This is going to take 5 or 6 years 
to implement.
    Mr. Joyce. Is it an investment also in the data services, 
the infrastructure there?
    I know the one thing I have seen: is it pretty dated, the 
equipment that you are forced to use down there? Back to the 
old mainframe days?
    Secretary Mnuchin. It is a combination of hardware, 
software, business processes. It impacts every single area. It 
impacts our enforcement. It impacts our customer service.
    Over time, by the IRS taking in all this data, we should be 
able to do more of our enforcement electronically using 
technology, and taxpayers deserve to have a better experience, 
which we need this investment in technology to do.
    Mr. Joyce. Thank you, sir.
    Mr. Chairman, I yield back.
    Mr. Quigley. Thank you.
    And, sir, I cannot agree more. We absolutely need to on a 
bipartisan basis help modernize the IRS, and I hope we are all 
in agreement that we need to make sure they have the resources 
to enforce those efforts as well and that those dollars are not 
taken away every year or reduced every year in the process to 
help fund the other parts of the agency.
    Mr. Crist.
    Mr. Crist. Thank you, Mr. Chairman.
    And thank you, Secretary, for being with us today.
    Mr. Secretary, I want to talk about cash. You oversee a lot 
of important agencies, sir, designed to keep Americans safe and 
keep the financial system secure. And there is a vast 
regulatory system built on that, monitoring everything from 
bank accounts to wire transfers, from terrorist financing, real 
estate fraud, insider training, even Russian sanctions, as it 
were.
    When money touches the U.S. financial system, it is almost 
like it comes into the light. I like that. I am from Florida, 
and we appreciate transparency, as I am sure you do. We like to 
say that sunlight is, in fact, the best disinfectant.
    I am grateful to all of the folks at Treasury who are 
utilizing financial regulations to find the bad guys, throw 
them in jail, keep the American people safe. They have a lot of 
tools, and they know how to use them and use them well.
    But this is a question about cash. Would you briefly 
explain to me from a law enforcement perspective what happens 
when markets exist in cash only?
    Secretary Mnuchin. Well, first of all, thank you for your 
acknowledgement of the many areas.
    Cash, obviously particularly as it relates to the U.S. 
financial system, we need to be able to track cash when it 
comes in and out of the banking system so that cash 
transactions are not used for illicit purposes.
    I would also say a big focus of ours has also been crypto 
assets for similar reasons, that cryptocurrencies can be used 
like cash for illicit activities.
    So cash is something that is very important to monitor. On 
the other hand, I do just want to acknowledge despite the world 
that we live in which is going more and more digital, the 
worldwide demand for U.S. cash is significant, and being the 
reserve currency of the world, we have to be careful in being 
able to properly enforce and monitor these cash transactions 
with that.
    Mr. Crist. Yes, sir. It seems like from a financial crime 
standpoint money laundering, tax evasion, even armed robbery, 
cash only is not right. It seems like as policy makers, you and 
I would want to steer commerce out of the all cash space and 
into regulated space. Would you agree with that, by and large?
    Secretary Mnuchin. Again, I want to be careful because, 
yes, as a general matter, cash transactions create a more 
complicated regulatory environment.
    On the other hand, as I said, I want to be very careful 
that we do not regulate that you cannot use cash.
    Mr. Crist. Fair enough. My home State recently legalized 
medical marijuana, overwhelmingly, and the industry has 
responded, Mr. Secretary. By 2020, the regulated license and 
tax cannabis market in my State alone could come close to $1 
billion.
    But because of a discrepancy in Federal and State law and a 
failure of Congress to act and a failure of regulators to be 
proactive, this regulated licensed, voter approved billion 
dollar industry is going to be all cash.
    I note a 5.86 percent increase requested for Financial 
Crimes Enforcement Network, or FenCEN. I assume this increase 
is because you all want to catch more bad guys and make 
families more safe.
    So why then is Treasury not doing everything at its 
disposal to create a workable, reasonable, confidence-inspiring 
way to make it safe for these companies to bring their revenues 
into the sunlight?
    Secretary Mnuchin. Mr. Crist, we have had a few other 
comments on this earlier. So, again, let me just say I hope 
this is something this committee can on a bipartisan basis work 
with since there are people on both sides of the aisle that 
share these concerns.
    I will just say I do not believe this is a failure of the 
regulators. I want to defend the regulators on this issue. The 
problem is, okay, there is a conflict between the Federal law 
and the State law.
    And I am not making a policy comment on what the right 
outcome is, but I, too, share your concern, whether it is my 
supervision of the IRS where I have already said we have to 
build cash rooms to take in cash, which creates all different 
types of security issues.
    There is not a Treasury solution to this. There is not a 
regulator solution to this. If this is something that, you 
know, Congress wants to look at on a bipartisan basis, I would 
encourage you to do this.
    This is something where there is a conflict between Federal 
and State that we and the regulators have no way of dealing 
with.
    Mr. Crist. Thank you.
    Your encouragement is appreciated, Mr. Secretary. Thank you 
so much.
    Mr. Chairman, I yield.
    Mr. Quigley. Thank you.
    I am going to close by commending you as I did in the 
beginning and questioning you as I did in the beginning.
    Again, I want to thank you for the notion of including 
increases for both the Office of Terrorism and Financial 
Intelligence and the Financial Crimes Enforcement Network. We 
want to work with you to make sure we use those precious 
resources appropriately.
    Mr. Crist talked about transparency. He was quoting the 
people of Florida, but it was actually Justice Brandeis who 
said sunshine is the best of disinfectants.
    Respectfully, sir, I would disagree with you in the notion 
that your office should be reviewing this decision, the request 
coming from the chairman of Ways and Means, at all.
    But in the final analysis, I think you need to appreciate 
the fact, and I am asking you if you do, what Mr. Crist brought 
up. There is a reason that Presidents release their tax 
returns, right? There is a reason these regulations were put in 
place and the ability to do this, and it is certainly not 
anything novel, as has been suggested recently.
    Richard Nixon, Gerald Ford, Nelson Rockefeller all had 
congressional hearings relating to their tax returns. There is 
something you trade off when you do what the President of the 
United States does, and it is generally the notion that the 
public has a right to know and make the decision on their own 
whether a law maker is making a decision based on their own 
interest or on someone else's.
    So would you acknowledge there is a reason these Presidents 
released their returns and that this call for transparency 
matters at this time in our Nation's history?
    Secretary Mnuchin. Well, I believe that these Presidents 
released those returns on a voluntary basis. I am not aware of 
that there is any law that required them to.
    I am aware----
    Mr. Quigley. But would you acknowledge that there is a 
reason they did it, that they are not doing it----
    Secretary Mnuchin. I do not----
    Mr. Quigley [continuing]. To show people how to fill out a 
tax return if you are the President.
    Secretary Mnuchin. Again, they made individual decisions. I 
would just also like to say there is a requirement for 
Presidents to have financial disclosure. I believe that this 
President has complied with that, as other people, and the 
general public, when they elected President Trump, made the 
decision to elect him without his tax returns being released.
    Now, since we opened with this, okay, I guess I just cannot 
help----
    Mr. Quigley. We can do better with an answer.
    Secretary Mnuchin [continuing]. I just cannot help but say 
since you made the comment on President Obama and being looked 
at, I am----
    Mr. Quigley. A little bit.
    Secretary Mnuchin [continuing]. I am sure there are many 
prominent Democrats who are relieved that when Kevin Brady was 
the chairman of the committee that he did not request specific 
returns.
    But anyway, it was a pleasure to be here----
    Mr. Quigley. Because it was released.
    Secretary Mnuchin [continuing]. With you today.
    Mr. Quigley. And President Obama released visitor records. 
President Obama was more transparent than the last ten 
Presidents.
    Secretary Mnuchin. I was not referring to Presidents. I was 
referring to other members of Congress, prominent Democratic 
people who may support people, ordinary taxpayers.
    But in any event, it is a pleasure to be here with you 
today to address the funding, and we look forward to working 
with you on many of these bipartisan issues.
    Mr. Quigley. And this is a technical question. Will you 
submit DHS' request for funding for the record?
    Secretary Mnuchin. I assume we would be more than happy to 
do that. Just make sure I check on that, but I do not see any 
reason why that would not be the case.
    Mr. Quigley. Very good. Thank you.
    This meeting is adjourned.
    [Questions and answers submitted for the record follow:]
    
    
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