[Congressional Record Volume 140, Number 144 (Thursday, October 6, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: October 6, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. DODD (for himself and Mr. D'Amato):
  S. 2510. A bill to amend the Federal Deposit Insurance Act to exclude 
certain bank products from the definition of a deposit; to the 
Committee on Banking, Housing, and Urban Affairs.


      the bank insurance fund and depositor protection act of 1994

 Mr. DODD. Mr. President, I introduce the Bank Insurance Fund 
and Depositor Protection Act of 1994. Sponsoring this legislation with 
me is my colleague, Senator Alfonse D'Amato, the ranking member of the 
Senate Banking Committee.
  The Bank Insurance Fund and Depositor Protection Act of 1994 is 
simple and straightforward. It prohibits Federal deposit insurance 
coverage for a new financial product that recently emerged from a small 
corner of the retail banking world. This first of its kind product, 
called a retirement CD, has been cleverly constructed to receive both 
the benefits of Federal deposit insurance and tax deferral.
  Earlier this year, the Office of the Comptroller of the Currency 
[OCC] and the Federal Deposit Insurance Corporation [FDIC] sanctioned 
the sale of the retirement CD by Blackfeet National Bank, a small 
national bank in Montana. In separate letters dated May 12, 1994, the 
FDIC and the OCC stated that they had no objection to the sale of the 
retirement CD by Blackfeet. I would note that the Internal Revenue 
Service has not issued a similar opinion on the tax status of the 
retirement CD.
  At this time, Blackfeet is the only insured depository institution 
going forward with the sale of the retirement CD to consumers. However, 
it is my understanding that approximately eight other institutions have 
signed licensing agreements to sell the retirement CD and may begin 
offering the product within the next few weeks. Many others are 
carefully examining the retirement CD with an eye toward offering it at 
some time in the future.
  Mr. President, as it is currently structured, the retirement CD is 
not an appropriate product to be covered by Federal deposit insurance. 
The retirement CD raises significant policy issues related to consumer 
protection, safety and soundness, regulatory control, and competitive 
equity. I believe that if it is allowed to proliferate as it is 
currently structured, the retirement CD could have a tremendously 
negative impact on consumer confidence in our financial institutions 
and on the stability of our deposit insurance system.
  I have described in detail most of my concerns about the retirement 
CD in a June 20, 1994 letter that I and several of my Banking Committee 
colleagues sent to the OCC and the FDIC. I would like to include that 
letter along with the regulators' responses in the Record.
  I will not reiterate all the concerns described in that letter, but 
will briefly mention a couple of the more troubling issues that arise 
in connection with the retirement CD.
  First, there is enormous potential for customer confusion about the 
retirement CD's terms and conditions. This product is not a plain 
vanilla certificate of deposit. It is not a simple annuity. It is a 
complex newfangled hybrid that has both CD and annuity features.
  The retirement CD pays a fixed rate of interest for up to 5 years, 
after which the rate is adjusted at the sole discretion of the bank. 
This rate is never supposed to fall below 3 percent. Interest ceases to 
be posted upon maturity. The customer may withdraw up to two-thirds of 
the balance at maturity, and the remainder will be disbursed in fixed 
periodic payments for life, incorporating the imputed interest rate.
  Consumers must understand that the interest rate is set at the sole 
discretion of the bank. While there is a 3-percent floor during the 
period when interest accrues, there is no similar threshold during the 
payout phase. This raises the prospect that a customer may not know 
what the imputed rate is tied to, and that the bank could offer a fixed 
payout at an extremely unfavorable rate.
  Second, a consumer must understand that this retirement CD, unlike 
traditional certificates of deposit, contains a component that is not 
FDIC insured. FDIC insurance only applies to the balance that is not 
withdrawn at maturity, less the full dollar amount of any payments 
received. If a bank that issues a retirement CD fails at a point when 
the customer had already received the full value of the account through 
lump-sum distribution and monthly payments, the FDIC would neither 
insure nor continue to pay the monthly payments for the rest of the 
customer's life. This is the case despite the fact that the promotional 
material claims to guarantee payments for life.
  Mr. President, the OCC and the FDIC share many of my concerns about 
the likelihood of customer confusion, the existence of misleading 
marketing information, and the impact of this product on bank safety 
and soundness. They outlined these concerns in their respective no 
objection letters I referred to earlier. However, the regulators chose 
not to prevent Blackfeet from going forward with the issuance of the 
retirement CD, as long as the bank complied with a lengthy list of 
conditions.
  Mr. President, I think this was ill-advised. There is already strong 
evidence of substantial customer confusion regarding the insurance 
status of non-deposit investment products like mutual funds and annuity 
products being sold by banks and other insured depository institutions. 
These products are much less complex that the retirement CD. The 
regulators themselves have helped to collect compelling evidence about 
the ongoing problem of customer confusion. At a time when we are 
wrestling with how to eliminate this problem, I find it difficult to 
understand why the regulators gave their stamp of approval to the sale 
of this new complex product which can only make a bad situation worse.
  Mr. President, for this and many other reasons, the retirement CD as 
it's currently structured should not be offered by banks to the public. 
The legislation I am introducing today will exclude the retirement CD 
from the definition of a deposit under the Federal Deposit Insurance 
Act. The retirement CD will therefore not be confered by Federal 
deposit insurance
  The legislation does not prohibit banks from offering the retirement 
CD. It simply denies the product deposit status under the Federal 
Deposit Insurance Act.
  The legislation is not intended to eliminate existing levels of 
deposit insurance coverage to deposit accounts established in 
connection with certain individual retirement accounts, Keogh plans, 
eligible deferred compensation plans, pension plans, or similar 
employee benefit plans which may be maintained at an insured depository 
institution. This legislation eliminates Federal deposit insurance 
coverage for products which expose the issuing insured depository 
institution, and ultimately the deposit insurance funds, to liabilities 
that are annuity contracts and are tax deferred under section 72 of the 
Internal Revenue Code of 1986.
  The provisions of this act do not apply to any liability which is not 
an annuity contract, whether or not tax deferred under section 72 of 
the Internal Revenue Code. For example, a liability other than an 
annuity contract which is part of an individual retirement account 
would not be affected by the provisions of this act even though the tax 
liability is deferred under section 72 of the Internal Revenue code of 
1986 because section 408(d) of the Code incorporates section 72 only by 
reference.
  Mr. President, the retirement CD may be cleverly packaged. It may be 
a tempting new business opportunity for the banking industry. But 
because it raises serious public policy concerns that have not been 
fully explored, it must not be provided the protection of the Federal 
safety net--at least until it is more closely examined by Congress, the 
banking regulators, and the Internal Revenue Service. I hope that the 
Banking Committee will hold hearings on this matter early next year.
  I ask unanimous consent that the Bank Insurance Fund and Consumer 
Protection Act of 1994 be printed in the Record along with additional 
material.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2510

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Bank Insurance Fund and 
     Depositor Protection Act of 1994''.

     SEC. 2 DEFINITION OF DEPOSIT.

       Section 3(l)(5) of the Federal Deposit Insurance Act (12 
     U.S.C. 1813(l)(5)) is amended--
       (1) in subparagraph (A), by striking ``and'' at the end;
       (2) in subparagraph (B), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(C) any liability of an insured depository institution 
     that arises under an annuity contract, the income on which is 
     tax deferred under section 72 of the Internal Revenue Code of 
     1986.''.

     SEC. 3. EFFECTIVE DATE.

       The amendments made by section 2 shall apply to any 
     liability of an insured depository institution that arises 
     under an annuity contract issued on or after October 6, 1994.
                                  ____



                     1. consumer protection issues

       The OCC and FDIC letters clearly indicate that both 
     regulators have rather significant reservations about the 
     consumer-protection implications of the Retirement CD. Both 
     letters contain suggestions or conditions aimed at ensuring 
     customer understanding and adequate disclosure. This insured 
     deposit product combines features of both certificates of 
     deposit and annuities, and it is enormously complex. 
     Consumers may not fully comprehend how it works, the interest 
     rate structure or the extent of FDIC insurance coverage.
       The Retirement CD will pay a fixed rate of interest for up 
     to five years, after which the rate becomes adjustable until 
     the agreed- upon maturity date. The only assurance given to 
     the consumers with respect to this variable interest rate is 
     that it will be at least 3 percent. Upon maturity, the 
     customer may withdraw up to two-thirds of the account 
     balance, and the remainder of the account will be dispersed 
     for life in fixed payments. These periodic payments 
     incorporate an imputed interest rate. The consumer must 
     understand that the interest rate, during much of the 
     accumulation period (prior to the agreed- upon maturity date) 
     and all of the payout phase, will be determined at the sole 
     discretion of the bank. Furthermore, as we understand this 
     product during the payout phase, there will be no minimum 
     imputed interest rate, similar to the three percent floor in 
     the accumulation phase. This raises an ominous prospect: that 
     a customer will not know exactly what the ``imputed'' rate is 
     keyed to an that the bank could offer a fixed payout at an 
     extremely unfavorable rate.
       As we understand the product, FDIC insurance would only 
     apply to the balance (principal plus accrued interest) that 
     was not withdrawn on the date of maturity, less the full 
     dollar amount of any payments received during the pay-out 
     period. Therefore, a customer would have to understand that 
     if the bank were to fail at a point when the customer had 
     already received the full value of the account through lump-
     sum distribution and monthly payments, the FDIC would neither 
     insure, nor continue to pay, the monthly payments for the 
     rest of the customer's life.
       The OCC and the FDIC have expressed consumer protection 
     concerns with respect to depository institution sales of 
     uninsured non-deposit investment products, such as mutual 
     fund shares. There is evidence that banking consumers do not 
     always understand the simple fact that some of the products 
     that banks offer are not FDIC-insured. With respect to the 
     Retirement CD, we are concerned that consumers will not be 
     able to fully-understand that a product that is called a 
     ``certificate of deposit''--a traditional insured deposit 
     product--contains a component that is not FDIC-insured 
     (although we understand that the promotional materials 
     misleadingly ``guarantee'' payments for life).
       Even the regulators seem somewhat uncertain about how the 
     Retirement CD works. The respective letters from the OCC and 
     the FDIC differ in their descriptions of one of the most 
     important basic terms of the product--mainly, at what point 
     the payout is agreed to. The OCC letter states, ``[o]n the 
     maturity date the customer will select from various options 
     for repayment'' (p. 2, emphasis added). The FDIC letter 
     states, ``[u]pon opening the account, the customer also 
     chooses his/her payout options'' (p. 1-2, emphasis added). If 
     the regulators are confused, certainly the potential for 
     consumer confusion is enormous.
       We must ask this question: Do the regulators honestly 
     believe that this product--that contains variable interest 
     rates, certain tax benefits, and partial FDIC-insured deposit 
     status--will not create substantially greater confusion than 
     non-deposit investment products?


                          2. regulatory issues

       Annuities are currently subject to the state regulations 
     enforced by state insurance officials. It is unclear if state 
     insurance regulatory requirements will apply to the 
     Retirement CD. Both customers and the bank should know this. 
     If state regulations do not apply, it should be determined 
     whether banks and bank regulators currently have the ability 
     or resources to safeguard these accounts, and what policies 
     and procedures are necessary to train bank personnel about 
     annuities and about appropriate sales practices.


                     3. safety and soundness issues

       Blackfeet and other banks that may offer the Retirement CD 
     clearly will be acting as an underwriter of what is 
     essentially an annuity. Although clever lawyering has gained 
     this annuity product designation as a ``deposit'', it poses 
     much greater risk to the bank than a traditional deposit. 
     National banks will be assuming an unprecedented and 
     inappropriate risk as a result of having to make a fixed 
     payout for the life of a customer. Ultimately, these payments 
     could exceed the consumer's balance on deposit at maturity. 
     While the OCC suggests that Blackfeet's business plan should 
     indicate how it will manage the risk associated with the 
     annuity payment, the OCC requires no specific showing that 
     the bank has the capability to quantify or manage this 
     long-term liability of unknown proportions.
       This ``deposit'' is structured so that at the date of 
     maturity, the bank must determine the fixed lifetime payout 
     for the customer using a complex and not entirely-discernible 
     process to achieve a proper rate of return. The Congress has 
     opted not to authorize banks to assume the type of risk 
     Blackfeet would assume in offering the Retirement CD. The OCC 
     and the FDIC seem willing to disregard this consistent record 
     of Congressional reluctance to allow federally-insured 
     depository institutions to engage in such high-risk 
     activities. The OCC and FDIC also seem too willing to take it 
     on faith that a small national bank (armed with a software 
     program) will have the business acumen and operational know-
     how to handle the risk of underwriting this annuity product.


                     4. competitive equality issues

       The proliferation of the Retirement CD will produce an 
     unfair competitive advantage for banks. It is reasonable to 
     expect that consumers will be drawn to a tax-deferred annuity 
     that also offers federal deposit insurance. By allowing 
     national banks to underwrite, market and sell a tax-deferred 
     annuity that is FDIC-insured, the FDIC is granting a 
     substantial competitive advantage over similar annuity 
     products that do not come with a government guarantee.
       In expanding future opportunities for all financial service 
     providers and consumers, the Federal government's goal should 
     be to encourage competition on a free and fair basis. Balance 
     sheet strength, customer service and other market-determined 
     characteristics, not market-distorting government guarantees, 
     should determine success. Given the recent savings and loan 
     crisis, and the regulators' concerns over the abuse of 
     deposit insurance, it would seem ill-advised to extend the 
     reach of the federal safety net to a product that raises so 
     many regulatory, competitive and consumer protection 
     concerns.
       The OCC and the FDIC have made it very clear that when 
     given the opportunity, they will usually take the most 
     expansive and creative view of bank powers under current law. 
     We strongly support the view that, to the maximum extent 
     possible, an explicit statutory mandate must exist before the 
     regulators authorize expanded powers for banks, or any other 
     financial intermediaries. For this reason, we continue to 
     support comprehensive modernization of our entire financial 
     system. Until this can be accomplished by Congress, we urge 
     the OCC and FDIC to balance the proclivity to expand bank 
     powers through regulatory channels against the legitimate 
     public policy concerns of consumer protection, safety and 
     soundness, and competitive equality. Products that raise 
     serious public policy concerns deserve great scrutiny, 
     regardless of how cleverly they are packaged or how 
     attractive they may be to the banking industry. The 
     Retirement CD is clearly one such product.
       We do not share your view that this product, as it is 
     currently structured, in an appropriate product for national 
     banks to offer to retail customers. Therefore, we are 
     developing, and will soon introduce, legislation to prohibit 
     the sale of this investment product. Pending consideration of 
     this legislation by Congress, we urge the OCC and the FDIC to 
     reconsider their respective positions on the Retirement CD.
           Sincerely,
     Christopher J. Dodd.
     Richard H. Bryan.
     Alfonse M. D'Amato.
     Lauch Faircloth.
                                  ____

                                         Federal Deposit Insurance


                                                  Corporation,

                                     Washington, DC, July 8, 1994.
     Hon. Christopher J. Dodd,
     Committee on Banking, Housing, and Urban Affairs, U.S. 
         Senate, Washington, DC.
       Dear Senator Dodd: Thank you for your letter concerning the 
     Retirement CD, a product developed by American Deposit 
     Corporation which is being offered by Blackfeet National 
     Bank, Browning, Montana. Your letter expresses reservations 
     regarding the Federal Deposit Insurance Corporation's 
     position, as expressed in our Legal Division's May 12, 1994 
     advisory opinion. We appreciate the opportunity to address 
     your concerns. Similar letters will be sent to Senators 
     D'Amato, Bryan and Faircloth.
       Your primary concern is the ``consumer protection 
     implications of the Retirement CD.'' The FDIC shares your 
     concern that potential customers not be misled with regard to 
     the workings of and the federal deposit insurance coverage 
     afforded to the Retirement CD. That is precisely why the 
     advisory opinion discusses these issues in such detail. The 
     advisory opinion expressly states that the ``FDIC therefore 
     strongly believes that all promotional materials, 
     advertisements, agreements and other customer materials 
     concerning the Retirement CD should clearly and conspicuously 
     state that the lifetime monthly annuity payments are not 
     guaranteed by the FDIC.'' The opinion then goes on to 
     discuss, in great detail, the Legal Division's concerns 
     regarding the customer promotional materials which it 
     reviewed, including explicit suggestions to revise certain 
     portions of the text which were found to be inaccurate and 
     possibly misleading. The advisory opinion also states that 
     the offering bank should follow the applicable provisions of 
     the ``Interagency Statement on Retail Sales of Nondeposit 
     Investment Products.''
       Your letter questions whether (i) state insurance laws and 
     regulations apply to the Retirement CD and (ii) a national 
     bank may offer this type of product. Our advisory opinion 
     makes it quite clear that since the FDIC was addressing these 
     questions as insurer, not as the primary federal regulator of 
     Blackfeet National Bank, the only questions considered by the 
     Legal Division were whether the Retirement CD is a 
     ``deposit'' as that term is defined in section 3(l) of the 
     FDI Act and, if so, the extent to which it is insured by the 
     FDIC. Thus, the FDIC did not consider and has taken no 
     position on these other issues. Your letter also asserts 
     that the FDIC has ``sanctioned'' and ``reacted favorably'' 
     to the Retirement CD. While the FDIC has determined that 
     the Retirement CD is a ``deposit'' as that term is defined 
     in the FDI Act and, therefore, is entitled to a certain 
     level of deposit insurance coverage, the advisory opinion 
     explicitly provides that it ``should in no way be 
     represented or construed as an endorsement or approval by 
     the FDIC of this product.''
       You suggest in your letter that the regulators seem 
     uncertain about how the Retirement CD works since the FDIC's 
     and OCC's descriptions of the choice of payout options differ 
     slightly. While our advisory opinion does state that the 
     customer chooses his/her payout option when the account is 
     opened, it goes on to explain that this election may be 
     changed at any time up until thirty days prior to the 
     maturity date. Thus, the FDIC and OCC share a common 
     understanding of the product's parameters.
       Section 11(a)(1)(A) of the FDI Act requires the FDIC to 
     insure the deposits of all insured depository institutions. 
     Since our staff determined that the Retirement CD qualifies 
     as a deposit--to the extent described in the advisory 
     opinion--we are required by law to insure it. In making its 
     determination, the Legal Division considered all applicable 
     statutory factors. The FDI Act does not require, or even 
     permit, the FDIC to consider the ``ramifications for the . . 
     . insurance industry.''
       If you have any further questions or need any additional 
     information, please let us know.
           Sincerely,
                                              Andrew C. Hove, Jr.,
                                                  Acting Chairman.
                                  ____

                                      Comptroller of the Currency,


                              Administrator of National Banks,

                                  Washington, DC, August 18, 1994.
     Hon. Christopher J. Dodd,
     Committee on Banking, Housing, and Urban Affairs, U.S. 
         Senate, Washington, DC.
       Dear Senator Dodd: I am responding to your June 20, 1994, 
     letter addressed jointly to me and Andrew C. Hove, Acting 
     Chairman, Federal Deposit Insurance Corporation (``FDIC''), 
     concerning our recent letters to the Blackfeet National Bank 
     (the ``Bank'') regarding its new Retirement CD. I appreciate 
     this opportunity to address the concerns expressed in your 
     letter relating to this bank product. Since your letter was 
     also signed by them, we have sent identical responses to 
     Senators Bryan, D'Amato and Faircloth.
       Your letter states you are troubled that the OCC ``would 
     react favorably to a product with such enormous ramifications 
     for the banking system, the Bank Insurance Fund, the 
     insurance industry--and, most importantly, for the consumers 
     of financial products--without consultation with Congress and 
     without requesting more specific commitments and information 
     from American Deposit Corp. or Blackfeet.''
       Please be assured that during the OCC's review of the 
     Bank's November 8, 1993, letter in which the Bank informed us 
     of its intention to market the Retirement CD, our staff had 
     numerous telephone conversations with Blackfeet and its legal 
     counsel, and did request a substantial amount of additional 
     information. On the basis of that information and our own 
     research, we found no reason in law or supervisory policy to 
     prohibit the offering of this product. Accordingly, we issued 
     our no-objection letter to the Bank. Our administrative 
     process does not routinely involve consultation with 
     Congress. However, we are available to discuss the Blackfeet 
     matter with you and the members of your staff at your 
     convenience.


                     1. consumer protection issues

       The consumer protection issues you address generally arise 
     from the mix of features that comprise the Retirement CD, and 
     the ability of the Bank to explain and of consumers 
     adequately to understand this combination of features. You 
     are concerned that the product's structure may prevent 
     consumers from fully comprehending how the product works, its 
     interest rate structure and the extent to which the product 
     is covered by FDIC insurance. In addition, your letter 
     indicates that consumers may not be able to understand a 
     product that is called a certificate of deposit but 
     contains a non-FDIC insured component. Moreover, you ask 
     whether we believe that the Retirement CD, which contains 
     variable interest rates, tax benefits, and partial FDIC-
     insured deposit status, will create substantially greater 
     confusion than nondeposit investment products.
       The OCC is concerned about any bank product that 
     potentially may confuse customers. I understand your concern 
     that the combination of certain attributes of the Retirement 
     CD, including variable interest rates, tax benefits, and 
     partial FDIC-insured deposit status presents complications 
     and could create customer confusion. We fully agree that it 
     is important customers not misunderstand the nature of 
     financial products offered to them. This is a problem to 
     which we and the other federal banking agencies have been 
     sensitive in our evaluation of bank sales of all types of 
     nondeposit investments products. While the Retirement CD's 
     complexities do not present a legal basis for preventing its 
     offer and sale by the Bank, they do raise supervisory 
     concerns. In response to those concerns we imposed conditions 
     on the operation of Bank sales programs to address the 
     potential problem of customer confusion.
       Our legal review of the Retirement CD rested upon an 
     analysis of the powers of national banks to engage in the 
     business of banking. We concluded that offering the product 
     represents the exercise by the Bank of its express 
     authorizations to receive deposits and enter into contracts, 
     coupled with its powers to incur liabilities and fund its 
     operations. By offering the Retirement CD, the Bank is 
     engaging in the business of banking, an activity federal law 
     authorizes it to undertake.
       The Bank did not seek and the OCC did not issue a formal 
     approval of the product. Because offering the Retirement CD 
     lies within the business of banking, the Bank does not need 
     specific OCC approval to offer the product. Even so, the Bank 
     may not ignore safety and soundness and customer protection 
     concerns when it actually sells the product. We therefore 
     advised the Bank that the OCC would not object to the 
     offering of the Retirement CD only if the Bank met certain 
     supervisory and consumer protection related conditions.
       To address consumer-related concerns, our letter cautioned 
     the Bank that the OCC expects it accurately to represent the 
     ``product's risk and economics, deposit insurance status and 
     tax treatment in dealing with actual and prospective 
     customers.'' We also stipulated twelve conditions that 
     concern adequate disclosure and customer protection. Among 
     these conditions are requirements that the Bank--(1) take 
     steps to assure that its representations to customers 
     regarding the FDIC insured status of the product are fair and 
     accurate (condition #6); (2) make specific disclosures 
     concerning the tax aspects of the product (conditions #9-10); 
     (3) adequately explain the product's mechanics and economics 
     (condition #12); (4) properly explain the calculation of the 
     applicable interest rate (condition #13); and (5) implement 
     an appropriate training program for personnel who will be 
     involved in marketing the product. OCC examiners will 
     periodically evaluate the Bank's compliance with these 
     conditions.
       In addition to the conditions detailed in our letter 
     concerning disclosures, we informed the Bank that the 
     Interagency Statement on Retail Sales of Nondeposit 
     Investments Products, NR 94-21 (February 17, 1994) is 
     applicable to the non-FDIC insured portion of the product. We 
     have also advised the Bank of the applicability of 12 U.S.C. 
     Sec. 4301 et seq. and 12 C.F.R. Sec. 230 et seq. (Truth in 
     Savings).
       You also set forth your understanding that during the 
     payout phase of the Retirement CD there will be no minimum 
     imputed interest rate, similar to the three percent floor in 
     the accumulation phase. This is not our understanding. The 
     Bank has represented to us that at the end of the 
     accumulation phase, a monthly payment amount is calculated 
     for the depositor based primarily on three elements--(1) the 
     balance left in the account after the depositor has made any 
     withdrawals; (2) an imputed interest rate that cannot be 
     below three percent; and (3) the depositor's life expectancy. 
     Once the payment amount is determined, it remains fixed for 
     the life of the depositor. Thus, there is a minimum imputed 
     interest rate of three percent used in calculating the 
     monthly payments.
       Another concern expressed in your letter relates to the 
     fact that FDIC insurance only applies to the balance 
     (principal plus accrued interest) that is left in the account 
     at the end of the accumulation phase. Your concern is that 
     depositors may not understand that if the Bank fails after 
     the depositor has received payments equal to this balance, 
     the FDIC would neither insure, nor continue to pay, the 
     monthly payments for the rest of the customers life. We 
     addressed this specific concern in condition #6 of our letter 
     where we directed the Bank to take steps to assure that 
     representations to customers concerning the FDIC insured 
     status of the product are fair and accurate, and that any 
     limitations on FDIC insurance are conspicuously indicated.
       You also expressed concern that the Bank's promotional 
     materials contained the phrase ``guaranteed payments for 
     life.'' This language was contained in an early draft of the 
     Bank's materials, and we strongly objected to it. (See 
     condition #8 in our letter.) The phrase has been deleted from 
     the current draft promotional materials and the term 
     ``guaranteed'' now is used only with respect to the three 
     percent guaranteed minimum interest rate. We are discussing 
     use of the term in the context with the Bank's counsel to 
     make sure its use is not confusing to investors.
       Finally as to consumer issues, you point out an apparent 
     discrepancy between our letter and the FDIC's with respect to 
     the time at which consumers may select from various options 
     for repayment. The FDIC's letter states the selection is made 
     ``upon opening the account'' whereas our letter states the 
     selection is made ``on the maturity date.'' The depositor is 
     actually allowed to select the terms for repayment on either 
     date. We viewed the maturity date as the most effective time 
     for this selection, and that is why we used that date in our 
     letter. However, the FDIC is correct in stating that 
     depositors may make their selections upon opening the 
     account.


                          2. regulatory issues

       You state that annuities are currently subject to state 
     regulations enforced by state insurance officials, and note 
     that it is unclear if state insurance regulatory requirements 
     will apply to the Retirement CD. In addition, you believe 
     that customers should know whether state regulations apply to 
     the product. If they do not, you suggest we consider whether 
     banks and bank regulators currently have the ability or 
     resources to safeguard these accounts, and what policies and 
     procedures are necessary to train Bank personnel about 
     annuities and appropriate sales practices.
       Our legal analysis and conclusions to date have been 
     limited to a determination of the Bank's authority to conduct 
     the business of banking under the National Bank Act. State 
     regulatory officials may conclude that state insurance laws 
     also apply to the Retirement CD or any other activity which 
     we interpret as being authorized by the National Bank Act. 
     Such a conclusion, however, does not affect our 
     interpretation of that Act. The applicability of any 
     particular state law to the Retirement CD will have to be 
     reviewed on a case by case basis.
       We believe the OCC has the expertise fully to examine and 
     evaluate Bank practices to mitigate the risks associated with 
     the Retirement CD. The most significant concerns associated 
     with the Retirement CD, in our view, relate to liquidity and 
     funding. Written procedures and formal training presently 
     available to, and extensively used by, OCC examiners address 
     a variety of issues relevant to the supervision of bank 
     obligations, including the evaluation of bank liquidity and 
     funding issues. In the event additional guidance or training 
     is necessary, it will be provided to examiners.
       Condition #15 of our no-objection letter specifically 
     requires the Bank to implement a program for training 
     personnel who will be involved in marketing the Retirement 
     CD. The training program must ensure a thorough understanding 
     of the product so that customer questions are answered 
     properly, and investment risks are adequately conveyed. The 
     OCC has focused, and will continue to focus, on the Bank's 
     training efforts in this regard, as well as its other efforts 
     to mitigate the risks associated with the product.


                     3. safety and soundness issues

       You state that offering the Retirement CD is tantamount to 
     acting as an underwriter of an annuity. The risks associated 
     with the product you believe are much greater to the Bank 
     than a traditional deposit. The risk you state comes from the 
     ``unprecedented and inappropriate risk'' a bank assumes by 
     agreeing to make a fixed payout for the life of a customer. 
     You are also troubled that the OCC ``requires no showing that 
     the bank has the capability to quantify or manage this long-
     term liability of unknown proportions.''
       Our letter to the Blackfeet National Bank prescribed 
     conditions for the Bank, including the need for Bank 
     expertise in designing and implementing product controls and 
     systems to mitigate the risks associated with the product. We 
     directed the Bank to pay particular attention to adequate 
     planning for the use of funds generated from the product, 
     accurate estimation of product payouts, and proper design 
     of internal controls. Additionally, we required that the 
     Bank adequately manage its funding sources for the payout 
     obligations that will arise from the Retirement CD, 
     considering the financial risks associated with the 
     product.
       We directed the Bank to take appropriate steps to deal with 
     the risks it will assume by offering the Retirement CD and 
     required the Bank to furnish us with a detailed business 
     plan. The OCC will review the business plan and will evaluate 
     the manner in which the Bank utilizes funds received from the 
     Retirement CD and funds these obligations.
       We believe these steps adequately and responsibly address 
     the supervisory concerns you have expressed with the payment 
     risks associated with the Retirement CD. As with any bank 
     product, we will continue to review the Bank's implementation 
     of these procedures and evaluate the Bank's effectiveness in 
     dealing with the risks associated with the product. Should we 
     determine at any point that the Bank is materially not in 
     compliance with these requirements, we would direct it to 
     cease offering the product until it took appropriate 
     corrective actions.


                     4. competitive equality issues

       You state your belief that the proliferation of the 
     Retirement CD will result in an unfair competitive advantage 
     for banks over annuity products offered by insurance 
     companies. Given the wide and growing range of products that 
     could be viewed as competitive in this area, and 
     uncertainties as to the popularity of the product, it is hard 
     to tell whether any competitive advantage will actually be 
     present. But the potential for competitive implications does 
     not affect the Bank's legal authority to offer the product.
       I hope this letter addresses the questions and concerns you 
     expressed in your letter concerning the Blackfeet Retirement 
     CD. Should you have any questions or need any additional 
     information, please let me know.
           Sincerely,
                                                 Eugene A. Ludwig.
                                  ____

         U.S. Senate, Committee on Banking, Housing, and Urban 
           Affairs,
                                    Washington, DC, June 20, 1994.
     Hon. Eugene Ludwig,
     Comptroller of the Currency, Office of the Comptroller of the 
         Currency, Washington, DC.
     Hon. Andrew C. Hove,
     Acting Chairman, Federal Deposit Insurance Corporation, 
         Washington, DC.
       Dear Mr. Ludwig and Chairman Hove: We are following with 
     great interest and concern the efforts of the Blackfeet 
     National Bank (``Blackfeet'') of Browning, Montana to offer 
     to the general public a new ``Retirement CD.'' We are 
     disappointed that the OCC and the FDIC, by separate 
     correspondence dated May 12, 1994, have in effect sanctioned, 
     with certain conditions, plans to market and offer this 
     Retirement CD investment product.
       We are very troubled that the OCC and FDIC would react 
     favorably to a product with such enormous ramifications for 
     the banking system, the Bank Insurance Fund, the insurance 
     industry--and, most importantly, for the consumers of 
     financial products--without consultation with Congress and 
     without requesting more specific commitments and information 
     from American Deposit Corp. or Blackfeet.
       The Retirement CD product raises a number of significant 
     concerns which we have detailed below. We strongly believe 
     these matters need to be thoroughly addressed by the 
     regulators and Congress before this investment product is 
     offered to the public.

 Mr. D'AMATO. Mr. President, I am pleased to cosponsor the Bank 
Insurance Fund and Depositor Protection Act of 1994 with my 
distinguished colleague from Connecticut, Senator Dodd. This bill makes 
a necessary and important refinement to our banking laws. This bill 
would clarify the definition of a ``deposit'' in the Federal Deposit 
Insurance Act to make clear that certain annuity products are not FDIC-
insured deposits. This legislation would provide necessary guidance to 
the banking regulators, make the law more precise, and protect the bank 
insurance fund from potential unquantifiable losses.
  Mr. President, recently there has been a lot of marketing hype about 
a new investment product--the Retirement CD. This product will operate 
much like a traditional annuity, but will be underwritten by a bank 
under the rubric of certificate of deposit. In short, a Federal-insured 
hybrid investment vehicle--and a potential roll-of-the-dice with Uncle 
Sam's implicit backing. The Comptroller of the Currency and the FDIC 
will permit this so-called CD to be offered to depositors, with FDIC 
protection, under current law. Senator Dodd and I, along with several 
of our colleagues on the Senate Banking Committee, wrote to the OCC and 
the FDIC to express our concern about this product, a product that 
would be marketed with the market-enhancing lure of FDIC insurance.
  Mr. President, the regulators have tried to address the issues we 
raised, but our public policy concerns remain unabated. This 
legislation has been introduced in order to provide further 
congressional guidance as to the appropriate scope and operation of 
Federal banking law and the proper use of Federal deposit insurance.
  This bill has been refined in an attempt to avoid any undesired 
effect on standard deposit products that banks commonly offer today. 
For instance, qualified plans and individual retirement accounts are 
not intended to be covered by this legislation, to the extent that they 
do not generate depository institution liabilities that constitute 
annuity contracts. This is so even if the depository institution 
liability has tax-deferred status under section 72 of the Internal 
Revenue Code.
  Again, I support this bill with the hope that it will protect 
consumers of financial products, safeguard FDIC funds, and promote 
safe-and-sound banking practices.
                                 ______

      By Mr. LIEBERMAN:
  S. 2511. A bill to specifically exclude certain programs from 
provision of the Electronic Funds Transfer Act; to the Committee on 
Banking, housing, and Urban Affairs.


         THE ELECTRONIC BENEFITS REGULATORY RELIEF ACT OF 1994

 Mr. LIEBERMAN. Mr. President. I introduce the Electronic 
Benefits Regulatory Relief Act of 1994. This bill is also cosponsored 
by Senators Breaux, Domenici, Durenburger, Hatfield, and Pressler. When 
passed, this bill will eliminate one of the major barriers to making 
the banking system more accessible to those receiving government 
benefits like Aid to Families with Dependent Children or food stamps. 
If this bill is not passed, we will have missed an opportunity to 
reduce the cost of government services, and an opportunity to make the 
delivery of government services more efficient and humane.
  This legislation is necessary to reverse a regulation issued by the 
Federal Reserve Board. That ruling, issued last March, said that the 
electronic benefit transfer [EBT] cards issued by Stats are subject to 
the same liability limits as ATM or credit cards. On the surface that 
seems reasonable--a card is a card and there seems little reason to 
differentiate between cards to withdraw government benefits from a bank 
and cards to withdraw earnings or savings from a bank. But, as is often 
the case with regulations, what appears on the surface isn't 
necessarily the whole story.
  With the simple extension of this regulation to EBT cards, the 
Federal Reserve has dramatically altered social benefit legislation, 
extended the Electronic Funds Transfer Act into a realm it was not 
intended to cover, and created for States a new liability of 
unpredictable size. This bill seeks to reestablish the legislative 
intent governing food stamps, the legislative intent of the Electronic 
Funds Transfer Act, an at the same time limit a State's exposure to 
liability if they chose EBT over checks and coupons.
  Electronic benefit transfer cards are simply an extension of current 
technology into the delivery of government benefits. Instead of 
receiving checks or coupons, recipients receive an EBT card. With that 
card they can access the cash benefits whenever and wherever they 
choose. They can withdraw as little as $5, or as much as the system 
will allow in a single transaction. Recipients can use their card at 
the supermarket instead of food stamps the way millions of Americans 
now use credit or debit cards to pay for food.
  EBT cards offer recipients greater protection from theft than current 
methods of payment. Without the associated pin number, the EBT card is 
useless. Checks are easily stolen and forged. Food stamp coupons, once 
stolen, can be used by anyone and can even be used to buy drugs on the 
black market.
  EBT cards provide recipients access to a banking system that is 
frequently criticized for shunning them. It is often the case that the 
only way a recipient can get his or her check cashed is by paying an 
exorbitant fee to some nonbanking facility. Several Senator have 
introduced or supported bills requiring banks to cash government 
checks. Their goal was to provide these individuals access to the same 
services most Americans enjoy. Those bills will be unnecessary when EBT 
cards replace checks. EBT cards can be used at number of locations at 
any hour of the day or night and no fees charged to the recipient for 
transactions.
  The action by the Federal Reserve will stop all of these benefits 
from happening. State and local governments have indicated that if 
Regulation E is enforced they will not go forward with EBT. John 
Michaelson, the director of Social Services in San Bernardino County 
California points out that while San Bernardino County was selected as 
the pilot site for the California EBT development, that project will 
not go forward as long as Regulation E applies. Similarly, Governor 
Carlson of Minnesota recently wrote to me indicating that the plans to 
expand EBT statewide in Minnesota will be halted by the application of 
Regulation E. Letters of support for this legislation have come from 
Gov. Pete Wilson of California, Gov. David Walters of Oklahoma, Gov. 
Mike Sullivan of Wyoming, Gov. Edwin W. Edwards of Louisiana, Gov. Arne 
H. Carlson of Minnesota, the National Association of State Auditors, 
Comptrollers and Treasures, the American Public Welfare Association, 
the National Association of Counties, the National Governors 
Association, and the Electronic Funds Transfer Association. I ask 
unanimous consent that these letters, along with the letter from Mr. 
Michaelson, be printed in the Record immediately following my 
statement.
  The dilemma that faces States is that simply switching from checks 
and coupons to EBT cards, because of Regulation E, creates a new 
liability. Stolen benefit checks and coupons are not replaced except in 
extreme circumstances. Regulation E requires that all but $50 of any 
benefits stolen through an EBT card must be replaced. The effect of the 
Federal Reserve's action is that the simple act of changing the method 
of delivery imposes on the States a liability of unknown magnitude.

  This action by the Federal Reserve is inconsistent with the 
legislative intent that created the benefit programs. The legislation 
for both food stamps and Aid to Families with Dependent Children--the 
two largest programs included in EBT--are quite clear in specifying 
that lost or stolen benefits will be replaced only in extreme 
circumstances. We should not allow that legislation to be changed 
through regulation.
  This action is also consistent with the legislative intent of the 
Electronic Funds Transfer Act. The EFTA is about the relationship 
between an individual and his or her bank. It is designed to protect 
the individual in that relationship because of the dramatic disparity 
in power between the individual and the bank. In EBT, any relationship 
between the bank and the individual is meditated by the State. The 
State sets up a single account which all recipients draw upon. If there 
is a mistake, either in the bank's favor or the recipient's, the bank 
goes to the State, and it is the State's responsibility to contact the 
individual. It is difficult to accept that the same disparity in 
bargaining power exists between the State and the bank.
  The differences between EBT and other electronic transfers were 
carefully documented in a letter from Dr. Alice Rivilin, Deputy 
Director of OMB, to the Board of Governors of the Federal Reserve.
  Opponents of this action argue that by exempting EBT cards from the 
Electronic Funds Transfer Act discriminates against the poor. This 
argument misses two important differences between EBT and ATM cards. 
First, ATM access is a service that banks give with discretion, and can 
withdraw. States cannot deny recipients access to benefits. If there is 
abuse of the system, the State's only alternative is to operate dual 
systems, thus decreasing the efficiency gains of EBT. Second, EBT 
extends to recipients greater protection of their benefits than checks 
or coupons. If stolen, the card can't be used without the pin number. 
And, recipients are less likely to have all their cash stolen. With 
checks they must receive all the cash at once, and usually pay a fee 
for cashing the check. With EBT cards they can withdraw only what they 
need, and transaction costs are covered by the contract between the 
State and the bank.
  Others suggest that the concern with fraud if EBT is covered by 
Regulation E unfairly impugns the character of the recipients. That is 
not so. It only says that they are like everyone else--a small portion 
will participate in fraudulent activities to the expense of all the 
rest. One of the major criminal problems with ATM cards, according to 
the Secret Service, is fraud involving Regulation E protection. An 
individual can sell his or her ATM card, and as long as the price is 
greater than $50, everyone wins but the bank. The Secret Service knows 
this type of fraud occurs, but proving it is very difficult. States 
rightly fear that similar fraud will occur with EBT.
  Earlier this month the Vice President issued the first report from 
the EBT task force and called for nationwide implementation. Without 
passage of this legislation, that goal will never be reached. When the 
Federal Reserve was considering this issue, 40 Governors wrote in 
opposition. The National Association of State Auditors, Comptrollers, 
and Treasurers; The American Public Welfare Association, the National 
Association of Counties, the National Conference of State Legislatures, 
and the National Governors' Association wrote jointly to Vice President 
Gore and to Chairman Greenspan opposing the application of Regulation E 
to EBT.
  The Federal Reserve has made a mistake. We in Congress now need to 
act to ensure that benefits cards can become a reality. I urge my 
colleagues to enact this bill promptly.
  I ask unanimous consent that a copy of the bill and additional 
material be printed in the Record
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2511

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. ELECTRONIC BENEFIT TRANSFERS.

       Section 940 of the Electronic Fund Transfer Act (15 U.S.C. 
     1693b) is amended--
       (1) by inserting ``(1)'' after ``(d)''; and
       (2) by adding at the end the following new paragraphs:
       ``(2)(A) The Board may not, under paragraph (1), make the 
     disclosures, protections, responsibilities, and remedies 
     created by this title apply to an electronic benefit transfer 
     program established under State or local law, or administered 
     by a State or local government, unless the payment under such 
     programs is made directly into a consumer's account held by 
     the recipient.
       ``(B) Subparagraph (A) does not apply to employment related 
     payments including salaries, pension, retirement, or 
     unemployment benefits established by Federal, State, or local 
     governments.
       ``(C) Nothing in subparagraph (A) alters the protections of 
     benefits established by Federal, State, or local statute.
       ``(D) For purposes of subparagraph (A), an electronic 
     benefit transfer program is a program under which a 
     government agency distributes needs-tested benefits by 
     establishing accounts to be accessed by recipients 
     electronically, such as through automated teller machines, or 
     point-of-sale terminals. A program established for the 
     purpose of enforcing the support obligations owned by absent 
     parents to their children and the custodial parents with whom 
     the children are living is not an electronic benefit transfer 
     program.''.
                                  ____

         Executive Office of the President, Office of Management 
           and Budget,
                                     Washington, DC, May 21, 1993.
     Mr. William W. Wiles,
     Secretary, Board of Governors of the Federal Reserve System, 
         Washington, DC
       Dear Mr. Wiles: This letter responds to the proposal, 
     published for comment on February 8, 1993, to revise 
     Regulation E to cover electronic benefit transfer (EBT) 
     programs. Please refer to Docket No. R-0796. This letter 
     contains our endorsement of the EBT Steering Committee 
     proposal for modifying Reg E, our views on the differences 
     between program beneficiaries and the consumers with bank 
     accounts, and our recommendations for your consideration.


                      EBT Steering Committee View

       We strongly support the recommendations of the Electronic 
     Benefit Steering Committee, which were submitted to the Board 
     on May 11, 1992. The EBT Steering Committee recommended that 
     EBT be treated differently from other electronic fund 
     transfers, that specific minimum standards be established for 
     EBT programs, and that agencies be allowed to implement 
     Regulation E fully on a voluntary basis, if appropriate. A 
     copy of the Steering Committee recommendation is enclosed.
       In an analysis that is being prepared for the Steering 
     Committee, preliminary data from a study for the Department 
     of the Treasury indicate that the additional cost to 
     government of compliance with Regulation E as proposed could 
     be between $120 million to $826 million annually, with the 
     most likely costs of $498 million. Such cost increases would 
     preclude State and Federal expansion of current EBT programs 
     and could cause termination of some, if not all, programs.
       We oppose implementation of Regulation E as proposed by the 
     Board on February 16, 1993 based on the recommendations of 
     the EBT Steering Committee which is composed of senior 
     Federal program policy officials who have given a great deal 
     of deliberation to the issue and who are accountable for the 
     management of Federal programs. We believe that the 
     preliminary data shows that States and the Federal government 
     would be exposed to an expense that will serious limit the 
     potential for EBT in the future. In addition we believe there 
     are significant differences between program beneficiaries and 
     a regular bank customer. OMB urges the Board to exercise its 
     authority under the Electronic Funds Transfer Act (EFTA) to 
     prescribe regulations that consider the economic impact on 
     beneficiaries, State and Federal governments, and other 
     participants.


         differences between beneficiaries and banked consumers

       The EFTA is intended to protect consumers when EFT services 
     are made available to them. The plastic EBT card gives the 
     beneficiary more choices on where and when to withdraw cash. 
     However, they are not ``shopping'' for benefits as a customer 
     would shop for a bank card. Benefits are only received from 
     one payment source. Furthermore, regular banking EFT services 
     are not necessarily being ``made available'' to them. In 
     fact, these beneficiaries may be required to access benefits 
     through EBT in the future. These differences make necessary 
     protections that are different from, and in many ways, 
     greater than, those afforded by Regulation E. The EFTA 
     assumes a contractual relationship between the consumer and 
     the bank, as evident in the provisions for disclosure of 
     terms and conditions of electronic funds transfers (15 USC 
     1693c(a)). Under EBT, beneficiaries do not enter into 
     contracts with either banks or agencies governing terms and 
     conditions of transfers.
       EBT offers great potential benefits to recipients--
     alleviating the stigma of welfare experienced in grocery 
     checkout lines when presenting food coupons, eliminating 
     check cashing fees, allowing beneficiaries to become 
     proficient with a technology useful in the working world, and 
     eliminating the hazard of carrying cash after cashing a 
     check. Surveys of beneficiaries show overwhelming preference 
     for EBT over checks. The desire to access benefits through 
     this technology is so strong that in at least one locality 
     individual beneficiaries and the private sector are working, 
     without government assistance, to implement EBT.
       Individual benefit programs also offer significant 
     protections to beneficiaries that are far greater than any 
     protections afforded by financial institutions to consumers:
       Access to funds by eligible beneficiary is a right 
     guaranteed by law and is not conditioned on any prior abuses. 
     Eligibility is based on need.
       Improper withdrawals can only be recouped in a way that 
     protects economic interest of beneficiary. For example, 
     reductions of future benefits are strictly limited to 10 
     percent per month in AFDC.
       If beneficiary contests an adverse action, extensive 
     administrative apparatus supports the appeal at no cost to 
     the beneficiary.


                          omb recommendations

       The Federal Reserve Board has requested comment on whether 
     modifications to Regulation E for EBT beyond those proposed 
     should be considered. OMB specific recommendations are 
     enclosed.
       We recommend that the Board create some exceptions in 
     Regulation E for EBT programs. In summary, we believe the 
     Board has authority under the EFTA to prescribe regulations 
     that provide exceptions for any class of electronic funds 
     transfer that would effectuate the purposes of the EFTA. We 
     believe that the Steering Committee proposal, taken together 
     with existing protections in individual program requirements, 
     establish the rights, liabilities, and responsibilities of 
     participants in EBT programs and are primarily directed to 
     protecting and enhancing the rights of individual 
     beneficiaries.
       OMB joins with the Federal Reserve Board in its commitment 
     to protect the rights of individuals in this emerging 
     technology. We look forward to continued progress on this 
     governmentwide initiative.
           Sincerely,
                                                  Alice M. Rivlin,
                                                  Deputy Director.
                                  ____



                                         Governor Pete Wilson,

                                   Sacramento, CA, Sept. 15, 1994.
     Hon. Joseph I. Lieberman,
     U.S. Senate,
     Washington, DC
       Dear Senator Lieberman: I am writing to give my support to 
     your proposed legislation to exempt Electronic Benefit 
     Transfer (EBT) programs from the Electronic Funds Transfer 
     Act, Specifically from the Federal Reserve's Regulation E.
       California cannot assume the unknown fiscal liability that 
     accompanies subjecting EBT programs to Regulation E, which 
     includes a requirement to replace lost or stolen benefits. 
     The State has begun development of a pilot EBT project, but 
     Regulation E greatly increases our potential liability, 
     jeopardizing our ability to meet federal cost neutrality 
     requirements and making EBT economically infeasible, thus 
     thwarting further development within our state.
       I recognize EBT as a tool to help the states provide 
     efficient and effective social welfare programs, and am 
     committed to working with you to resolve the concerns raised 
     by the application of Regulation E to EBT programs.
           Sincerely,
                                                      Pete Wilson.
                                  ____

                                                State of Oklahoma,


                                       Office of the Governor,

                                 Oklahoma City, OK, June 10, 1994.
     Hon. Joseph Lieberman,
     Chairman, Governmental Affairs Subcommittee on Regulation and 
         Governmental Information, U.S. Senate,
     Washington, DC.
       Dear Senator Lieberman: I am writing in support of your 
     legislation to exempt electronic benefits transfer (EBT) from 
     the Electronic Funds Transfer Act (EFTA). The prompt passage 
     of this legislation is needed to ensure that EBT becomes a 
     reality in Oklahoma.
       Electronic benefits transfer is the future of government 
     benefit distribution. The advantages for recipients and 
     government entities have been studied and validated. The 
     pending implementation of Regulation E in March 1997, will be 
     an irresponsible act in light of the consequences anticipated 
     in liability costs to the states. If Regulation E is 
     implemented, the nationwide costs for replacing food stamps 
     is estimated in excess of $800 million a year. Estimates are 
     not available for the numerous money payments anticipated for 
     EBT distribution. Current federal regulations provide ample 
     protection to the consumer recipients, in addition to the 
     known advantages of receiving benefits electronically.
       Oklahoma is leading a multi-state southwest regional team 
     in procuring an EBT system to distribute food stamps and 
     money payments. This month, the Oklahoma Department of Human 
     Services will publish a Request for Information to be 
     distributed to potential bidders to inform them of our unique 
     approach to procurement, and to provide the opportunity to 
     comment on the proposed system design. We plan to publish a 
     Request for Bids in September 1994 to hire a vendor to 
     provide EBT services. Oklahoma has been working toward this 
     goal for five years. Our investment in EBT is an investment 
     in fiscal responsibility. Please feel free to call Dee Fones 
     (405) 521-3533 if you have any questions or if we can be of 
     further assistance in helping to pass this legislation.
           Sincerely,
                                                    David Walters.
                                  ____

                                                 State of Wyoming,


                                       Office of the Governor,

                                      Cheyenne, WY, June 21, 1994.
     Hon. Joseph Lieberman,
     Chairman, Government Affairs Subcommittee on Regulation and 
         Government Information, U.S. Senate, Washington, DC
       Dear Senator Lieberman: We are writing to you to express 
     full support for your leadership in proceeding with 
     legislation to exempt electronic benefits transfer (EBT) from 
     the Electronic Funds Transfer Act (EFTA), including exception 
     from the Regulation E (Reg E) provision.
       Wyoming is developing an off-line smart card system 
     solution to deliver state and federal benefits. Wyoming's 
     first phase is to conduct a federally approved combined Food 
     Stamp and WIC Supplemental Food Program Demonstration Pilot. 
     As this approach uses off-line distributive technology in 
     contrast to traditional on-line magnetic stripe banking 
     technology, we propose that smart card technology should be 
     exempt as benefits are in the hands of the client/user and 
     not controlled by a mainframe bank processor.
       The application of Reg E to EBT represents a major transfer 
     of liability that states are not prepared to embrace. One 
     estimate suggests that for Good Stamps alone, the liability 
     losses could be 800 million each year.
       Of greatest concern is the faulty premise of the Federal 
     Reserve Board. The assumption in applying EFTA to EBT is that 
     the bank/customer relationship in the private sector is 
     analogous to the government/recipient relationship in the 
     public sector. This assumption is false because public 
     assistance recipients are entitled to benefit and must be 
     served. Banks market their services for profits. They get to 
     choose the customers they serve.
       Second, customers of government benefit programs are given 
     a card to access and manage their benefits, but they do not 
     own the account and cannot deposit additional resources to 
     the account. Further, banks charge fees to cover the costs of 
     maintaining bank accounts, including complying with 
     Regulation E.
       Finally, Congress set up benefit programs like Food Stamps, 
     AFDC and WIC to achieve a public safety net to assure health 
     and welfare for all citizens. States will never be able to 
     apply Regulation E to these programs like banks apply the 
     Regulation because the goals of the relationship with the 
     client/user are fundamentally different.
       Once again, thank you for your leadership on this important 
     issue.
           Sincerely,
     Mike Sullivan,
       Governor.
     Dave Ferrari,
       State Auditor.
                                  ____

                                               State of Louisiana,


                                       Office of the Governor,

                                   Baton Rouge, LA, June 28, 1994.
     Hon. Joseph Lieberman,
     Chairman, Governmental Affairs Subcommittee on Regulation and 
         Governmental Information, U.S. Senate, Washington, DC.
       Dear Senator Lieberman: I am writing in support of your 
     legislation to exempt electronic benefits transfer (EBT) from 
     the Electronic Funds Transfer Act (EFTA). This legislation is 
     needed to ensure the future electronic delivery of 
     governmental entitlement benefits in Louisiana.
       Electronic benefits transfer as a method of distribution of 
     government benefits has proven to be viable and secure. 
     Although entitlement programs have been granted exemption 
     from Regulation E until 1997, this regulation threatens the 
     development and growth of EBT because of anticipated 
     liability to the states. Estimated losses to the states could 
     exceed $1.5 billion a year if Regulation E is implemented in 
     March 1997.
       Louisiana is participating in a joint venture with other 
     states in the southwest region in procuring an EBT system to 
     distribute AFDC and food stamp benefits. Proposals from 
     bidders will be solicited in September 1994. Implemention of 
     EBT is an investment that is responsible administratively in 
     addition to being beneficial to recipients. Your efforts in 
     securing the future of EBT are appreciated.
           Sincerely,
                                                 Edwin W. Edwards.
                                  ____



                                           State of Minnesota,

                                    Washington, DC, June 29, 1994.
     Hon. Joseph I. Lieberman,
     Hart Senate Office Building, Washington, DC.
       Dear Senator Lieberman: I am writing in support of 
     legislation you plan to introduce which would exempt welfare 
     benefit programs from provisions of the Electronic Funds 
     Transfer Act. Without such an exemption, plans to expand 
     Minnesota's statewide Electronic Benefits Systems (EBT) would 
     be halted.
       As you know, the Federal Reserve Board recently ruled that 
     welfare programs using electronic benefit issuance are 
     subject to the consumer protection provisions of Regulation E 
     under the Electronic Funds Act. Welfare programs have been 
     exempted from Regulation E since 1987. Under the new Federal 
     Reserve Board ruling, as of March, 1997, the regulation will 
     be applied.
       Minnesota cannot accept the unknown liability inherent in 
     applying Regulation E to benefit programs. The cost of 
     replacing benefits should a card become lost or stolen would 
     fall strictly on the state under this rule, even for the 
     share of the benefit which is federally funded.
       Your legislation, if enacted, would permit Minnesota and 
     other states to move forward with developing electronic 
     benefit transfer (EBT) systems which will help state and 
     federal government improve service delivery of welfare 
     benefits to the client.
           Warmest regards,
                                                  Arne H. Carlson,
                                                         Governor.
         National Association of State Auditors, Comptrollers and 
           Treasurers,
                                        Phoenix, AZ, May 20, 1994.
     Hon. Joseph I. Lieberman,
     Chairman, Subcommittee on Regulation and Government 
         Information, Committee on Governmental Affairs, U.S. 
         Senate, Washington, DC.
       Dear Senator Lieberman: I am writing in support of your 
     legislation to exclude Electronic Benefit Transfer (EBT) 
     programs from the Electronic Fund Transfer Act. The National 
     Association of State Auditors, Comptrollers and Treasurers 
     (NASACT) supports the establishment of EBT programs, but 
     opposes the decision of the Board of Governors of the Federal 
     Reserve of March 1994 to apply the liability provisions of 
     Regulation E, which implements the Electronic Fund Transfer 
     Act, to these programs.
       Regulation E governs the relationship between a financial 
     institution and its customers. This is a decidedly different 
     relationship from that which exists between a government and 
     benefit recipients. Regulation E is a ``show stopper'' for 
     EBT. By requiring governments to replace all but $50 of a 
     benefit that a recipient claims has been lost or stolen, it 
     would change the current policy for benefit replacement and 
     make EBT too expensive to implement. While we support 
     consumer protection and training programs for recipients 
     participating in EBT programs, we believe that the 
     protections provided under Regulation E are inappropriate in 
     a government EBT environment.
       Simply stated, governments are not banks. Banks market 
     their services to specific customers whose business will 
     generate increased profits. Banks can choose not to serve 
     customers. Governments, on the other hand, must serve 
     recipients that are entitled to benefits. While banks charge 
     fees or surcharges to cover the cost of maintaining bank 
     accounts--including the cost of Regulation E--governments do 
     not charge recipients to participate in public assistance 
     programs. In addition, unlike banking customers, government 
     benefit recipients do not establish individual accounts, they 
     do not own the accounts, they cannot deposit funds into the 
     accounts and they cannot write checks against the accounts.
       I want to commend you for introducing legislation 
     addressing this important issue. Your legislation will help 
     assure that governments can improve service delivery without 
     experiencing undue liability. As the legislation progresses, 
     you may want to consider a technical amendment to clarify the 
     scope of the bill. For instance, it might be helpful to more 
     fully explain the meaning of the term ``general assistance.'' 
     NASACT will, of course, be happy to assist you and your staff 
     in any way possible.
           Sincerely,
                                                Douglas R. Norton.
                                                        President.
                                                   American Public


                                          Welfare Association,

                                     Washington, DC, May 25, 1994,
     Hon. Joseph Lieberman,
     Chairman, Governmental Affairs Subcommittee on Regulation and 
         Government Information, U.S. Senate, Washington, DC.
       Dear Senator Lieberman: I am writing to give full support 
     to your legislation to exempt electronic benefits transfer 
     (EBT) from the Electronic Funds Transfer Act (EFTA), 
     including from its Regulation E (Reg E) provision.
       Across the country, human service agencies are moving 
     toward making EBT a reality for the people they serve. 
     Unfortunately, as you know, the Federal Reserve Board decided 
     on March 7, 1994 to apply Reg E to EBT starting in March, 
     1997, requiring the issuer of an electronic transfer card to 
     replace all but $50 of any benefits that are lost or stolen. 
     The Board's decision to apply banking law to EBT expands the 
     liability of government and taxpayers regarding benefit 
     replacement, creating a drastic change in current social 
     policy. Furthermore, making card issuers responsible for 
     benefit replacement shifts costs from the federal domain to 
     the states, creating a new unfunded mandate. Financial 
     estimates conclude that the costs to government and taxpayers 
     for replacing food stamps alone under this ruling could run 
     in excess of $800 million a year. This estimate does not 
     include the potential costs associated with replacing other 
     benefits that can be transferred electronically, such as 
     AFDC, child support, General Assistance, WIC, and SSI.
       Indeed, the Federal Reserve Board's decision effectively 
     will impede state EBT activity due to the prohibitive costs 
     associated with replacing lost or unauthorized transfers of 
     government benefits. Currently, the regulations of the Food 
     Stamp Program (a 100% federally-funded program) prohibit 
     replacing food coupons, unless coupons were not received in 
     the mail, were stolen from the mail, or were destroyed in a 
     ``household misfortune.'' Current AFDC regulations prohibit 
     replacing the federal portion of the amount of an AFDC 
     benefit check unless the initial check has been voided or, if 
     cashed, the federal portion has been refunded (AFDC is 
     jointly funded by federal and state governments). These 
     policies have provided adequate client protection in the 
     past, and when combined with the added safeguard of a 
     properly-used EBT card with a PIN number, would continue 
     offering adequate protections.
       In an era when government is striving--both due to 
     necessity and public demand--to deliver services that cut or 
     contain costs rather than provide opportunities for increased 
     costs, Regulation E not only dampens but may thwart state 
     efforts to benefit from EBT. In fact, in a federal government 
     attempts to have states or localities currently operating EBT 
     programs test the costs associated with the regulation, no 
     state has yet come forward to volunteer for the pilot test 
     due to the financial and political risk.
       As the national representative of the 50 cabinet-level 
     state human service departments, hundreds of local public 
     welfare agencies, and thousands of individuals concerned 
     about achieving efficient and effective social welfare 
     policy, APWA is quite concerned about finding a solution that 
     will allow progress on EBT. Our members are the innovators 
     and visionaries bringing EBT to clients at the state and 
     local levels. They are the people who deliver the government 
     benefits such as food stamps, AFDC, child support, and 
     medical and are committed to working with you to find a 
     solution to the barrier Reg E presents.
       Sincere thanks to you for taking the critical steps needed 
     to mitigate the impact of the Board's decision. We look 
     forward to working with you to help pass this legislation 
     quickly. Please feel free to call either me or Kelly Thompson 
     at 202-682-0100.
           Sincerely,
                                            A. Sidney Johnson III,
                                               Executive Director.


                             National Association of Counties,

                                    Washington, DC, June 29, 1994.
     Hon. Joseph I. Lieberman,
     U.S. Senate,
     Washington, DC.
       Dear Senator Lieberman: The National Association of 
     Counties (NACo) strongly supports the draft legislation that 
     you have recently released exempting electronic funds and 
     benefits delivery system programs established by federal, 
     state or local government agencies from the provisions of 
     Regulation E of the Electronic Fund Transfer Act.
       EBT/EFT offers numerous advantages to both the issuing 
     agency and the recipient. Government agencies will save 
     substantial administrative and production costs, as well as 
     costs associated with fraud. Recipients will have the benefit 
     of a secure delivery system, and a more dignified method of 
     receiving public assistance. Also, retail establishments 
     would save the time and money involved in manually processing 
     Food Stamps and vouchers. In all, EBT/EFT benefits everyone, 
     especially the taxpayers.
       Presently, numerous counties in six states are operating 
     EBT/EFT programs in various stages of development. Many other 
     counties are considering EBT/EFT implementation, but are 
     reserving initiating a system until the issue of liability 
     under Regulation E of the EFTA is resolved. For many 
     counties, the application of Regulation E would effectively 
     make initiating an electronic delivery system economically 
     unfeasible through the violation of the cost neutrality 
     requirement.
       It is also the position of NACo that the consumer rights of 
     welfare and Food Stamp recipients, which appear to be the 
     major concern of the Federal Reserve Board of Governors and 
     the driving force behind their push for Regulation E's 
     application, are protected under extensive federal rules in 
     the authorizing statutes and program regulations. Application 
     of Regulation E would be duplicative in some cases, and 
     costly in all cases.
       For these reasons, NACo supports your draft bill excluding 
     government EBT/EFT programs and looks forward to working with 
     you as this bill moves through the legislative process. 
     Please do not hesitate to contact Marilina Sanz, Associate 
     Legislative Director for Human Services and Education at NACo 
     on 202-942-4260 should you have any questions.
           Sincerely,
                                                   Larry E. Naake,
                                               Executive Director.


                               National Governors Association,

                                     Washington, DC, Oct. 4, 1994.
     Hon. Joseph I. Lieberman,
     U.S. Senate,
     Washington, DC.
       Dear Senator Lieberman: We are writing in strong support of 
     legislation that you are introducing to exempt certain 
     electronic benefit transfer programs from the Electronic 
     Funds Transfer Act.
       As you know, Governors have been leaders in using 
     technology to improve the delivery of services to the public 
     through such initiatives as distance learning, telemedicine, 
     and electronic benefit transfer (EBT). States and localities 
     have been exploring for over a decade the potential of EBT 
     for providing clients with more convenient and safer access 
     to benefits and for improving the ability of states to manage 
     programs and prevent fraud. More recently, Vice President 
     Albert Gore has promoted nationwide EBT for some federal 
     benefit programs in the near future as part of his 
     Reinventing Government initiative.
       Progress toward wider use of EBT has been slowed, however, 
     by the Federal Reserve Board's decision last March to apply 
     Regulation E of the Electronic Funds Transfer Act to EBT 
     programs. This Federal Reserve decision essentially changed 
     federal social policy by creating a new entitlement to 
     replacement of lost or stolen welfare benefits for EBT 
     clients--a new entitlement benefit that clients who receive 
     those same welfare benefits in cash or coupons do not have. 
     Estimates of the cost of this new benefit vary widely but 
     range as high as $800 million annually.
       While the Board's decision created this new entitlement 
     benefit, it did not address how this benefit would be 
     financed. To date the federal government has refused to 
     commit to reimburse states for the EBT benefit replacement 
     costs of even those welfare benefits that are entirely 
     federally financed, such as food stamps. This is true despite 
     the fact that most of the administrative savings from EBT 
     accrue to the federal government, not to the states.
       Governors are not opposed to consumer protections for EBT 
     clients. If the consumer protections of Regulation E are 
     applied to EBT programs, however, we believe that Congress 
     must recognize that this is a new entitlement benefit and act 
     accordingly to fund it. Otherwise it will become an unfunded 
     mandate on the states, and Governors will have little choice 
     but to halt their efforts toward creating EBT systems for 
     welfare clients.
       If Congress is not able to fund this new entitlement 
     benefit, then we believe that the only alternative is to make 
     it clear that clients who receive welfare benefits through 
     EBT are entitled to the same protections as clients who 
     receive benefits in cash or in coupons--no more, no less. 
     That is exactly what your legislation would do. We believe 
     your bill addresses the following problems created by the 
     Federal Reserve Board decision:
       Inequitable treatment of clients--The bill ensures that 
     clients have the same rights and responsibilities regardless 
     of whether their welfare benfits are delivered by check, by 
     coupon or electronically.
       Unfunded mandates on states and localities--The bill 
     eliminates the unfunded mandate for states and localities to 
     replace lost or stolen EBT benefits even when the original 
     benefit was entirely federally funded.
       Loss of EBT as a viable means of delivering welfare 
     benefits--The bill will remove the Regulation E roadblock to 
     nationwide EBT by making it financially possible for 
     Governors to proceed with EBT to the benefit of clients and 
     federal, state and local governments.
       We recognize that there may be other ways to address these 
     problems but all of these other means would necessarily 
     involve some unknown new cost because they would create some 
     level of new entitlement to benefit replacement. Until 
     Governors have a commitment from the federal government to 
     assume the costs of any new EBT entitlement benefits, your 
     bill's exemption approach is the only solution that we can 
     support.
           Sincerely,
     Gov. Mel Carnahan,
       Chair, Human Resources Committee.
     Gov. Arne H. Carlson,
       Vice Chair, Human Resources Committee.
                                                  Electronic Funds


                                         Transfer Association,

                                        Herndon, VA, Oct. 4, 1994.
     Hon. Joseph Liberman,
     Chairman, Government Affairs Subcommittee on Regulation and 
         Government Information, U.S. Senate, Washington, DC,
        Dear Senator Lieberman: On behalf of the Board of 
     Directors of the Electronic Funds Transfer Association 
     (EFTA), I wish to express support for your legislation to 
     exempt electronic benefits transfer (EBT) from Regulation E 
     (Reg E) of the Electronic Funds Transfer Act (EFT Act).
       The Federal Reserve Board has declared its intention to 
     apply Reg E to EBT starting in March 1997. Under the 
     provisions of the regulation, the issuer of an EBT card will 
     be required to replace all but $50 of any benefits that are 
     lost or stolen. The replacement costs have delayed 
     indefinitely the implementation of EBT programs in several 
     states, including California. States cannot pass their fraud 
     costs to benefit recipients; they must be borne by taxpayers, 
     who are looking to EBT to cut delivery costs, not increase 
     them. Financial estimates conclude that costs to government 
     and taxpayers for replacing benefits may run as high as $800 
     million per year. Currently, the state of Maryland (and 
     possibly others) is considering pursuing legal action against 
     the Federal Reserve Board for regulating a matter that is not 
     within its purview. EFTA agrees with this assessment and 
     believes the three year delay in implementation provides the 
     opportunity for Congress to resolve this matter.
       On August 1, 1994, EFTA filed comments with the Federal 
     Reserve Board of Governors in response to the proposed 
     revisions of Reg E. We indicated that the imposition of Reg 
     E's liability and error resolution rules will terminate EBT 
     programs in many states and will substantially delay progress 
     of many other important EBT initiatives. As a fiscal and 
     political matter, states are unwilling to undertake 
     responsibility for liabilities of an undermined value. If EBT 
     fails to develop, benefits recipients will be substantially 
     disadvantaged. They will not obtain the advantages of 
     convenience, security, speed and dignity that EBT can offer.
       EFTA has become a strong advocate of EBT over the past 
     several years, advising the Office of Technology Assessment 
     (OTA) and the Federal EBT Task Force of the myriad benefits 
     associated with EBT. Like Vice President Gore, EFTA's goal is 
     to utilize the current ATM/POS infrastructure in order to 
     facilitate the electronic delivery of federal and state 
     benefits nationwide. However, as Dale Brown, Director of the 
     Maryland statewide EBT project indicated, applying the 
     regulation would be a ``show stopper.'' Ms. Brown estimates 
     that Maryland could inherit a potential liability of several 
     million dollars. EFTA members include government agencies, 
     EFT processors and networks, card issuers and manufacturers, 
     as well as financial institutions. With a significant 
     increase in costs due to benefit replacement, EBT would no 
     longer be a viable venture for these stakeholders.
       EFTA would be pleased to work with you to help pass this 
     legislation. In addition, we offer our assistance in crafting 
     language that would further protect recipients whose benefits 
     have been lost or stolen, while minimizing the opportunities 
     for fraud that currently threaten fledgling EBT programs 
     across the country.
       We thank you for your thoughtful analysis and interest in 
     such a significant issue. If EFTA can be of any help in this 
     matter please do not hesitate to call at 703-435-9800.
           Sincerely,

                                               H. Kurt Helwig,

                                         Acting President and CEO,
                                   Director, Government Relations.
                                              Department of Public


                                              Social Services,

                               San Bernardino, CA, April 15, 1994.
     Mr. William Ludwig,
     Administrator, Food and Nutrition Service,
     Alexandria, VA.
       Dear Bill: For more than 4 years San Bernardino County has 
     attempted to bring Electronic Benefit Transfer (EBT), not 
     only to our County, but to the entire State of California. 
     Now, as we submit the attached Request for Proposal (RFP), 
     after overcoming many hurdles and after finally being named 
     as the EBT Pilot County for California, yet another mountain 
     stands in our way. That mountain is the Federal Reserve 
     Board's ruling that Regulation E does apply to EBT.
       The San Bernardino County Board of Supervisors and I have 
     made EBT a high priority. Besides being a cost-effective use 
     of new technology, it is the best of all worlds (an 
     occurrence not often seen in today's world of government 
     bureaucracy). EBT holds the promise of being more cost 
     effective than our current Food Stamp distribution system, it 
     is also less costly for grocers and is generally viewed 
     favorably by recipients for a number of reasons, not the 
     least of which is having to access their benefits only as 
     they use them.


                          Regulation E Impact

       First, I am not aware of any written definitive statement 
     of shares of cost of Regulation E by any federal agency, in 
     particular FNS or ACF. I have heard verbal statements from 
     FNS that our County Cost Cap, which EBT cannot exceed, may 
     dictate that all Regulation E costs above that cap must be 
     borne 100% by the State or local Government--in our case San 
     Bernardino County.
       I cannot, in good conscience, recommend to my Board of 
     Supervisors, a contract which includes an unknown liability 
     for Regulation E. To do so is tantamount to asking them to 
     sign a blank check.
       Therefore, with the concurrence of the California Welfare 
     Director's Association, the County of San Diego and the 
     California Department of Social Service, I must put you on 
     notice that our EBT RFP will not be released until we receive 
     a written Federal commitment for relief from the unknown 
     liability of Regulation E, such as assurance that we will not 
     be responsible for any Regulation E costs above our cap.
       As you are aware, San Bernardino, a number of other 
     California counties and the State have been committed to 
     bringing EBT to California and, therefore, the above 
     statement was arrived at only after a great deal of debate 
     and discussion with all affected parties. However, an 
     immediate resolution to the Regulation E cost-sharing issue 
     could resolve this and allow us to move forward.
       As always, I and my staff will make ourselves available for 
     any discussion that you think will be helpful in our pursuit 
     of EBT for San Bernardino County and, therefore, California.
           Sincerely,
                                               John F. Michaelson,
                                                 Director.
                                 ______

      By Mr. McCONNELL (for himself and Mr. Ford):
  S. 2512. A bill to require the Secretary of Agriculture to issue an 
order to establish a thoroughbred horse industry promotion program, and 
for other purposes; to the Committee on Agriculture, Nutrition, and 
Forestry.


                the thoroughbred industry promotion act

  Mr. McCONNELL. Mr. President, I rise today with my colleague Senator 
Ford, to introduce legislation authorizing the Secretary of Agriculture 
to establish a check-off program to fund critical promotion and 
research activities in the thoroughbred horse industry.
  The Thoroughbred Industry Promotion and Research Act of 1994 is 
patterned after more than a dozen other successful commodity promotion 
and research programs which are similarly authorized by Federal 
statutes.
  Kentucky is the thoroughbred horse breeding capital of North 
America--indeed of the word. In 1992, there were 34,512 thoroughbred 
foals registered in the United States; 6,807 or 19.7 percent in 
Kentucky alone, followed by California, 11.7 percent; Florida, 10.1 
percent; and Texas, 6.4 percent. Those four States, plus Oklahoma, 4.5 
percent, accounted for more than half of the 1992 registered foal crop. 
Large or small, however, each State makes its own contribution to the 
industry on a nationwide basis.
  Many of our colleagues may not know that Kentucky also has become one 
of the leading racing States in the country. It has always enjoyed that 
distinction on the first Saturday in May when the Kentucky Derby is run 
at historic Churchill Downs in Louisville. Another historic event 
returns in just a month--November 5--when the Breeders' Cup returns to 
Churchill Downs. But other Kentucky racetracks--notably Keeneland, 
Turfway Park, Dueling Grounds, and Bluegrass Downs--have moved Kentucky 
up into the top three racing States, measured by gross purse 
distributions--$51.6 million in 1993--behind only California and New 
York, and followed by Florida and Illinois, according to 1993 
statistics from the Daily Racing Form.
  But there is not a lot of good news in the industry outside of 
Kentucky. Historically speaking, horseracing has always been a leading 
spectator sport. But in 1993, for the first time in modern history, 
thoroughbred racing suffered declines in both on-track attendance and 
parimutuel wagering. In the competitive context of expanding demands 
for the entertainment dollar, declines in revenue and handle are 
dangerous trends.
  Needless to say, I and thoroughbred breeders, owners, and racetracks, 
do not propose to stand by while competition shrinks market shares and 
replaces thoroughbred racing at the top of America's menu of 
entertainment options.
  Like many agricultural industries, the thoroughbred horse industry is 
comprised mainly of small- and medium-sized owners, breeders, and small 
business proprietors, such as trainers, jockeys, exercise riders, 
grooms, blacksmiths, and veterinarians. Not surprisingly, development 
of nationally coordinated marketing and promotion programs is difficult 
to accomplish for such a diverse bunch.
  A market research project recently conducted by a nationally 
recognized advertising agency for the Thoroughbred Owners and Breeders 
Association [TOBA] in a three-State market--Kentucky, Illinois, and 
Ohio--identified several marketing objectives for thoroughbred racing. 
But as TOBA President Helen Alexander recently noted,'' * * * 
strategies for attaining those or any other business objectives cannot 
be developed without adequate funding.''
  This bill would provide a method of funding that is needed for 
effective marketing and promotion of the industry. It provides a 
mandatory assessment of one-fourth of 1 percent of gross handle--25 
cents per $100. Operations and promotional activities would be directed 
by a board comprised of owners, racetracks, a trainer, and a jockey--
all representative of purse participants in the net revenue stream 
after payouts to patrons who wager on thoroughbred racing--and to State 
governments, which regulate and tax the sport.
  This bill also would create a funding source for needed research 
activity; economic impact data at national, regional, and State levels; 
drug testing; the quality assurance program administered by the 
Association of Racing Commissioners International; and sustained racing 
surface and injury breakdown reporting studies, to name but a few 
needed research and development activities.
  Something meaningful must be done to promote the thoroughbred 
industry and enable it to compete more effectively for its market 
share. This approach has worked elsewhere. As I recently told a 
thoroughbred industry journalist, ``Professional promotion has worked 
like charm for every other agricultural commodity for which it has been 
implemented.'' It ought to be made available for this one, too.
  This is a starting point for reasoned consideration and informed 
discussion of an optional method of funding needed marketing, promotion 
and research activity in a significant American industry whose roots 
trace to Colonial times. This bill provides a solid foundation for 
addressing unmet needs.
                                 ______

      By Mr. ROCKEFELLER:
  S. 2513. A bill to enhance the research conducted by the Agency for 
Health Care Policy and Research concerning primary care, and for other 
purposes; to the Committee on Labor and Human Resources.


            the center for primary care research act of 1994

 Mr. ROCKEFELLER. Mr. President, I offer a bill that would 
establish a new Center for Primary Care Research within the Agency for 
Health Care Policy and Research. This bill would establish within the 
Federal Government the only location dedicated to increasing the 
Nation's critical need for primary care research.
  Family doctors, general internists, and pediatricians handle most of 
the health care problems for most of the people, most of the time. They 
care for the bulk of serious and disabling problems, as well as provide 
preventive care and treatment of common illnesses. As the health care 
system in the United States continues to evolve, more and more emphasis 
and responsibility will be placed on these primary care providers.
  Each time a primary care provider sees a patient, he or she must make 
a decision on whether or not to perform certain laboratory tests, to 
treat, observe, educate, refer to a specialist, or hospitalize that 
patient. These decisions have a dramatic impact on people's health and 
on health care costs. Therefore, it is of critical importance that 
family doctors and other primary care providers, such as nurse 
practitioners and physician assistants, make their decisions based on 
the best scientific information available.
  Currently there is almost no primary care research being done and 
only a small number of primary care providers are actually trained to 
do this type of research. There is an urgent need to develop an 
infrastructure of primary care research and financial support for 
primary care research.
  Primary care is defined as comprehensive and person-centered care--as 
opposed to disease or organ-specific--addressing the full range of 
personal health needs through preventive, curative, and rehabilitative 
care. It is the care you get when you first get sick, and the care you 
get from your own doctor over time. Results from the Medical Outcomes 
Study, the largest and best study ever done on the subject, showed that 
primary care doctors provided similar medical care as specialists, at 
lower cost, even when the severity of illness was taken into 
consideration.
  Our country already spends over $11 billion on biomedical research, 
and does so wisely. Biomedical research focuses on basic science 
research, such as molecular biology, and individual diseases in highly 
artificial hospital settings, usually in patients of certain ages and 
sex, and without the complications of other diseases and without the 
interaction of other medicines. While this information is extremely 
important, there is a critical need to complement this type of research 
with primary care research which is relevant to illness as most people 
experience it. This kind of research is not specifically addressed 
anywhere in the Federal research establishment.

  For example, while there is lots of research on the treatment of 
brain tumors, most patients do not see their doctor because of a brain 
tumor. Instead people come in complaining of a headache and while 
specialists are frequently trained to order a CAT scan or MRI for every 
headache, primary care providers need to determine which patients need 
these tests, which patients might, in fact, have a tumor and which 
patients do not need an MRI. Currently, there is very little medical 
science to help doctors make these determinations. It is critical for 
our health care system--for patient care research program to answer 
these questions.
  The same goes for back pain. Which patients have a pulled muscle and 
which ones have a slipped disk? Should they all have an MRI? A recent 
study showed that over half of normal people have an abnormal MRI. So 
we don't want to MRIs on everyone with back pain. Or, another example, 
ear infections in kids. In the United States we tent to treat them all 
with antibiotics. In many European countries they seem to do just as 
well without antibiotic treatment. We need research to answer these 
questions, based on real life patients being treated by their family 
doctor.
  Other examples are chronic disease like high blood pressure. Doctors 
have very little scientific information on how often patients with high 
blood pressure should have their blood pressure checked. Should it be 
every month, every 3 months, every 6 months, or every day at home? Does 
it make a difference? We just don't have the answer to these very basic 
questions. And many patients, especially the elderly, have multiple 
problems. For patients with Alzheimer's disease, we don't know what the 
best way is to care for them.
  We know how to treat many types of cancer, and we know how to treat 
depression, but what about patients with cancer and depression. Another 
example is prevention. We know that lowering cholesterol is important 
in preventing heart disease, at least for men, as is exercise, diet, 
and not smoking. But we need to know more about the relative importance 
of these factors, how they interact, or whether lowering cholesterol is 
as important for women or the elderly. These are the real life 
situations which patients see primary care doctors about every day, and 
where research is desperately needed.
  If primary care providers are to effectively care for most patients, 
they need to base their treatments on the sound foundation of science 
obtained through research. There needs to be a ``home'' for primary 
care research with its own funding source.

  Therefore, Mr. President, I propose that the current division of 
primary care in AHCPR which has very little visibility and has not been 
very effective in competing for support or in building an 
infrastructure of primary care research, be elevated to the center for 
primary care research. This center should have its own funding source 
which would make it the only place in the Federal Government with 
dedicated funding for primary care research.
  The purpose of the Center for Primary Care Research would be to meet 
our country's critical need for primary care research. Research that is 
relevant to actual primary care practice. This would include: 
development of a research agenda for primary care; conducting and 
supporting primary care research; providing support for institutions to 
develop an infrastructure in primary care research; promoting 
collaboration among the various primary care disciplines, researchers, 
and primary care practitioners; implementation of career development 
strategies to help develop primary care researchers; and other 
strategies to increase capacity in primary care research as outlined in 
``Putting Research into Practice,'' the AHCPR report of the task force 
on building capacity for research in primary care. This task force was 
put together by AHCPR to make recommendations on exactly this problem.
  In summary, as we move to a health care system which is increasingly 
based on primary health care and as the education and training of 
health care providers becomes increasingly oriented toward primary care 
providers, there is an essential need for more research to provide a 
basis for primary care practice and to improve the quality of primary 
health care.
  This amendment is strongly supported by the American Academy of 
Family Physicians, the American College of Physicians, the American 
Society of Internal Medicine, the American Academy of Pediatrics, the 
Association of American Medical Colleges, the Association of Academic 
Health Centers, the Association of Professors of Medicine, the 
Organizations of Academic Family Medicine, the American Academy of 
Nurse Practitioners, and the American Academy of Physician Assistants.
  I also want to express my special thanks to Dr. Howard Rabinowitz, a 
dedicated physician who is completing a fellowship in my office, for 
his assistance with this legislation and his many valuable 
contributions over the past year to our efforts to better meet the 
health care needs of Americans.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2513

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. CENTER FOR PRIMARY CARE RESEARCH.

       (a) Establishment.--Section 902 of the Public Health 
     Service Act (42 U.S.C. 299a) is amended by adding at the end 
     thereof the following new subsection:
       ``(f) Center for Primary Care Research.--
       ``(1) Establishment.--The Secretary shall establish within 
     the Agency, a Center for Primary Care Research.
       ``(2) Funding and activities.--The Center established under 
     paragraph (1) shall carry out research that is relevant to 
     the practice of primary care, including--
       ``(A) the development and support of a research agenda for 
     primary care;
       ``(B) The provision of support to enable institutions to 
     develop an infrastructure in primary care research;
       ``(C) the development of increased communication and 
     collaboration among various primary care disciplines, 
     researchers, and primary care clinicians, including 
     physicians, nurse practitioners, and physician's assistants;
       ``(D) the implementation of career development strategies 
     and technical assistance for primary care researchers; and
       ``(E) the conduct of other activities to increase capacity 
     in primary care research determined appropriate by the 
     Administrator.
       ``(3) Authorization of appropriations.--There are 
     authorized to be appropriated to carry out this subsection, 
     $15,000,000 for fiscal year 1996, $20,000,000 for fiscal year 
     1997, and $25,000,000 for fiscal year 1998.''.
       (b) Transfers.--
       (1) In General.--There are transferred to the Center for 
     Primary Care Research (established under the amendment made 
     by subsection (a)) all functions, personnel employed in 
     connection with, and assets, liabilities, contracts, 
     property, records, and unexpended balances of appropriations, 
     authorizations, allocations, and other funds employed, used, 
     held, arising from, available to, or to be made available in 
     connection with the functions transferred by this subsection, 
     of the Division of Primary Care within the Agency for Health 
     Care Policy and Research (including all related functions for 
     any officer or employee of such Division).
       (2) Personnel.--The transfer pursuant to paragraph (1) of 
     full-time personnel (except special Government employees) and 
     part-time personnel holding permanent positions shall not 
     cause any such employee to be separated or reduced in grade 
     or compensation for one year after the date of transfer of 
     such employee under this subsection.
       (3) Continuing effect of legal documents.--All orders, 
     determinations, rules, regulations, permits, agreements, 
     grants, contracts, certificates, licenses, registrations, 
     privileges, and other administrative actions--
       (A) which have been issued, made, granted, or allowed to 
     become effective by the President, any Federal agency or 
     official thereof, or by a court of competent jurisdiction, in 
     the performance of functions which are transferred under this 
     paragraph, and
       (B) which are in effect at the time this subsection takes 
     effect, or were final before the date of enactment of this 
     Act and are to become effective on or after the date of 
     enactment of this Act,

     shall continue in effect according to their terms until 
     modified, terminated, superseded, set aside, or revoked in 
     accordance with law by the President, the Secretary or other 
     authorized official, a court of competent jurisdiction, or by 
     operation of law.
                                 ______

      By Mr. DURENBERGER:
  S. 2514. A bill to ensure economic equity for American women and 
their families by promoting fairness in the workplace; creating new 
economic opportunities for women workers and women businessowners; 
helping workers better meet the competing demands of work and family; 
and enhancing economic self-sufficiency through public and private 
pension reform and improved child support enforcement; to the Committee 
on Finance.


                        THE ECONOMIC EQUITY ACT

 Mr. DURENBERGER. Mr. President, I introduce the Economic 
Equity Act. I think it is fitting that one of my last official acts 
will be the introduction of the EEA in my final session in Congress.
  Today, a 13-year commitment of mine comes full circle. Back in 1981, 
I was one of the architects of the very first EEA. The concept of the 
EEA and the phrase ``Economic Equity'' originated in Minnesota, through 
a task force of interested citizens that I organized. The Economic 
Equity Act has been introduced in every Congress since 1981, and I am 
proud to have been a sponsor each time.
  From the beginning, the purpose of the act was to bring attention to 
the problem of economic discrimination against women, and to offer some 
real solutions. That goal is the same today.
  The EEA is an omnibus bill--a package of several free-standing bills 
that address a broad array of economic obstacles for women. The EEA 
changes in each successive Congress, reflecting past accomplishments 
and new challenges. Although the EEA itself has never passed, its great 
contribution has been that many of its individual provisions have 
become law.
  These are some of the provisions in past versions of the EEA that 
have been enacted:
  First, estate tax reforms that recognize women as equal partners in 
building a family business;
  Second, day care tax credits, especially for low- and moderate-income 
families;
  Third, Individual Retirement Accounts for women who choose to work in 
the home;
  Fourth, changes in farm credit regulations to eliminate the previous 
bias against unmarried women;
  Fifth, tougher child support enforcement;
  Sixth, the removal of economic roadblocks for women in pension and 
insurance laws;
  Seventh, increases in the standard deduction for single heads of 
household and an expansion in the earned income tax credit;
  Eighth, continued health benefits coverage for widows, divorced 
spouses, and dependent children under COBRA; and
  Nineth, grant programs for college students who need affordable child 
care.
  This year's Economic Equity Act is identical to the bill that was 
introduced on the House side by Representatives Pat Schroeder and 
Olympia Snowe, members of the Congressional Caucus for Women's Issues. 
The bill's four titles contain a total of 22 separate bills.
  The first title, Workplace Fairness, addresses the problem of 
discrimination in the workplace. One of the bills in this title, the 
Equal Remedies Act, was introduced last year by Senator Kennedy and 
myself. The Equal Remedies Act would cure an inequity in the law that 
prohibits victims of gender discrimination from receiving the same 
remedies available to victims of racial discrimination.
  Title I also contains a bill I sponsored with Senator Patty Murray, 
the Sexual Harassment Prevention Act. This would set up a low-cost 
system to help employers establish policies to reduce the incidence of 
sexual harassment in the workplace.
  The second title, Economic Opportunity, would expand access to the 
fields of science and engineering, increase Federal contract 
opportunities, and increase access to credit for women starting small 
businesses.
  Title III addresses the difficulty of balancing the demands of work 
and family, by encouraging family friendly policies in the workplace 
and expanding access to quality child care.
  The fourth and final title, Economic Self-Sufficiency, deals with a 
variety of impediments to income security for women. These challenges 
range from the effectiveness of child support enforcement, to Social 
Security penalties for those who take time off from work to care for a 
family member, to the adequacy of job training programs.
  Although I may not endorse the particular approach of every provision 
of the EEA, I stand behind the EEA because it illuminates the enormity 
of economic obstacles facing half of America's citizens. Each of the 
challenges addressed under the umbrella of the EEA--touching countless 
areas of the law--deserves our attention and action.
  When we recognize the potential of all Americans and remove barriers 
to their economic participation, America will not only become a more 
fair place, it will become a better competitor in the international 
marketplace.
  America must make all of its citizens full partners in the economy. 
It is not only the right thing to do, it is the smart thing to do. Long 
after my retirement from this body, I hope the EEA will continue to 
speak that message.
                                 ______

      By Mr. BROWN:
  S. 2515. A bill to amend title 17, United States Code, to exempt 
business establishments from copyright fees for the public performance 
of nondramatic musical works, to provide for binding arbitration in 
royalty disputes involving performing rights societies, to ensure 
computer access to music repertoire, and for other purposes; to the 
Committee on the Judiciary.


             the fairness in musical licensing act of 1994

 Mr. BROWN. Mr. President, I introduce legislation that would 
lift a burden off of small businesses who currently pay fees to music 
licensing organizations under a complicated and cumbersome copyright 
law.
  Under current law, music licensing organizations are permitted to 
collect fees from those who play a radio or television in their 
commercial establishment. The music may be background music, or it may 
be music played at half-time during a football game. The music license 
fee applies to shoe stores, to diners, to shopping centers, or any 
other business establishment.
  The artists who create this music certainly deserve compensation for 
their intellectual property. In fact, those artists are compensated for 
their labors. When a song is played over a radio or TV, the broadcaster 
pays for the rights to play that song. When we are at home, and we turn 
on the radio, we are not expected to pay a second fee. Yet, if a radio 
is played at a commercial establishment for no commercial gain, a 
second fee is charged for the music. This double-dipping smacks of 
unfairness.
  In addition, there is tremendous inequity in the way licensing 
companies assess these fees. The businesses are unable to see a list of 
the songs that are available for licensing. The businesses are unable, 
because of the market inequity, to bargain for a fair price. Instead, 
we have an anticompetitive environment where two or three licensing 
companies control almost all of the music available. Small businesses 
have two options: pay the preordained fee or turn off the radio or TV.

  The approach I have taken to address this problem aims at leveling 
this playing field. The legislation I am introducing would require the 
licensing companies to make a list of their repertory available so 
businesses can know what products they are paying for.
  The legislation would exempt retail and other businesses from paying 
the fee for music played over radio and TV if a fee has already been 
paid. Where music has already been paid for by the broadcaster, the 
copyright owner has in fact been compensated.
  In addition, the legislation would establish arbitration to resolve 
disputes over fees. As it stands, if a retail store wishes to contest 
the fees paid to one of the licensing companies, they have to go to a 
court in New York. Moreover, full blown litigation in any case is often 
prohibitively expensive.
  The legislation would require the music licensing companies to offer 
per period programming licenses--in other words allow radio stations to 
purchase licenses for shorter time periods instead of 24 hours a day if 
they are only playing music in short spots between religious, news, or 
talk shows. I hope my colleagues will join me in leveling the playing 
field and will support this bill.
                                 ______

      By Mr. KENNEDY:
  S. 2516. A bill to consolidate and reform Federal job training 
programs to create a world class workforce development system for the 
21st century, and for other purposes; to the Committee on Labor and 
Human Resources.


             THE JOB TRAINING CONSOLIDATION AND REFORM ACT

  Mr. KENNEDY. Mr. President, today I am introducing the Job Training 
Consolidation and Reform Act. This bill grew out of a bipartisan effort 
that Senator Kassebaum and I initiated earlier this year to 
consolidate, reform, and revitalize federally funded job training 
programs, and I hope that this measure will help to lay the foundation 
for early and effective action on this important issue in the next 
Congress.
  In his State of the Union Address this year, President Clinton called 
on Congress to improve all aspects of Federal work force development 
policy. In this session of the Congress, we have responded by enacting 
new education and job training measures for youth, such as the School-
to-Work Opportunities Act and the Goals 2000: Educate America Act.
  We have also made significant progress in responding to President 
Clinton's challenge to streamline today's patchwork of job training 
programs and make them a more effective source of skills for all those 
whom these programs were designed to serve.
  For the past 6 months, we have been working to develop legislation to 
make job training more responsive to the needs of job seekers, workers, 
and businesses. We made substantial progress and reached agreement on 
many aspects of a comprehensive reform bill. Our goal is to transform 
federally funded job training efforts from the current disparate 
collection of free-standing, categorical programs into a coherent, 
integrated, accountable work force development system.
  Compared to other major industrial nations, the United States does 
not have a coherent labor market policy to help workers and firms 
adjust to structural changes in our economy. The basic building blocks 
of our current job training system were established during the years of 
the New Deal, the New Frontier, and the Great Society. The challenge 
then was to help hard-to-serve groups enter the labor force.
  Now, as we head into the 21st century, we must respond to a new set 
of problems. As a result of increased international competition, rapid 
technological change, and the current downsizing of defense, many 
workers already in the labor force need to be retrained in order to 
improve their skills and continue productive careers. Often, this kind 
of retraining may be needed more than once or even several times over 
the course of their careers.
  The increasing number of two-income families and families with single 
heads of household requires more flexible labor market institutions 
capable of helping workers to move in and out of the labor force 
without losing their earning power.
  In addition, as President Clinton has emphasized, more effective job 
training is an essential part of our efforts to reform the welfare 
system and end the endless cycle of welfare dependency.
  In the past decade, many private businesses have taken steps to try 
to deal with the profound structural changes taking place in our 
economy. It is time for the Federal government to act as well, by 
revising its own approach to job training, and giving workers a greater 
opportunity to succeed. The Clinton administration deserves credit for 
its leadership on this issue and for facing up to this serious 
challenge.
  In a series of recent speeches, Secretary of Labor Robert Reich has 
described the broad trends since the 1970's that have split the old 
middle class into three new groups--an ``underclass'' largely trapped 
in central cities and increasingly isolated from the heart of the 
economy; an ``overclass'' of those who are well-positioned to ride the 
waves of change successfully; and in between, the largest group, an 
``anxious class'', most of whom hold jobs but who are justifiably 
uneasy about their own future and even more fearful for their 
children's future.
  As Secretary Reich persuasively states, success in today's work force 
is heavily based on education and skills. Well-educated and highly 
skilled workers are prospering. Those with few skills or whose skills 
are out of date or out of step with the changing economy are concerned 
about their prospects as they drift farther and farther from the 
mainstream.
  The most effective way for Congress and the administration to deal 
with this challenge is to develop a more coherent job training system 
that is accessible to all job seekers, workers, and businesses, without 
retreating from the commitment we have made to the most disadvantaged.
  We must assess the strengths and weaknesses of the current system and 
develop a better strategy to achieve our goals, and all this must be 
accomplished within the constraints of the budget.
  According to a series of reports issued by the General Accounting 
Office at the request of Senator Kassebaum and myself and several other 
members of Congress, the Federal Government is now spending $25 billion 
a year on 154 separate job training programs. In Massachusetts, more 
than $700 million is spent each year on a variety of Federal and State 
programs outside the traditional school and college environments.
  Although we know the total Federal investment in job training, we 
still lack basic data about our return on this investment. The most 
alarming finding of the GAO reports is that many Federal agencies do 
not know whether their programs are working.
  At the request of Senator Kassebaum, GAO assessed 62 programs that 
provide job training assistance to the disadvantaged. The survey found 
that although Federal agencies monitor the expenditure of funds, they 
generally do not have information on outcomes. In light of the 
importance of job training, the lack of focus on outcomes is 
unacceptable, especially in this time of increasingly tight Federal 
budgets and scarce resources for new investments.
  Over the past 6 months, Senator Kassebaum, and I have been working 
together to devise a new strategy to create the type of work force 
development system the Nation needs. In June we issued a joint 
statement on the Senate floor which laid out a series of principles to 
guide this reform. Several other Senators joined us at that time. We 
have subsequently received support from many other Senators on both 
sides of the aisle, and our staffs have spent many hours meeting with 
representatives of organizations and constituencies concerned with how 
the current system operates.
  This bill that I am introducing today--the Job Training Consolidation 
and Reform Act--contains a detailed strategy for reforming these 
programs. This bill has two major aspects. It establishes a process for 
sensible consolidation and streamlining of federally funded job 
training programs. And it reforms the delivery system to create a 
marketplace for job training services connected to real jobs.
  The consolidation that will take place under the bill is a means to 
an end. Although we should eliminate unnecessary or outmoded programs, 
the primary goal is to do a better job of helping jobseekers, workers, 
and firms in labor markets in communities across the Nation. The bill 
clearly states that savings resulting from program elimination or 
consolidation are to be reinvested into building a more integrated and 
accountable work force development system. We are clearly spending 
these resources unwisely and inefficiently now, and reform will enable 
us to accomplish far more with the same level of resources.
  I take pride that bipartisan developments in Massachusetts in recent 
years form the basis for major elements of the legislation. In 1988, 
Massachusetts became the first State to establish supercouncils at the 
State and local level to oversee policy on work force development.
  The MassJobs Council has played a vital role in pioneering new ways 
to link education reform with economic development. The MJC has 
also done excellent work in building the type of information system 
needed to provide beneficiaries of job training programs with vital 
information about the supply, demand, price, and quality of the 
services available in local labor markets.

  The bill encourages States to experiment with different strategies. 
All States will have an opportunity to obtain planning grants to design 
more efficient information systems. All States will be able to apply 
for waivers to remove cumbersome requirements that stand in the way of 
providing effective services to customers.
  Leading-edge States like Massachusetts will have an opportunity to 
compete for larger grants to accelerate reform. A new tripartite 
national board consisting of business, labor, and governmental 
officials will oversee State efforts, and establish accountability to 
ensure that lessons learned in the States are incorporated into 
national policy.
  The bill also provides incentives for communities to create local 
boards to oversee these activities. In Massachusetts, our 16 private 
sector led regional employment boards are playing a key role in 
ensuring that all programs--not just those funded by the Job Training 
Partnership Act--are linked to the skill requirements of industries 
that are vital to each region's competitiveness.
  Each of these REB's has responded to this challenge in a different 
way, based on the character of its local economy. In Boston, the REB 
has taken a leadership role in integrating youth employment programs in 
the public schools into a citywide school to work effort that leads to 
paid jobs in the hospital, financial services, communications, and 
environmental industries.
  In Springfield, the REB is helping design a comprehensive program for 
the 350 small- and medium-sized machine firms in Hampden County. REB's 
in Pittsfield and northern Worcester County have initiated similar 
efforts with the plastic industry. The REB on Cape Cod is developing a 
comprehensive one stop center in Hyannis to make it easier to obtain 
services.
  The act makes fund available to local boards on a matching basis for 
training programs to upgrade the skills and earnings of front-line 
workers in local industries. Local boards under the act, in conjunction 
with local officials, will oversee the development of one stop career 
centers.
  The act also includes provisions to strengthen cooperation and 
planning among the various Federal agencies responsible for these 
programs. The national board will be responsible for comparing the 
preparedness of the U.S. work force with that of other countries. It 
will develop a biennial plan to guide Federal policy, and produce an 
annual report card on the performance of the Nation's training 
programs.
  In sum, it is clear that the current policy is flawed. Many workers 
are increasingly anxious about their ability to adjust to economic 
changes, and it is increasingly clear that our Nation's job training 
programs are not operating effectively.
  By introducing this legislation now, I hope to be laying the 
groundwork for major reform in the next Congress. The effort that 
Senator Kassebaum and I have launched has been viewed as a positive 
development by a wide range of groups representing business, labor, and 
State and local governments. I would encourage these organizations and 
others who share our concern about its importance to review the bill I 
am introducing and Senator Kassebaum's earlier bill S. 1943, and to 
offer their comments and suggestions.
  The need for this reform has never been greater. Based on the 
constructive progress we have made this year and the positive response 
our effort has received, I am optimistic that there will be broad 
bipartisan support for comprehensive reform in the next Congress.
  I ask unanimous consent that the text of the bill and a summary of 
the bill be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2516

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Job 
     Training Consolidation and Reform Act''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings and purpose.
Sec. 3. Authorization of appropriations.
Sec. 4. Definitions.

                   TITLE I--FEDERAL RESPONSIBILITIES

Sec. 101. National Workforce Development Board.
Sec. 102. National Report Card.
Sec. 103. Mechanisms for building high quality integrated workforce 
              development systems.
Sec. 104. Centralized waivers.
Sec. 105. Quality assurance system.

                    TITLE II--STATE RESPONSIBILITIES

Sec. 201. State Workforce Development Councils.
Sec. 202. Membership.
Sec. 203. Chairperson.
Sec. 204. Duties and responsibilities.
Sec. 205. Development of quality assurance systems and consumer 
              reports.
Sec. 206. Administration.
Sec. 207. Establishment of unified service delivery areas.
Sec. 208. Financial and management information systems.
Sec. 209. Capacity building grants.
Sec. 210. Performance standards for unified service delivery areas.

                   TITLE III--LOCAL RESPONSIBILITIES

Sec. 301. Workforce development boards.
Sec. 302. Workforce development board policy blueprint.
Sec. 303. Report card.
Sec. 304. One-stop career centers.
Sec. 305. Progress reports.
Sec. 306. Capacity building.
Sec. 307. Incentive grants for incumbent worker training.

                        TITLE IV--CONSOLIDATION

Sec. 401. Purpose; findings; sense of the Congress.
Sec. 402. Integration of youth programs.
Sec. 403. Consolidation of workforce development programs.
Sec. 404. Integration of programs at the local level.
Sec. 405. Sunset of major workforce development programs.

          TITLE V--INTEGRATED LABOR MARKET INFORMATION SYSTEM

Sec. 501. Integrated labor market information.
Sec. 502. Responsibilities of the National Board.
Sec. 503. Responsibilities of the Secretary.
Sec. 504. Responsibilities of Governors.

     SEC. 2. FINDINGS AND PURPOSE.

       (a) Findings.--Congress finds that--
       (1) increasing international competition, technological 
     advances, and structural changes in the United States economy 
     present new challenges to private firms and public policy 
     makers in creating a skilled workforce with the ability to 
     adapt to change and technological progress;
       (2) the Federal Government should work with the private 
     sector to create a high performance workforce development 
     system to encourage collaboration among private sector firms 
     and publicly funded education and training efforts to assist 
     jobseekers and workers adjust to structural economic changes;
       (3) according to the General Accounting Office, there are 
     currently 154 federally funded employment and training 
     programs (hereafter referred to in section as the 
     ``programs'');
       (4) the programs cost more than $25,000,000,000 annually 
     and are administered by 14 different Federal departments and 
     agencies;
       (5) although it is necessary for the Federal Government to 
     consolidate or eliminate unnecessary programs, the primary 
     goal of Federal workforce development policy should be to 
     help facilitate transactions taking place between jobseekers, 
     workers, and business in local labor markets;
       (6) in order to bring more coherence to Federal workforce 
     development policy, there should be a single entity at the 
     Federal, State, or local level vested with the necessary 
     authority to strategically plan ways to transform the 
     separate training and employment programs into an integrated 
     and accountable workforce development system;
       (7) these Federal, State, and local strategic planning 
     bodies should be structured in such a way to give businesses 
     and workers a meaningful role in shaping policy and 
     overseeing the quality of workforce development programs;
       (8) while the Federal Government must maintain its 
     commitment to provide economically and educationally 
     disadvantaged individuals with skills and support services 
     necessary to succeed in the labor market, Federal workforce 
     development policy must also begin to provide incentives to 
     assist firms to help upgrade the skills of their front-line 
     workers;
       (9) the United States needs a comprehensive integrated 
     labor market information system to ensure that workforce 
     development programs are related to the demand for particular 
     skills in local labor markets, and to ensure that information 
     about the employment and earnings of the local workforce, and 
     the performance of education and training institutions, will 
     be available to citizens and decision makers;
       (10) in recent years, many States and communities have made 
     progress in developing new approaches to better integrate 
     Federal employment and training programs;
       (11) the Federal Government should take more systematic 
     measures to encourage experimentation and flexibility, and to 
     disseminate best practices in the design and implementation 
     of a comprehensive workforce development system throughout 
     the country; and
       (12) the Federal Government should address the findings of 
     this subsection through the implementation of immediate and 
     long-term improvements that result in the establishment of a 
     high quality workforce development system needed for the 
     economy of the 21st century.
       (b) Purpose.--It is the purpose of this Act to take certain 
     immediate actions, and to establish a process for bringing 
     about longer term improvements, that are needed to begin the 
     transformation of federally funded education and job training 
     efforts from a collection of fragmented programs into a 
     coherent, integrated, accountable workforce development 
     system that--
       (1) is based on the needs of jobseekers, workers, and 
     employers, rather than bureaucratic requirements;
       (2) is accessible to any jobseeker, worker, or employer;
       (3) focuses on accountability, performance, and accurate 
     information;
       (4) provides flexibility and responsibility to the States, 
     and in turn to local communities, for design and 
     implementation of workforce development systems;
       (5) requires the active involvement of firms and workers in 
     the governance, design, and implementation of such system;
       (6) is linked directly to employment and training 
     opportunities in the private sector; and
       (7) adopts best practices of quality administration and 
     management that have been successful in the private sector .

     SEC. 3. AUTHORIZATION OF APPROPRIATIONS.

       (a) In General.--Subject to subsection (b), there is 
     authorized to be appropriated to carry out titles I, II, III, 
     and IV--
       (1) $160,000,000 for fiscal year 1996; and
       (2) such sums as may be necessary for each of fiscal years 
     1997 through 1999.
       (b) Limitations.--
       (1) Fiscal year 1996.--In fiscal year 1996, of the funds 
     made available pursuant to subsection (a)--
       (A) not more than 5 percent shall be used for the 
     activities of the National Board;
       (B) not more than 10 percent shall be used for incentive 
     grants, pursuant to section 307;
       (C) not more than 15 percent shall be used for development 
     grants, pursuant to section 103(a); and
       (D) not less than 70 percent shall be used for 
     implementation grants, pursuant to section 103(b).
       (2) Fiscal years 1997 through 1999.--In each of fiscal 
     years 1997 through 1999, of the funds made available pursuant 
     to subsection (a)--
       (A) not more than 5 percent shall be used for the 
     activities of the National Board;
       (B) not more than 10 percent shall be used for incentive 
     grants, pursuant to section 307; and
       (C) not less than 85 percent shall be used for 
     implementation grants, pursuant to section 103(b).
       (c) Integrated Labor Market Information System.--To carry 
     out title V, there is authorized to be appropriated--
       (1) $90,000,000 for fiscal year 1996; and
       (2) such sums as may be necessary for each succeeding 
     fiscal year.

     SEC. 4. DEFINITIONS.

       For purposes of this Act--
       (1) the term ``development grant'' means a grant provided 
     to each State under section 103(a);
       (2) the term ``implementation grant'' means a grant 
     provided under section 103(b);
       (3) the term ``leading edge State'' means a State that has 
     been awarded an implementation grant under section 103(b);
       (4) the term ``workforce development program'' means any of 
     the more than 150 federally funded job training programs 
     identified by the General Accounting Office in testimony on 
     March 3, 1994, before the Subcommittee on Employment, Housing 
     and Aviation of the Committee on Government Operations of the 
     House of Representatives, and any State-funded program that 
     provides job training assistance to individuals or assists 
     employers to identify or train workers;
       (5) the terms ``integrated workforce development system'' 
     and ``integrated system'' mean the system of employment, 
     training, and employment-related education programs, 
     including the mandatory programs described in section 404(a) 
     and any additional Federal or State programs designated by 
     the Governor of a State, comprising the consolidated system 
     pursuant to section 404(b);
       (6) the term ``National Board'' means the National 
     Workforce Development Board established under section 101(b);
       (7) the term ``Federal Blueprint'' means the National 
     Workforce Development Strategic Plan issued by the National 
     Board pursuant to section 101(c)(1);
       (8) the term ``National Report Card'' means the Nation's 
     Workforce Development Report Card prepared pursuant to 
     section 102;
       (9) the term ``State Council'' means a State Workforce 
     Development Council established pursuant to section 201;
       (10) the term ``State Blueprint'' means the State Workforce 
     Development Policy Blueprint prepared pursuant to section 
     204(a);
       (11) the term ``State Report Card'' means the State 
     Workforce Development Report Card issued pursuant to section 
     204(b);
       (12) the term ``workforce development board'' means a local 
     board established pursuant to section 301;
       (13) the term ``unified service delivery area'' means the 
     common geographic service area boundaries established 
     pursuant to section 207 and overseen by a workforce 
     development board;
       (14) the term ``one-stop career center'' means an access 
     point for intake, assessment, referral, and placement 
     services, including services provided electronically, that is 
     part of the network established pursuant to section 304;
       (15) the term ``hard-to-serve'' means an individual meeting 
     the requirements of section 203(b) of the Job Training 
     Partnership Act (29 U.S.C. 1603(b)); and
       (16) the term ``Secretary'' means the Secretary of Labor, 
     unless the context suggests otherwise.
                   TITLE I--FEDERAL RESPONSIBILITIES

     SEC. 101. NATIONAL WORKFORCE DEVELOPMENT BOARD.

       (a) Findings.--Congress finds that a national workforce 
     development board is necessary to--
       (1) oversee the establishment and continuous improvement of 
     the national workforce development system;
       (2) provide policy guidance to enhance strategic planning 
     among the Federal agencies responsible for administering job 
     training programs;
       (3) bring private sector expertise to the governance of the 
     national workforce development system; and
       (4) take active steps to remove the legislative and 
     regulatory barriers to service integration.
       (b) Establishment.--
       (1) In general.--There is established the National 
     Workforce Development Board (referred to in this Act as the 
     ``National Board'').
       (2) Composition.--The National Board shall be comprised of 
     9 members, of whom--
       (A) one member shall be the Secretary of Labor;
       (B) one member shall be the Secretary of Education;
       (C) one member shall be the Secretary of Health and Human 
     Services;
       (D) three members shall be representatives of business 
     (including representatives of small businesses and large 
     employers);
       (E) two members shall be representatives of organized 
     labor; and
       (F) one member shall be selected from representatives of--
       (i) community-based organizations;
       (ii) State and local governments; or
       (iii) nongovernmental organizations that have a history of 
     successfully protecting the rights of individuals with 
     disabilities or older persons.
       (3) Additional requirements.--The members described in 
     subparagraphs (D), (E), and (F) of paragraph (2) shall--
       (A) in the aggregate, represent a broad cross-section of 
     occupations and industries;
       (B) to the extent feasible, be geographically 
     representative of the United States, and reflect the racial, 
     ethnic, and gender diversity of the United States; and
       (C) one member shall be a member of the National Skill 
     Standards Board established pursuant to the National Skill 
     Standards Act of 1994.
       (4) Expertise.--The National Board and the staff shall have 
     sufficient expertise to effectively carry out the duties and 
     functions of the National Board.
       (5) Business and labor advisory committees.--The National 
     Board may establish a business advisory committee and a labor 
     advisory committee which shall be comprised of members who 
     are appointed to the National Board pursuant to subparagraphs 
     (D) and (E) of paragraph (2), respectively, and members who 
     are not on the National Board, to assist the National Board 
     to carry out its duties pursuant to subsection (c).
       (6) Appointment.--The members described in subparagraphs 
     (D), (E), and (F) of paragraph (2) shall be appointed by the 
     President, by and with the advice and consent of the Senate.
       (7) Ex officio nonvoting members.--The Director of the 
     Office of Management and Budget, the Secretary of Commerce, 
     the chairpersons and ranking minority members of the 
     Committee on Labor and Human Resources of the Senate and the 
     Committee on Education and Labor of the House of 
     Representatives shall be ex officio, nonvoting members of the 
     National Board.
       (8) Terms.--Each member of the National Board appointed 
     under subparagraph (D), (E), and (F) of paragraph (2) shall 
     be appointed for a term of 4 years, except that of the 
     initial members of the National Board appointed under such 
     subparagraphs--
       (A) two members shall be appointed for a term of 2 years;
       (B) two members shall be appointed for a term of 3 years; 
     and
       (C) two members shall be appointed for a term of 4 years.
       (9) Vacancies.--Any vacancy on the National Board shall not 
     affect the powers of the National Board, but shall be filled 
     in the same manner as the original appointments.
       (10) Chairpersons.--The President, by and with the advice 
     and consent of the Senate, shall select one co-chairperson of 
     the National Board from among the members of the National 
     Board appointed under paragraph (2)(D) and one co-chairperson 
     from among the members appointed pursuant to paragraph 
     (2)(E).
       (11) Compensation and expenses.--
       (A) Compensation.--Each member of the National Board who is 
     not a full-time employee or officer of the Federal Government 
     shall serve without compensation. Each member of the National 
     Board who is an officer or employee of the Federal Government 
     shall serve without compensation in addition to that received 
     for the services of such member as an officer or employee of 
     the Federal Government.
       (B) Expenses.--The members of the National Board shall be 
     allowed travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter I of chapter 57 of title 5, United States 
     Code, while away from their homes or regular places of 
     business in the performance of services for the National 
     Board.
       (12) Executive director and staff.--
       (A) Executive director.--The co-chairpersons of the 
     National Board shall appoint an Executive Director who shall 
     be compensated at a rate determined by the National Board, 
     not to exceed the rate payable for level V of the Executive 
     Schedule under section 5316 of title 5, United States Code.
       (B) Staff.--The Executive Director may--
       (i) appoint and compensate such additional staff as may be 
     necessary to enable the National Board to perform its duties; 
     and
       (ii) fix the compensation of the staff without regard to 
     the provisions of chapter 51 and subchapter III of chapter 53 
     of title 5, United States Code, relating to classifications 
     of positions and General Schedule pay rates, except that the 
     rate of pay for the staff may not exceed the rate payable for 
     level V of the Executive Schedule under section 5316 of such 
     title.
       (13) Voluntary and uncompensated services.--Notwithstanding 
     section 1342 of title 31, United States Code, the National 
     Board is authorized, in carrying out this Act, to accept 
     voluntary and uncompensated services.
       (14) Agency support.--
       (A) Use of facilities.--The National Board may use the 
     research, equipment, services, and facilities of any agency 
     or instrumentality of the United States with the consent of 
     such agency or instrumentality.
       (B) Staff of federal agencies.--Upon the request of the 
     National Board, the head of any Federal agency may detail to 
     the National Board, on a reimbursable basis, any of the 
     personnel of such Federal agency to assist the National Board 
     in carrying out this Act. Such detail shall be without 
     interruption or loss of civil service status or privilege.
       (15) Procurement of temporary and intermittent services.--
     The co-chairpersons of the National Board may procure 
     temporary and intermittent services of experts and 
     consultants under section 3109(b) of title 5, United States 
     Code.
       (16) National commission for employment policy.--
       (A) In general.--Part F of title IV of the Job Training 
     Partnership Act (29 U.S.C. 1771 et seq.) is repealed.
       (B) Conforming amendment.--Subsection (i) of section 106 of 
     such Act (29 U.S.C. 1516(i)) is amended by striking ``(i) 
     Functions of NCEP.--The National Commission for Employment 
     Policy'' and inserting ``(i) Functions of National Workforce 
     Development Board.--The National Workforce Development Board 
     established under section 101 of the Job Training 
     Consolidation and Reform Act''.
       (c) Duties.--
       (1) National workforce development strategic plan.--
       (A) In general.--Not later than July 1, 1995, and every 2 
     years thereafter, the National Board shall issue a National 
     Workforce Development Strategic Plan (referred to in this Act 
     as the ``Federal Blueprint'').
       (B) Requirements.--The Federal Blueprint shall evaluate the 
     progress being made toward streamlining, consolidating, and 
     reforming the workforce development system of the United 
     States, and toward the purposes described in section 2(b). 
     The Federal Blueprint shall--
       (i) compare the preparedness of the workforce of the United 
     States with the workforce of other countries;
       (ii) serve as a strategic plan to guide the integration of 
     federally funded workforce development programs into a 
     streamlined system;
       (iii) assess the lessons learned from the experience of 
     leading edge States, and States that waive certain program 
     requirements to experiment with alternative workforce 
     development strategies;
       (iv) analyze how businesses are--

       (I) progressing in the restructuring of the workplace to 
     provide continuous learning for their employees;
       (II) improving the skills and abilities of the front-line 
     workers of such businesses; and
       (III) taking measures to integrate public workforce 
     development programs into private sector training systems;

       (v) make recommendations to Congress and the President on 
     ways to improve linkages between federally funded business 
     modernization programs and federally funded workforce 
     development programs;
       (vi) include a research agenda for the National Board to 
     carry out its activities;
       (vii) evaluate the labor market information of the Nation 
     and recommend areas in need of improvement; and
       (viii) based on the evaluation of the progress being made 
     toward the development of an integrated, accountable, 
     effective workforce development system, as described in the 
     National Report Card, make recommendations to Congress and 
     the President on ways to promote further streamlining, 
     consolidation, and reform.
       (2) Congressional testimony.--The co-chairpersons of the 
     National Board shall, at least annually, provide testimony, 
     during a joint hearing before the Committee on Labor and 
     Human Resources of the Senate and the Committee on Education 
     and Labor of the House of Representatives on the progress 
     being made in developing a more integrated and accountable 
     public and private workforce development system in the United 
     States.
       (3) Employer and worker training.--Not later than 180 days 
     after the date of enactment of this Act, the National Board 
     shall make recommendations to Congress and the President on 
     what measures can be taken, including changes in the tax 
     codes, to encourage employers and workers to invest in 
     training and skills upgrading, and to encourage employers to 
     hire and train hard-to-serve individuals.
       (4) Review of grant proposals.--The National Board shall 
     review the implementation grant proposals pursuant to section 
     103(b) and the incentive grant proposals submitted pursuant 
     to section 307, and make recommendations to the Secretary 
     regarding such proposals.
       (5) Coordination with the national skill standards board.--
     The National Board shall annually hold a joint meeting with 
     the National Skill Standards Board established pursuant to 
     section 503 of the National Skill Standards Act to ensure 
     that Federal efforts to reform and streamline the Nation's 
     workforce development system are integrated and coordinated.
       (6) Final recommendations.--Not later than June 1, 1999, 
     the National Board shall submit recommendations in the form 
     of a joint resolution to the President and Congress, pursuant 
     to section 403(b).

     SEC. 102. NATIONAL REPORT CARD.

       (a) In General.--Not later than July 1, 1996, and each July 
     1 thereafter, the National Board shall prepare a report to be 
     known as the Nation's Workforce Development Report Card 
     (referred to in this Act as the ``National Report Card'').
       (b) Requirements.--The National Report Card shall assess 
     the performance of the workforce development system of the 
     United States, based on the earnings and employment gains and 
     other nonemployment-related outcomes of individuals assisted 
     by the programs comprising such system. The National Report 
     Card shall evaluate all workforce development programs that 
     receive Federal funding, and shall--
       (1) assess the performance of each program;
       (2) assess performance based on the type of assistance 
     provided, including the categories of services identified in 
     section 105(b)(1)(C);
       (3) assess year-to-year changes in performance;
       (4) report on the extent to which hard-to-serve populations 
     are receiving services and the related outcomes in relation 
     to services received in the preceding three years;
       (5) determine the annual Federal investment in workforce 
     development in each State; and
       (6) assess the performance of the workforce development 
     system in each State.

     SEC. 103. MECHANISMS FOR BUILDING HIGH QUALITY INTEGRATED 
                   WORKFORCE DEVELOPMENT SYSTEMS.

       (a) State Development Grants.--
       (1) Purpose.--The purpose of this subsection is to assist 
     States and communities in strategic planning for integrated 
     workforce development systems, including the development of a 
     financial and management information system, a quality 
     assurance system, and an integrated labor market information 
     system.
       (2) Grants to states.--On the application of the Governor 
     of a State, on behalf of the State, the Secretary may provide 
     a development grant to the State in such amount as the 
     Secretary, in consultation with the National Board, 
     determines to be necessary to enable such State to develop a 
     strategic plan pursuant to paragraph (1) for the development 
     of a comprehensive statewide integrated workforce development 
     system.
       (3) Application.--To be eligible to receive a development 
     grant under this subsection, the Governor of a State, on 
     behalf of the State, shall submit to the National Board and 
     the Secretary an application, at such time, in such form, and 
     containing such information as the Secretary may require.
       (b) Implementation Grants to Leading Edge States.--
       (1) Purpose.--The purpose of this subsection is to assist 
     States in the implementation of statewide high quality 
     integrated workforce development systems that are accountable 
     for achieving results.
       (2) Grants to states.--On the application of a Governor of 
     a State, on behalf of the State, in accordance with paragraph 
     (6), the Secretary, in consultation with the National Board, 
     may provide an implementation grant to the State in such 
     amount as the Secretary determines to be necessary to enable 
     such State to implement an integrated workforce development 
     system.
       (3) Period of grant.--The provision of payments under a 
     grant under this subsection shall not exceed 4 fiscal years, 
     and shall be subject to the annual approval of the Secretary, 
     in consultation with the National Board, and the availability 
     of appropriations for the fiscal year involved.
       (4) Allocation requirements.--
       (A) First year.--In the first fiscal year in which a State 
     receives amounts from an implementation grant under 
     subsection (b), the State shall use not less than 75 percent 
     of such amount to provide subgrants to local workforce 
     development boards.
       (B) Second year.--In the second fiscal year in which a 
     State receives amounts from an implementation grant under 
     subsection (b), the State shall use not less than 80 percent 
     of such amount to provide subgrants to local workforce 
     development boards.
       (C) Third and succeeding years.--In the third, and each 
     succeeding, fiscal year in which a State receives amounts 
     from an implementation grant under subsection (b), the State 
     shall use not less than 85 percent of such amount to provide 
     subgrants to local workforce development boards.
       (5) Limitation.--A State shall be eligible to receive not 
     more than 1 implementation grant under this subsection.
       (6) Application.--To be eligible to receive an 
     implementation grant under this subsection, the Governor of a 
     State, on behalf of the State, shall submit to the National 
     Board and the Secretary an application that shall include a 
     copy of the State Blueprint and such other information as the 
     Secretary, with the advice of the National Board, may 
     require.
       (c) Dissemination of Information on Best Practices.--
       (1) In general.--The Secretary, in consultation with the 
     National Board, shall--
       (A) collect and disseminate information that will assist 
     State and local communities undertaking activities to 
     streamline and reform their job training systems, including 
     information on--
       (i) the successful experiences of States and localities 
     that have received development or implementation grants, or 
     that have been granted waivers; and
       (ii) research concerning the restructuring of workforce 
     development systems; and
       (B) facilitate the exchange of information and ideas among 
     States and local entities carrying out job training reform 
     initiatives.
       (2) Use of information clearinghouses and other entities.--
     To carry out this subsection, the Secretary and the National 
     Board shall utilize such mechanisms as--
       (A) the Capacity Building and Information Dissemination 
     Network established pursuant to section 453(b) of the Job 
     Training Partnership Act (29 U.S.C. 1733(b));
       (B) the education resources information center 
     clearinghouses referred to in the General Education 
     Provisions Act (20 U.S.C. 1221e);
       (C) the National Network for Curriculum Coordination in 
     Vocational and Technical Education established under section 
     402(c)(2) of the Carl D. Perkins Vocational and Applied 
     Technology Education Act (20 U.S.C. 2402(c)(2));
       (D) the National Institute for Literacy established under 
     section 384 of the Adult Education Act (20 U.S.C. 1213c); and
       (E) the State Literacy Resource Centers established under 
     section 356 of such Act (20 U.S.C. 1208aa).
       (d) Workforce Development Impact Reports.--
       (1) Submission.--For each bill or resolution concerning 
     workforce development reported by any committee of the Senate 
     or the House of Representatives, the National Board shall 
     determine whether proposed Federal job training legislation 
     complies with the data reporting, common definitions, and 
     common funding cycles described in subsections (b) and (e) of 
     section 105. A determination of compliance by the National 
     Board under this subsection shall be included in the 
     committee report accompanying such legislation, if timely 
     submitted to such committee before such report is filed.
       (2) Procedure.--It shall not be in order in the Senate or 
     the House of Representatives to consider any bill or 
     resolution concerning workforce development that would not 
     comply with the national workforce development system, as 
     determined by the National Board under paragraph (1).
       (3) Waiver.--This subsection may be waived or suspended in 
     the Senate or the House of Representatives only by the 
     affirmative vote of three-fifths of the members of such 
     House.

     SEC. 104. CENTRALIZED WAIVERS.

       (a) Expedited Process.--Not later than 180 days after the 
     date of enactment of this Act, the President shall establish 
     an expedited process to consider and act on waiver requests 
     submitted by the States under this section.
       (b) States Not Receiving Implementation Grants.--
       (1) In general.--Any State may apply, in accordance with 
     this section, for a waiver relating to provisions of law or 
     regulations for one or more of the programs listed in section 
     404(a), for a period of 2 years to facilitate the provision 
     of assistance for workforce development.
       (2) Waiver authority.--A waiver may be granted under this 
     subsection only if--
       (A) the requirement sought to be waived impedes the ability 
     of the State, or a local entity in the States, to carry out 
     the State or local workforce development plan;
       (B) the State has waived, or agrees to waive, similar 
     requirements of State law; and
       (C) in the case of a statewide waiver, the State--
       (i) provides all State and local agencies and appropriate 
     organizations in the State with notice and an opportunity to 
     comment on the State's proposal to seek a waiver; and
       (ii) submits the affected agency's comments with the waiver 
     application.
       (3) Application.--Each application submitted under this 
     subsection shall--
       (A) identify the statutory or regulatory requirements that 
     are requested to be waived and the goals that the State or 
     local agency intends to achieve;
       (B) describe the action that the State has undertaken to 
     remove State statutory or regulatory barriers identified in 
     the application;
       (C) describe the goals of the waiver and the expected 
     programmatic outcomes if the request is granted;
       (D) describe the numbers and types of people to be affected 
     by such waiver;
       (E) describe a timetable for implementing the waiver;
       (F) describe the process the State will use to monitor, on 
     a biannual basis, the progress in implementing the waiver; 
     and
       (G) describe how the goals of the waived program or 
     programs will continue to be met.
       (c) States Receiving Implementation Grants.--Subject to 
     subsection (d), each State receiving an implementation grant 
     under section 103(b) shall have the provisions of law, or 
     regulations under such provisions, described in its grant 
     application or State Blueprint of such State waived for the 
     duration of the implementation grant.
       (d) Limitations.--
       (1) In general.--A waiver shall not be granted of a 
     provision of law (or a regulation under such provision) under 
     a workforce development program if such waiver would alter--
       (A) the purposes or goals of such program;
       (B) the allocation of funds under such program;
       (C) any provision of law under such program relating to 
     public health or safety, civil rights, protections granted 
     under title I and sections 503 and 504 of the Rehabilitation 
     Act of 1973 (29 U.S.C. 701 et seq.), occupational safety and 
     health, environmental protection, displacement of current 
     employees, or fraud and abuse; or
       (D) eligibility requirements under such program, except 
     that a waiver may be granted with respect to an eligibility 
     requirement if such waiver would provide for increased 
     flexibility in developing common definitions for individuals 
     eligible for such program.
       (2) Circulars and related regulations.--The following 
     circulars promulgated by the Office of Management and Budget 
     shall be subject to the waiver authority of this subsection:
       (A) A-87, relating to cost principles for State and local 
     governments.
       (B) A-102, relating to grants and cooperative agreements 
     with State and local governments.
       (C) A-122, relating to nonprofit organizations.
       (D) A-110, relating to administrative requirements for 
     grants and cooperative agreements with nonprofit 
     organizations and institutions of higher education.
       (E) A-21, relating to cost principles for institutions of 
     higher education.
       (3) Effective date.--A waiver granted under this section 
     shall take effect on the date such waiver is granted.
       (4) Review of application.--Each application submitted by a 
     State pursuant to paragraph (3) shall be reviewed by the 
     Secretary or agency head who has jurisdiction over the 
     workforce development program or programs to which such 
     waiver request relates.
       (5) Approval or disapproval of application.--
       (A) Timing.--Each application submitted by a State in 
     accordance with subsection (b)(3) shall be reviewed promptly 
     upon receipt, and shall be approved or disapproved not later 
     than the end of the 60-day period beginning on the date such 
     application is received.
       (B) Approval.--Waiver or waivers proposed in an application 
     may be approved for the 2-year period beginning on the date 
     such application is approved, if the State demonstrates in 
     the application that such waiver or waivers would achieve 
     coordination, expansion, and improvement in the quality of 
     services under its workforce development system.
       (C) Disapproval and resubmission.--If an application is 
     incomplete or unsatisfactory, the appropriated Federal 
     official shall, before the end of the period referred to in 
     subparagraph (A)--
       (i) notify the State of the reasons for the failure to 
     approve the application;
       (ii) notify the State that the application may be 
     resubmitted during the period referred to in clause (iii); 
     and
       (iii) permit the State to resubmit a corrected or amended 
     application during the 60-day period beginning on 
     notification under this subparagraph.
       (D) Review of resubmitted application.--Any application 
     resubmitted under subparagraph (C) shall be approved or 
     disapproved before the expiration of the 60-day period 
     beginning on the date of the resubmission.
       (6) Revocation of waiver.--If, after approving an 
     application under this subsection, it is found that the 
     waiver or waivers do not achieve coordination, expansion, and 
     improvement in the quality of services under the workforce 
     development programs to which such waiver or waivers relate, 
     the waiver or waivers may be revoked in whole or in part.
       (7) Notification of inspector general.--The inspector 
     general of any Federal agency that has jurisdiction over a 
     workforce development program for which a waiver or waivers 
     has been approved shall be notified of the grant of such 
     waiver.

     SEC. 105. QUALITY ASSURANCE SYSTEM.

       (a) Purpose.--The purpose of this section is to improve the 
     quality of all Federal programs directed at improving the 
     knowledge, skills, and abilities of members of the workforce 
     by strengthening accountability and encouraging the adoption 
     of quality improvement processes at all levels of the 
     workforce development system. In order to accomplish this 
     purpose, this Act--
       (1) directs the Secretaries of Labor, Education, and Health 
     and Human Services to jointly, in consultation with the 
     National Board--
       (A) develop common terms and definitions as described in 
     subsection (b);
       (B) develop a placement accountability system as described 
     in subsection (c); and
       (C) adjust existing program performance standards as 
     described in section 210; and
       (2) directs the National Board to recommend a system of 
     performance standards in its joint resolution submitted to 
     Congress pursuant to section 403(b) that includes standard 
     outcome measures relating to--
       (A) employment;
       (B) job retention;
       (C) earnings; and
       (D) nonemployment outcome measures (such as learning and 
     competency gains).
       (b) Common Terms and Definitions.--
       (1) In general.--Each workforce development program that 
     receives Federal funds shall collect and report to the 
     Governor and the State Council, if applicable, for each 
     participant to whom assistance is provided, the following 
     information:
       (A) The quarterly employment status and earnings for 1 year 
     after the participant no longer receives assistance under 
     such program.
       (B) Economic and demographic characteristics, including the 
     participant's--
       (i) social security number;
       (ii) date of birth;
       (iii) gender;
       (iv) race or ethnicity;
       (v) disability status;
       (vi) education (highest formal grade level achieved at 
     commencement of participation in program);
       (vii) academic degrees and credentials at time of entry 
     into the program; and
       (viii) employment status at time of entry into the program, 
     including--

       (I) scheduled hours of work per week (if employed);
       (II) weeks of unemployment (if not employed);
       (III) status as a homeless individual;
       (IV) veteran status; and
       (V) information regarding the receipt by the individual of 
     public financial assistance (including Federal, State, and 
     local assistance).

       (C) Services received, the extent, when appropriate, and 
     spending for such services, including--
       (i) assessments;
       (ii) testing;
       (iii) counseling;
       (iv) job development or job search assistance;
       (v) occupational skills training, including on-the-job 
     training;
       (vi) work experience;
       (vii) job readiness training;
       (viii) basic skills education;
       (ix) postsecondary academic education (nonoccupational); 
     and
       (x) supportive and supplementary services.
       (D) Program outcomes, as specified by the State, such as--
       (i) advancement to higher level education or training;
       (ii) attainment of additional degrees or credentials 
     (including skill standards as such standards become 
     available);
       (iii) assessment of learning gain in basic skills programs;
       (iv) attainment and retention of subsidized or unsubsidized 
     employment;
       (v) quarterly earnings; and
       (vi) reduction in welfare dependency.
       (E) Other data elements that may be added to the items 
     required to be collected and reported for all program 
     participants, as the National Board develops additional 
     standard definitions, including--
       (i) date of entry into the program and date of exit from 
     the program;
       (ii) program applicant, program participant, and program 
     terminee; and
       (iii) attainment of recognized skills standards.
       (2) Replacement of existing requirements.--Program 
     monitoring under this section shall supplant existing 
     monitoring and reporting requirements for program 
     participants.
       (3) Adoption of common terms and definitions.--
       (A) Report.--Not later than 180 days after the date of 
     enactment of this Act, each Federal department and agency 
     with responsibility for a workforce development program shall 
     report to the National Board on its progress in adopting the 
     common terms and definitions for program participants, 
     service activities, and outcomes by program operators and 
     grant recipients.
       (B) Implementation.--Not later than 1 year after the date 
     of enactment of this Act, each workforce development program 
     receiving Federal funds shall use the common terms and 
     definitions.
       (C) Use.--Upon adoption by the appropriate Federal 
     agencies, the common definitions for terminology developed 
     and reported pursuant to section 455 of the Job Training 
     Partnership Act (29 U.S.C. 1735(b)) shall be utilized in 
     interpreting and compiling the core data elements. 
     Notwithstanding any other provision of Federal law, such 
     common definitions shall be utilized in lieu of existing 
     program definitions for similar data elements.
       (4) Recommendations.--Not later than 180 days after the 
     date all of the Members of the National Board are appointed, 
     the National Board shall make recommendations to the 
     Secretaries of Labor, Education, and Health and Human 
     Services, and the heads of other agencies operating workforce 
     development programs, on common definitions for other terms, 
     including terms relating to--
       (A) program status, including--
       (i) applicant;
       (ii) participant;
       (iii) terminee; and
       (iv) training-related placement;
       (B) program eligibility, including--
       (i) family income; and
       (ii) economically disadvantaged individuals; and
       (C) other terms considered appropriate by the National 
     Board, such as common cost categories.
       (5) Amendments.--If any of the proposed common definitions 
     require amendment to existing laws, the National Board shall 
     submit to Congress recommendations for legislative action not 
     later than 9 months after the date all of the members of the 
     National Board are appointed.
       (c) Placement Accountability.--
       (1) In general.--The purpose of this subsection is to 
     establish a placement accountability system using a cost-
     effective data source with information on job placement, 
     earnings, and job retention, to foster accountability by all 
     federally funded workforce development programs.
       (2) Performance monitoring.--Each workforce development 
     program that receives Federal funds shall--
       (A) engage in continuous performance self-monitoring by 
     measuring, at a minimum, the quarterly employment status and 
     earnings of each recipient of assistance under such program; 
     and
       (B) monitor each recipient of assistance for a period of 
     not less than 1 year, beginning on the date on which the 
     recipient no longer receives assistance under such program.
       (3) Information matching.--
       (A) Core data.--Each workforce development program that 
     receives Federal funds shall provide the information 
     described in subsection (b) regarding program participants to 
     the State agency responsible for labor market information 
     designated in title V.
       (B) Matching.--The State agency responsible for labor 
     market information designated in title V shall, in 
     conjunction with the Bureau of Labor Statistics, match the 
     information provided pursuant to subparagraph (A) with 
     quarterly employment and earnings records.
       (4) Reimbursement.--Requesting programs shall reimburse the 
     State agency responsible for wage record data for the cost of 
     matching such information. Notwithstanding any other 
     provision of Federal law, requesting programs may use Federal 
     funds for such reimbursement.
       (5) Confidentiality.--Requesting pro- grams--
       (A) shall protect the confidentiality of wage record data 
     through the use of recognized security procedures; and
       (B) may not retain such data for more than 10 years.
       (6) Submission to state council.--The State agency 
     responsible for labor market information shall submit the 
     results of the matching to the State Council, in accordance 
     with procedures and schedules specified by the National Board 
     and the Secretary.
       (7) Responsibility of governors.--The Governor of each 
     State shall ensure the submission of the matched data to the 
     State Council, the National Board, the Secretary, and other 
     Federal entities, as required by the National Board.
       (d) Dissemination of Quality Assurance.--The information 
     obtained under subsection (c) shall be made available to--
       (1) the State Council of the State in which the program is 
     located;
       (2) the local workforce development boards in the State in 
     which the program is located; and
       (3) consumers of labor market information to judge 
     individual program performance in an easily accessible 
     format.
       (e) Consistent Funding Cycles.--
       (1) In general.--All federally funded workforce development 
     training activities shall, to the extent practicable, be 
     funded on a consistent funding cycle basis.
       (2) Recommendations for funding cycle.--Not later than 180 
     days after the date on which all of the members of the 
     National Board are appointed, the National Board shall make 
     recommendations to Congress on the appropriate funding cycle 
     to be used for all workforce development programs and 
     activities.
                    TITLE II--STATE RESPONSIBILITIES

     SEC. 201. STATE WORKFORCE DEVELOPMENT COUNCILS.

       (a) Establishment.--Each State desiring to participate in 
     the development of an integrated and accountable workforce 
     development system under the procedures specified in section 
     103(b) shall establish a State Workforce Development Council 
     (referred to in this Act as a ``State Council'') or have 
     located within such State an existing entity that is similar 
     to a State Council and that includes members who are 
     representatives of employers and workers.
       (b) Purpose.--Each State Council shall serve as the 
     principal advisory board for the Governor of such State for 
     all programs included in the States integrated workforce 
     development system.
       (c) Functions.--Each State Council shall assume the 
     functions and responsibilities of councils and commissions 
     required under Federal law that are part of the integrated 
     workforce development system of such State.

     SEC. 202. MEMBERSHIP.

       (a) In General.--
       (1) Representatives of business and industry and organized 
     labor.--Each State Council shall be comprised of individuals 
     who are appointed by the Governor for a term of not less than 
     2 years from among--
       (A) representatives of business and industry, who shall 
     constitute not less than 33 percent of the membership of the 
     State Council, including individuals who are members of local 
     workforce development boards; and
       (B) representatives of organized labor who shall constitute 
     not less than 25 percent of the membership of the State 
     Council and shall be selected from among individuals 
     nominated by recognized State labor federations.
       (2) Additional members.--Each State Council may include one 
     or more qualified members who are appointed by the Governor 
     from among representatives of the following:
       (A) Postsecondary institutions.
       (B) Secondary or postsecondary vocational education 
     institutions.
       (C) Community-based organizations.
       (D) Nongovernmental organizations that have a history of 
     successfully protecting the rights of individuals with 
     disabilities or older persons.
       (E) Units of general local government or consortia of such 
     units.
       (F) State officials responsible for administering programs 
     listed in sections 402 and 404(a), and included in the 
     integrated system.
       (G) The State legislature.
       (H) Any local program that receives Federal funding from 
     any program included in the integrated workforce development 
     system of the State.
       (b) Ex Officio.--
       (1) Nonvoting members.--The Governor may appoint ex officio 
     additional nonvoting members to the State Council.
       (2) Expertise.--The Governor of the State shall ensure that 
     the State Council and the staff of the State Council have 
     sufficient expertise to effectively carry out the duties and 
     functions of the State Council described under the laws 
     relating to the applicable program.
       (c) Advisory Committees.--Each State Council may establish 
     a business and a labor advisory committee to assist the State 
     Council in carrying out its duties pursuant to section 204. 
     Membership on such advisory committees shall include State 
     Council members from the business and labor communities and 
     such additional members as the State Council requires.

     SEC. 203. CHAIRPERSON.

       The Governor of the State shall appoint a chairperson of 
     the State Council who is a representative of the business 
     community.

     SEC. 204. DUTIES AND RESPONSIBILITIES.

       (a) State Workforce Development Policy Blueprint.--The 
     State Council shall assist the Governor to prepare and submit 
     to the National Board a biennial report to be known as the 
     State Workforce Development Policy Blueprint (referred to in 
     this Act as the ``State Blueprint''). The State Blueprint 
     shall--
       (1) serve as a strategic plan for integrating federally 
     funded workforce development programs included in an 
     integrated system of the State, established pursuant to 
     section 103(b), with State-funded job training, employment, 
     employment-related education, and economic development 
     activities;
       (2) summarize and analyze information about training needs 
     of critical industries in the State contained in the local 
     workforce development policy blueprints developed by the 
     workforce development board;
       (3) establish State goals for the integrated workforce 
     development system and a common core set of performance 
     measures and standards for programs included in the system, 
     to be used in lieu of existing performance measures and 
     standards for each of the included programs;
       (4) analyze how the businesses of the State are--
       (A) progressing in the restructuring of the workplace to 
     provide continuous learning;
       (B) improving the skills and abilities of front-line 
     workers of such businesses; and
       (C) participating in State and local efforts to transform 
     federally funded education and job training programs into a 
     coherent and accountable workforce development system;
       (5) utilize information available from the State Report 
     Card and other sources to analyze the relative effectiveness 
     of individual workforce development programs within the State 
     and of the State's workforce development system as a whole;
       (6) evaluate the progress being made within the State in 
     streamlining, consolidating, and reforming the workforce 
     development system of the State in accordance with the 
     purposes contained in section 2(b) and the framework for 
     State implementation contained in the implementation grant 
     proposal of the State;
       (7) describe how service to special hard-to-serve 
     populations is to be maintained;
       (8) identify how any funds that a State may be receiving 
     under section 103(b) are to be utilized in conjunction with 
     existing resources to continuously improve the effectiveness 
     of the workforce development system of the State;
       (9) describe the method to be used to allocate funds 
     received under section 103(b) in a fair and equitable manner 
     among unified service delivery areas;
       (10) specify the additional elements, if any, to be 
     included in operating agreements between local workforce 
     development boards and one-stop career centers;
       (11) specify additional criteria, if any, for selection of 
     one-stop career centers;
       (12) specify the conditions under which the requirements of 
     section 304(g) may be waived;
       (13) specify the nonemployment-related outcome measures 
     that will be used for the workforce development system;
       (14) specify the nature and scope of the budget authority 
     for local workforce development boards in the State; and
       (15) supplant federally required planning reports for 
     programs under the integrated workforce development system of 
     the State.
       (b) State Workforce Development Report Card.--The State 
     Council shall assist the Governor of the State to issue an 
     annual report to be known as the State Workforce Development 
     Report Card (referred to in this Act as the ``State Report 
     Card''). The State Report Card shall describe the performance 
     of all workforce development programs operating in the State 
     that receive Federal funding and any additional State-funded 
     programs that the Governor may choose to include. The State 
     Report Card shall--
       (1) include an integrated budget that documents the annual 
     spending, number of clients served, and types of services 
     provided for workforce development programs for the State as 
     a whole and for each unified service delivery area within the 
     State;
       (2) assess the maintenance of effort to hard-to-serve 
     populations in relation to the number served and outcomes for 
     those populations in the preceding 3 years;
       (3) utilize information available from the quality 
     assurance system established under section 105 to assess--
       (A) employment and earnings experiences of individuals who 
     have received assistance from each workforce development 
     program operated in the State; and
       (B) relative employment and earnings experiences of 
     participants receiving services from each one-stop career 
     center in the State;
       (4) include an analysis of other nonemployment-related 
     results for each workforce development program operating 
     within the State; and
       (5) include a report of annual employment trends and 
     earnings (by industry and occupation) in the State and each 
     unified service delivery area, to assist State and local 
     policy makers, training providers, and users of the system to 
     link the training provided to the skill and labor force needs 
     of local employers.
       (c) Workforce Development Board Certification and 
     Effectiveness Criteria.--Each State Council shall--
       (1) assist the Governor to certify each local workforce 
     development board; and
       (2) make recommendations to the Governor for criteria that 
     will be used to judge the effectiveness of each of the 
     workforce development boards of the State.

     SEC. 205. DEVELOPMENT OF QUALITY ASSURANCE SYSTEMS AND 
                   CONSUMER REPORTS.

       (a) In General.--The State Council shall develop a quality 
     assurance system to complement and expand upon the quality 
     assurance system established in section 105 in order to 
     provide customers of job training services with consumer 
     reports on the supply, demand, price, and quality of job 
     training services in each unified service delivery area in 
     the State.
       (b) Selection of Tools and Measures.--Each State shall 
     select the tools and measures that are appropriate to the 
     needs of such State, including, but not limited to--
       (1) collecting and organizing service provider performance 
     data in accordance with information generated from the State 
     Report Card under section 204(b), the financial and 
     management information system designed pursuant to section 
     208, and the labor market information system of the State 
     described in section 501; and
       (2) conducting surveys as appropriate to ascertain customer 
     satisfaction.
       (c) Collection and Dissemination.--The State Council shall, 
     in conjunction with the local workforce development boards, 
     establish mechanisms for collecting and disseminating the 
     quality assurance information on a regular basis to--
       (1) individuals seeking employment;
       (2) employers;
       (3) policymakers at the Federal, State, and local levels; 
     and
       (4) training and education providers.
       (d) Assurances.--Each public and private education, 
     training, and career development service provider receiving 
     Federal funds under a program in an integrated system of the 
     State pursuant to section 103(b) shall collect and provide 
     the quality assurance information required under this 
     section.

     SEC. 206. ADMINISTRATION.

       (a) Authorities.--Each State Council shall be independent 
     of other State workforce development agencies and have the 
     authority to--
       (1) employ staff; and
       (2) receive and disburse funds.
       (b) Special Projects.--Each State Council may fund and 
     operate special pilot or demonstration projects for purposes 
     of research or continuous improvement of system performance.
       (c) Limitation on Use of Funds.--Not more than 5 percent of 
     the funds received by the State from an implementation grant 
     under section 103(b) shall be used for the administration of 
     the State Council.

     SEC. 207. ESTABLISHMENT OF UNIFIED SERVICE DELIVERY AREAS.

       (a) Recommendations.--Each State Council shall make 
     recommendations to the Governor of such State for the 
     establishment of unified service delivery areas that may be 
     used as intrastate geographic boundaries, to the extent 
     practicable, for all workforce development programs in an 
     integrated system of the State pursuant to section 103(b).
       (b) Establishment.--Each State receiving an implementation 
     grant under section 103(b) shall, based upon the 
     recommendations of the State Council, and in consultation and 
     cooperation with local communities, establish unified service 
     delivery areas throughout the State for the purpose of 
     providing community wide workforce development assistance in 
     one-stop career centers under section 304.
       (c) Responsibilities.--In establishing unified service 
     delivery areas, the Governor, in consultation with the State 
     Council and local communities--
       (1) shall take into consideration existing--
       (A) labor market areas;
       (B) units of general local government;
       (C) service delivery areas established under section 101 of 
     the Job Training Partnership Act (29 U.S.C. 1511); and
       (D) the distance traveled by individuals to receive 
     services;
       (2) may merge existing service delivery areas; and
       (3) may not approve a total number of unified service 
     delivery areas that is greater than the total number of 
     service delivery areas in existence in the State on the date 
     of enactment of this Act.

     SEC. 208. FINANCIAL AND MANAGEMENT INFORMATION SYSTEMS.

       (a) In General.--Each State shall use a portion of the 
     funds it receives under section 103(a) to design a unified 
     financial and management information system. Each State that 
     receives an implementation grant under section 103(b) shall 
     require that all programs designated in the integrated system 
     use the unified financial and management information system.
       (b) Requirements.--Each unified financial and management 
     information system shall--
       (1) be used by all agencies involved in workforce 
     development activities, including one-stop career centers 
     which shall have the capability to track the overall public 
     investments within the State and unified service delivery 
     areas, and to inform policymakers as to the results being 
     achieved through that investment;
       (2) contain a common structure of financial reporting 
     requirements, fiscal systems, and monitoring for all 
     workforce development expenditures included in the integrated 
     system that shall utilize the common data elements and 
     definitions included in subsections (b) and (c) of section 
     105;
       (3) support local efforts to establish unified service 
     systems, including intake and eligibility determination for 
     all financial aid sources; and
       (4) notwithstanding any other provision of Federal law, 
     supplant federally required fiscal reporting and monitoring 
     for each individual program included in the integrated 
     system.

     SEC. 209. CAPACITY BUILDING GRANTS.

       From funds made available to a State for implementation 
     pursuant to section 103(b) or development pursuant to section 
     103(a), the State shall develop a strategy to enhance the 
     capacity of the institutions, organizations, and staff 
     involved in State and local workforce development activities 
     by providing services such as--
       (1) training for members of the local workforce development 
     boards;
       (2) training for front-line staff of any local education or 
     training service provider or one-stop career center;
       (3) technical assistance regarding managing systemic 
     change;
       (4) customer service training;
       (5) organization of peer-to-peer networks for training, 
     technical assistance, and information sharing;
       (6) organizing a best practices database covering the 
     various workforce development system components; and
       (7) training for State and local staff on the principles of 
     quality management and decentralizing decisionmaking.

     SEC. 210. PERFORMANCE STANDARDS FOR UNIFIED SERVICE DELIVERY 
                   AREAS.

       (a) In General.--The Governor of each State that implements 
     an integrated workforce development system under section 
     103(b) may, in consultation with the State Council, the local 
     workforce development boards in the State, and employees of 
     any of the job training programs included in the integrated 
     system or the employee organizations of such employees, make 
     adjustments to existing performance standards for programs in 
     such system in the unified service delivery area of the 
     State.
       (b) Criteria.--Criteria developed pursuant to subsection 
     (a) may include such factors as--
       (1) placement, retention, and earnings of participants in 
     unsubsidized employment, including--
       (A) earnings at 1, 2, and 4 quarters after termination from 
     the program; and
       (B) comparability of wages 1 year after termination from 
     the program with wages prior to participation in the program;
       (2) acquisition of skills pursuant to a skill standards and 
     skill certification system endorsed by the National Skill 
     Standards Board established pursuant to section 503 of the 
     National Skill Standards Act of 1994;
       (3) the satisfaction of participants and employers with 
     services provided and employment outcomes; and
       (4) the quality of services provided and the maintenance of 
     effort to hard-to-serve populations, such as low-income 
     individuals and older workers.
       (c) Adjustments.--Each Governor of a State that implements 
     an integrated workforce development system under section 
     103(b) shall, within parameters established by the National 
     Board, and after consultation with the workforce development 
     boards in the State, prescribe adjustments to the performance 
     criteria prescribed under subsections (a) and (b) for the 
     unified service delivery areas based on--
       (1) specific economic, geographic, and demographic factors 
     in the State and in regions within the State; and
       (2) the characteristics of the population to be served, 
     including the demonstrated difficulties in serving special 
     populations.
       (d) Use of Criteria.--The performance criteria developed 
     pursuant to this section shall be utilized in lieu of similar 
     criteria for programs receiving Federal funding included in 
     the integrated system of the State, to the extent determined 
     by the State Council subject to the approval of the National 
     Board.
                   TITLE III--LOCAL RESPONSIBILITIES

     SEC. 301. WORKFORCE DEVELOPMENT BOARDS.

       (a) Establishment.--In each State receiving an 
     implementation grant under section 103(b), and subject to 
     subsection (b) of this section, the local elected officials 
     of each unified service delivery area shall establish a 
     workforce development board to administer the workforce 
     development assistance provided by all the programs in the 
     integrated workforce development system in such area.
       (b) Exception.--States with a single unified delivery area 
     with contiguous borders shall not be subject to the 
     requirement of subsection (a).
       (c) Membership.--Each workforce development board shall be 
     comprised of--
       (1) representatives of business and industry, who shall 
     constitute a majority of the board and who shall be business 
     leaders in the unified service delivery area;
       (2)(A)(i) representatives of organized labor organizations, 
     who shall be selected from among individuals nominated by 
     recognized State labor federations; and
       (ii) representatives of community-based organizations, who 
     shall be selected from among those individuals nominated by 
     officers of such organizations; and
       (B) who shall comprise not less than 30 percent of the 
     membership of the board;
       (3) representatives of educational institutions;
       (4) community leaders, such as leaders of--
       (A) economic development agencies;
       (B) human service agencies and institutions;
       (C) veterans organizations; and
       (D) entities providing job training;
       (5) representatives of nongovernmental organizations that 
     have a history of successfully protecting the rights of 
     individuals with disabilities or older persons; and
       (6) a local elected official, who shall be a nonvoting 
     member.
       (d) Nominations.--
       (1) Business and industry representatives.--
       (A) In general.--The representatives of business and 
     industry under paragraph (1) of subsection (c) shall be 
     selected by local elected officials from among individuals 
     nominated by general purpose business organizations after 
     consultation with, and receiving recommendations from, other 
     business organizations in the unified service delivery area.
       (B) Definition.--For purposes of this paragraph, the term 
     ``general purpose business organization'' means an 
     organization that admits to membership any for-profit 
     business operating within the unified service delivery area.
       (2) Labor representatives.--The representatives of 
     organized labor under paragraph (2) of subsection (c) shall 
     be selected from among individuals recommended by recognized 
     State and local labor federations. If the State or local 
     labor federation fails to nominate a sufficient number of 
     individuals, individual workers may be included on the 
     workforce development board as labor representatives.
       (3) Other members.--The members of the workforce 
     development board described in paragraphs (1), (4), and (5) 
     of subsection (c) shall be selected by chief local elected 
     officials in accordance with subsection (e) from individuals 
     recommended by interested organizations.
       (4) Expertise.--The State Council and Governor of each 
     State shall ensure that the workforce development board and 
     the staff of the State Council have sufficient expertise to 
     effectively carry out the duties and functions of existing 
     local boards described under the laws relating to the 
     applicable program. Such expertise shall include, where 
     appropriate, knowledge of--
       (A) the long-term needs of individuals preparing to enter 
     the workforce;
       (B) the needs of State, local, and regional labor markets; 
     and
       (C) the methods for evaluating the effectiveness of 
     education and job training programs in serving various 
     populations.
       (e) Appointment Process.--In the case of a unified service 
     delivery area--
       (1) in which there is one unit of general local government, 
     the chief elected official of such unit shall determine the 
     number and appoint members to the board from the individuals 
     nominated or recommended under subsection (d); and
       (2) in which there are 2 or more units of general local 
     government, the chief elected officials of such units shall 
     determine the number and appoint members to the workforce 
     development board from the individuals nominated or 
     recommended under subsection (d), in accordance with an 
     agreement entered into by such units of general local 
     government or, in the absence of such an agreement, by the 
     Governor of the State in which the unified service delivery 
     area is located.
       (f) Terms.--Each workforce development board shall 
     establish, in its bylaws, terms to be served by its members, 
     who may serve until the successors of such members are 
     appointed.
       (g) Vacancies.--Any vacancy on a workforce development 
     board shall be filled in the same manner as the original 
     appointment was made.
       (h) Removal for Cause.--Any member of a workforce 
     development board may be removed for cause in accordance with 
     procedures established by the workforce development board.
       (i) Chairperson.--Each workforce development board shall 
     select a chairperson, by a majority vote of the members of 
     the board, from among the members of the workforce 
     development board who are from business or industry. The term 
     of the chairperson shall be determined by the board.
       (j) Subcommittees.--Each workforce development board may 
     establish business and labor subcommittees to advise the 
     board on workforce development issues. Such subcommittees 
     shall have as members representatives of the business and 
     labor communities, and such other members as the board 
     determines necessary.
       (k) Duties.--Each workforce development board shall--
       (1) prepare a workforce development board policy blueprint 
     in accordance with section 302;
       (2) issue an annual unified service delivery area report 
     card in accordance with section 303;
       (3) review and comment on the local plans for all programs 
     included in the integrated workforce development system of 
     the State and operating within the unified service delivery 
     area, prior to the submission of such plans to the 
     appropriate State Council, or the relevant Federal agency, if 
     no State approval is required;
       (4) oversee the operations of the one-stop career center 
     established in the unified service delivery area under 
     section 304, including the responsibility to--
       (A) designate one-stop career center operators within the 
     unified service delivery area consistent with selection 
     criteria specified in section 204(a);
       (B) develop and approve the budgets and annual operating 
     plans of the one-stop career centers;
       (C) establish annual performance standards, customer 
     service quality criteria, and outcome measures for the one-
     stop career centers, consistent with measures developed 
     pursuant to sections 210;
       (D) assess the results of programs and services;
       (E) ensure that services and skills provided through the 
     centers are of high quality and are relevant to labor market 
     demands; and
       (F) determine priorities for client services from Federal 
     funding sources in the system;
       (5) develop a strategy to disseminate consumer reports 
     produced under section 205 to workers, jobseekers, and 
     employers, and other individuals in the unified service 
     delivery area; and
       (6) upon recommendation of a business or labor advisory 
     committee, the local board may apply to the Secretary for a 
     grant in the amount of 50 percent of the cost of establishing 
     innovative models of workplace training and upgrading of 
     incumbent workers pursuant to section 307.
       (k) Administration.--
       (1) In general.--Each local workforce development board 
     shall have the authority to receive and disburse funds made 
     available for carrying out the provisions of this Act and 
     shall employ its own staff, independent of local programs and 
     service providers.
       (2) Funding.--Each workforce development board shall 
     receive a portion of its funding from the implementation 
     grant of the State, with additional funds made available from 
     participating programs.
       (l) Conflict of Interest.--No member of a workforce 
     development board shall cast a vote on the provision of 
     services by that member (or any organization which that 
     member directly represents) or vote on any matter that would 
     provide direct financial benefit to such member.

     SEC. 302. WORKFORCE DEVELOPMENT BOARD POLICY BLUEPRINT.

       (a) In General.--Each workforce development board shall 
     prepare and submit to the State Council a biennial report, to 
     be known as the workforce development board policy blueprint, 
     except that in States with a single unified service delivery 
     area, the additional elements required in the regional 
     blueprint shall be incorporated into the State Blueprint.
       (b) Requirements.--The workforce development board policy 
     blueprint shall--
       (1) include a list of the key industries and industry 
     clusters of small- to mid-size firms that are most critical 
     to the current and future economic competitiveness of unified 
     service delivery area;
       (2) identify the workforce development needs of the 
     critical industries and industry clusters;
       (3) summarize the capacity of local education and training 
     providers to respond to the workforce development needs;
       (4) indicate how the local workforce development programs 
     intend to strategically deploy resources available from 
     implementation grants and existing programs operating in the 
     unified service delivery area to better meet the workforce 
     development needs of critical industries and industry 
     clusters in the unified service delivery area and enhance 
     program performance;
       (5) include a plan to develop one-stop career centers, as 
     described in section 304, including an estimate of the costs 
     in personnel and other resources to develop a network 
     adequate to provide universal access to such centers in the 
     local labor market;
       (6) describe how services will be maintained to all groups 
     served by the participating programs in accordance with their 
     legislative intent, including hard-to-serve populations;
       (7) identify actions for building the capacity of the 
     workforce development system in the unified service delivery 
     area; and
       (8) report on the level and recent changes in earned income 
     of workers in the local labor market, in relation to State 
     and national levels, by occupation and industry.
       (c) Use in Other Reports.--The workforce development board 
     policy blueprint may be utilized in lieu of local planning 
     reports required by any other Federal law for any program 
     included in the integrated workforce development system, 
     subject to the approval of the State Council.

     SEC. 303. REPORT CARD.

       (a) In General.--Each workforce development board shall 
     annually prepare and submit to the State Council a unified 
     service delivery area report card in accordance with this 
     section. The report card shall describe the performance of 
     all workforce development programs and service providers, 
     including the one-stop career centers, operating in the area 
     that is included in the integrated workforce development 
     system. In States with a single unified service delivery 
     area, the State Council shall prepare the report card.
       (b) Requirements.--The report card shall--
       (1) report on the relationship between services provided 
     and the local labor market needs as described in the 
     workforce development board policy blueprint;
       (2) using the quality assurance system information 
     established pursuant to section 205, include an analysis of 
     employment-related, and other outcomes achieved by the 
     programs and service providers operating in the area;
       (3) identity the performance of the one-stop career 
     centers;
       (4) detail the economic and demographic characteristics of 
     individuals served compared to the characteristics of the 
     general population of the unified service delivery area, and 
     the jobseekers, workers, and businesses of such area; and
       (5) assess the maintenance of effort to hard-to-serve 
     populations in relation to the level of services and outcomes 
     during the preceding 3 years.

     SEC. 304. ONE-STOP CAREER CENTERS.

       (a) Establishment.--Each workforce development board 
     receiving funds under an implementation grant awarded under 
     section 103(b) shall develop and implement a network of one-
     stop career centers in the unified service delivery area of 
     the workforce development board. The one-stop career centers 
     shall provide jobseekers, workers, and businesses universal 
     access to a comprehensive array of quality employment, 
     education, and training services.
       (b) Procedures.--Each workforce development board shall, in 
     conjunction with local elected official or officials in the 
     unified service delivery area, and consistent with criteria 
     specified in section 204(a), select a method for establishing 
     one-stop career centers.
       (c) Eligible Entities.--Each entity within the unified 
     service delivery area that performs the functions specified 
     in subsections (e) and (f) for any of the programs in the 
     integrated workforce development system shall be eligible to 
     be selected as a one-stop career center.
       (d) Period of Selection.--Each one-stop career center 
     operator shall be designated for two-year periods. Every 2 
     years, one-stop career center designations shall be 
     reevaluated by the workforce development board based on 
     performance indicated in the unified service delivery area 
     report card and other criteria established by the workforce 
     development board and the State Council.
       (e) Brokerage Services to Individuals.--Each one-stop 
     career center shall make available to the public, at no 
     cost--
       (1) outreach to make individuals aware of, and encourage 
     the use of, services available from workforce development 
     programs operating in the unified service delivery area;
       (2) intake and orientation to the information and services 
     available through the one-stop career center;
       (3) preliminary assessments of the skill levels (including 
     appropriate testing) and service needs of individuals, 
     including--
       (A) basic skills;
       (B) occupational skills;
       (C) prior work experience;
       (D) employability;
       (E) interests;
       (F) aptitude; and
       (G) supportive service needs;
       (4) job search assistance, including resume and interview 
     preparation and workshops;
       (5) information relating to the supply, demand, price, and 
     quality of job training services available in each unified 
     service delivery area in the State pursuant to section 
     501(c);
       (6) information relating to eligibility requirements and 
     sources of financial assistance for entering the programs 
     described in 501(c)(2)(C); and
       (7) referral to appropriate job training, employment, and 
     employment-related education or support services in the 
     unified service delivery area.
       (f) Brokerage Services to Employers.--Each one-stop career 
     center shall provide to each requesting employer--
       (1) information relating to supply, demand, price, and 
     quality of job training services available in each unified 
     service delivery area in the State, consistent with the 
     consumer reports described in section 205;
       (2) customized screening and referral of individuals for 
     employment;
       (3) customized assessment of skills of the current workers 
     of the employer;
       (4) an analysis of the skill needs of the employer; and
       (5) other specialized employment and training services.
       (g) Conflicts.--
       (1) In general.--Except as provided in paragraph (2), any 
     entity that performs one-stop career center functions shall 
     be prohibited from making an education and training referral 
     to itself.
       (2) Waiver.--If the enforcement of paragraph (1) would 
     result in diminished access to either one-stop career center 
     services or to education and training services, as defined 
     under section 204(a), such prohibition may be waived by the 
     State council upon request of a regional board.
       (h) Fees.--
       (1) In general.--Except as provided in paragraph (2), each 
     one-stop career center may charge fees for the services 
     described in subsection (f), subject to approval by the 
     workforce development board.
       (2) Limitation.--No fee may be charged for any service that 
     an individual would be eligible to receive at no cost under a 
     participating program.
       (3) Income.--Income received by a one-stop career center 
     from the fees collected shall be used by the workforce 
     development board to expand or enhance one-stop career 
     centers available within the unified service delivery area.
       (i) Core Data Elements and Common Definitions.--Each one-
     stop career center shall adopt the core data elements and 
     common definitions as specified in subsections (b) and (c) of 
     section 105, and updated by the National Board.
       (j) Operating Agreements.--
       (1) In general.--Each one-stop career center operator shall 
     enter into a written agreement with the workforce development 
     board concerning the operation of the center.
       (2) Approval.--The agreement shall--
       (A) be subject to the approval of--
       (i) the local chief elected official or officials;
       (ii) the State Council; and
       (iii) the Governor of the State in which the center is 
     located; and
       (B) shall address--
       (i) the services to be provided;
       (ii) the financial and nonfinancial contributions to be 
     made to the centers from funds made available pursuant to 
     section 103(b) and all participating workforce development 
     programs;
       (iii) methods of administration;
       (iv) procedures to be used to ensure compliance with 
     statutory requirements of the programs in the integrated 
     workforce development system; and
       (v) other elements, as required by the workforce 
     development board or the State Council under section 204(a).

     SEC. 305. PROGRESS REPORTS.

       Each workforce development board shall annually report to 
     the State Council on the progress such board is making with 
     respect to the effectiveness criteria of the workforce 
     development board established under section 210, assessing 
     the implementation of the integrated system, except that in 
     States with a single unified service delivery area the State 
     Council shall be responsible for carrying out the activities 
     under this section.

     SEC. 306. CAPACITY BUILDING.

       (a) In General.--Each workforce development board shall 
     identify actions to be taken for building the capacity of the 
     workforce development system in such unified service 
     delivery, except that in States with a single unified 
     delivery area, the State Council shall be responsible for 
     carrying out the activities under this section.
       (b) Funding.--The State Council shall make funds available 
     to each workforce development board for capacity building 
     activities from funds made available under section 103(b) and 
     any other funds within the integrated workforce development 
     budget of the State. For the activities described in 
     subsection (c), the workforce development board may also 
     submit requests to the State Council to redirect a portion of 
     training and technical assistance resources available from 
     any of the workforce development programs included in the 
     integrated system within the unified service development area 
     of the workforce development board.
       (c) Types of Activities.--Capacity building activities may 
     include--
       (1) training of workforce development board members;
       (2) staff training;
       (3) technical assistance regarding managing systemic 
     change;
       (4) customer service training;
       (5) organization of peer-to-peer networks for training, 
     technical assistance, and information sharing;
       (6) organizing a best practices database covering the 
     various system activities; and
       (7) training for local staff on the principles of quality 
     management and decentralized decisionmaking.

     SEC. 307. INCENTIVE GRANTS FOR INCUMBENT WORKER TRAINING.

       (a) Purpose.--The purpose of this section is to establish a 
     program to award competitive matching grants to assist local 
     workforce development boards respond to the training needs of 
     front-line workers in the communities in which such boards 
     are located.
       (b) Application.--Each local workforce development board 
     seeking a grant under this section shall submit an 
     application to the State Council of the State in which such 
     board is located, at such time, in such manner, and 
     containing such information as the Secretary may prescribe. 
     Not later than 30 days after receiving an application, the 
     State Council shall review and forward the application, with 
     comments, to the National Board and the Secretary.
       (c) Selection of Grantees.--
       (1) In general.--The Secretary, with the advice of the 
     National Board, shall award a grant under this section only 
     if the Secretary determines, from the grant application, that 
     the grant will be used to maintain or enhance the competitive 
     position of local industries that are committed to making the 
     investments necessary to develop the skills of their workers.
       (2) Criteria.--In awarding grants under this section, the 
     Secretary shall take into account--
       (A) the policy priorities and training needs of local 
     industries identified in the local workforce development 
     policy blueprints;
       (B) whether there is a demonstrated need for skill 
     upgrading to maintain firm or industry competitiveness;
       (C) whether the application contains proposals for training 
     that will directly lead to increased earnings of front-line 
     workers;
       (D) initiatives by firms or firm partnerships to develop 
     high performance work organizations;
       (E) whether the grant proposal meets the training needs of 
     small and medium sized firms;
       (F) whether the grant proposal is focused on workers with 
     substantial firm or industry tenure; and
       (G) whether the proposed industry activities are integrated 
     with private sector activities under the School-to-Work 
     Opportunities Act of 1994.
       (d) Use of Funds.--Grants awarded under this section shall 
     be used for skill enhancement and training activities that 
     may include--
       (1) basic skills;
       (2) occupational skills;
       (3) statistical process control training;
       (4) total quality management techniques;
       (5) team building and problem solving skills; and
       (6) other training or activities that will result in the 
     increased likelihood of job retention, higher wages, or 
     increased firm competitiveness.
       (e) Funding.--
       (1) Cost Share.--
       (A) Federal share.--A grant awarded under this section 
     shall be in an amount equal to 50 percent of the cost of 
     carrying out the grant proposal.
       (B) Local share.--As a condition to receiving Federal funds 
     under this section, local businesses, industry associations, 
     and worker organizations shall provide funding in an amount 
     equal to 50 percent of the cost of carrying out the grant 
     proposal.
       (2) Limitations.--
       (A) Use of funds.--Amounts awarded under this section shall 
     not be used to pay the wages of workers during the training 
     of such workers.
       (B) Additional funding.--Each recipient of funds under this 
     section shall certify that such funds shall supplement and 
     not supplant other public or private funds otherwise spent on 
     worker training.
                        TITLE IV--CONSOLIDATION

     SEC. 401. PURPOSE; FINDINGS; SENSE OF THE CONGRESS.

       (a) Purpose.--The purpose of this title is to streamline 
     the system of federally funded employment training services 
     available to jobseekers, workers, and businesses.
       (b) Findings.--The Congress finds that--
       (1) the process of streamlining the system of federally 
     funded employment training services begins with consolidating 
     and eliminating separate employment training programs; and
       (2) as such programs are eliminated, the funding for such 
     programs should be invested back into such system to support 
     the creation of a workforce development system, as described 
     in section 2(b).
       (c) Sense of the Congress.--It is the sense of the Congress 
     that--
       (1) any budget savings realized as a result of the 
     elimination or consolidation of programs pursuant to section 
     403(a) or through the sunsetting of programs pursuant to 
     section 405 should be reinvested in the Nation's job training 
     system as described in subsection (b); and
       (2) as programs are eliminated and merged, it is imperative 
     that such elimination and merging be done without in any way 
     reducing the commitment or level of effort of the Federal 
     Government to improving the education, employment, and 
     earnings of all workers, particularly hard-to-serve 
     individuals, including individuals with limited-English 
     proficiency, and other workers with special needs.

     SEC. 402. INTEGRATION OF YOUTH PROGRAMS.

       Not later than 180 days after the date of enactment of this 
     Act, the National Board shall study and report to the 
     President and Congress on how best to integrate the programs, 
     under the following statutes or portions of statutes, for in-
     school and out-of-school youth with the School-to-Work 
     Opportunities Act of 1994:
       (1) Part C of title II of the Job Training Partnership Act 
     (29 U.S.C. 1641 et seq.).
       (2) Part B of title II of the Job Training Partnership Act 
     (29 U.S.C. 1630 et seq.).
       (3) Part H of title IV of the Job Training Partnership Act 
     (29 U.S.C. 1782 et seq.).
       (4) The Carl D. Perkins Vocational and Applied Technology 
     Education Act (20 U.S.C. 2301 et seq.).
       (5) Youthbuild programs under title IV of the Cranston-
     Gonzalez National Affordable Housing Act (42 U.S.C. 12899 et 
     seq.).
       (6) Part B of title IV of the Job Training Partnership Act 
     (29 U.S.C. 1691 et seq.).

     SEC. 403. CONSOLIDATION OF WORKFORCE DEVELOPMENT PROGRAMS.

       (a) Annual Recommendations.--Not later than 180 days after 
     the date of enactment of this Act, and each June 1 
     thereafter, the National Board shall make recommendations to 
     the President and Congress for the elimination of Federal 
     workforce development programs, or programs whose functions 
     should be subsumed under other Federal programs.
       (b) Report.--Not later than June 1, 1999, the National 
     Board, based on such board's analysis of the experience of 
     leading edge States and the progress made toward establishing 
     an integrated workforce development system, shall prepare and 
     submit recommendations to the Committee on Education and 
     Labor of the House of Representatives and the Committee on 
     Labor and Human Resources of the Senate a report containing 
     the findings of such board, and recommendations for proposed 
     reforms. The National Board shall also submit to the Congress 
     a draft of a joint resolution containing provisions to 
     develop a streamlined, integrated, federally supported 
     workforce development system, from the programs listed in 
     section 404(a) and any other Federal workforce development 
     program determined by the National Board as appropriate to be 
     included that is consistent with this Act, pursuant to 
     section 2(b). The joint resolution shall include 
     recommendations for standard outcome measures as described in 
     section 105(a) and shall describe how the new system will 
     maintain services to hard-to-serve populations.

     SEC. 404. INTEGRATION OF PROGRAMS AT THE LOCAL LEVEL.

       (a) Requirement.--Any State receiving an implementation 
     grant to develop an integrated workforce development system 
     shall, at a minimum, include the programs and activities 
     carried out on the date of enactment of this Act under the 
     following provisions and Acts in such State's reformed 
     delivery system pursuant to section 103(b):
       (1) Part F of title IV of the Social Security Act (42 
     U.S.C. 681 et seq.).
       (2) Part A of title II, and title III of the Job Training 
     Partnership Act (29 U.S.C. 1601 et seq., 1651 et seq.).
       (3) The Wagner-Peyser Act (29 U.S.C. 49 et seq.).
       (4) Sections 235 and 236 of the Trade Act of 1974 (19 
     U.S.C. 2295 and 2296) and paragraphs (1) and (2) of section 
     250(d) of such Act (19 U.S.C. 2331(d)).
       (5) The Refugee Education Assistance Act of 1980 (8 U.S.C. 
     1522 note).
       (6) Title VII of the Stewart B. McKinney Homeless 
     Assistance Act (42 U.S.C. 11421 et seq.).
       (7) Section 6(d)(4) of the Food Stamp Act of 1977 (7 U.S.C. 
     2015(d)(4)).
       (b) Additional Programs.--Any State receiving an 
     implementation grant to develop an integrated workforce 
     development system may include the programs and activities 
     carried out on the date of enactment of this Act under the 
     following provisions and Acts in such State's reformed 
     delivery system pursuant to section 103(b):
       (1) Part B of title III of the Adult Education Act (20 
     U.S.C. 1203 et seq.).
       (2) Title V of the Older Americans Act of 1965 (42 U.S.C. 
     3056 et seq.).
       (3) The Carl D. Perkins Vocational and Applied Technology 
     Education Act (20 U.S.C. 2301 et seq.).
       (4) Part C of title IV of the Job Training Partnership Act 
     (29 U.S.C. 1721).
       (5) Any other Federal or State workforce development 
     program identified by the Governor pursuant to section 
     103(b), subject to a two-thirds vote of the National Board.

     SEC. 405. SUNSET OF MAJOR WORKFORCE DEVELOPMENT PROGRAMS.

       (a) Repeal.--
       (1) In general.--Subject to paragraph (2), the provisions 
     and Acts listed in paragraphs (1) through (7) of section 
     404(a) are repealed.
       (2) Effective date.--Paragraph (1) shall take effect on 
     September 30, 1999.
       (b) Technical and Conforming Amendments.--The National 
     Board shall include in the draft joint resolution submitted 
     under section 403(b), technical and conforming amendments 
     regarding the provisions and Act repealed under subsection 
     (a). Such proposed amendments should be consistent with the 
     purposes of this Act.
          TITLE V--INTEGRATED LABOR MARKET INFORMATION SYSTEM

     SEC. 501. INTEGRATED LABOR MARKET INFORMATION.

       (a) Findings.--Congress finds that accurate, timely, and 
     relevant data for the Nation, States, and localities is 
     required to achieve Federal domestic policy goals, such as--
       (1) economic growth and productivity through--
       (A) career planning and successful job training and job 
     searching by youth and adults; and
       (B) efficient hiring, effective worker training, and 
     appropriate location and organization of work by employers;
       (2) accountability, through planning and evaluation, in 
     workforce development and job placement programs funded by 
     the Federal Government or developed by other public or 
     private entities;
       (3) equity and efficiency in the allocation of Federal 
     funds; and
       (4) greater understanding of local labor market dynamics 
     through the support of research.
       (b) Purpose.--The purpose of this title is to provide for 
     the development, maintenance, and continuous improvement of a 
     nationwide integrated system for the collection, analysis, 
     and dissemination of labor market information.
       (c) System.--
       (1) Development.--The Secretary, in cooperation with the 
     National Board, the State Councils, where appropriate, and 
     the Governors, shall oversee and ensure the development, 
     maintenance, and continuous improvement of a nationwide 
     integrated system of labor market information that will--
       (A) promote comprehensive workforce development planning, 
     evaluation, and service integration;
       (B) meet and be responsive to the customer needs of 
     jobseekers, employers, and public officials at all government 
     levels who develop economic and social policy, allocate 
     funds, plan and implement workforce development systems, are 
     involved in career planning or exploration, and deliver 
     integrated services;
       (C) serve as the foundation for automated information 
     delivery systems that provide easy access to labor market, 
     occupational and career information; and
       (D) meet the Federal domestic policy goals specified in 
     section 501(a).
       (2) Information to be included.--The integrated system 
     described in paragraph (1) shall include statistical data 
     from survey and projection programs and data from 
     administrative reporting systems which, taken together, shall 
     enumerate, estimate, and project the supply of and demand for 
     labor at national, State, and local levels in a timely 
     manner, including, but not limited to, data on--
       (A) labor market demand, such as--
       (i) profiles of occupations that describe job duties, 
     education, and training requirements, skills, wages, 
     benefits, working conditions, and the industrial distribution 
     of occupations;
       (ii) current and projected employment opportunities and 
     trends, by industry and occupation, including growth 
     projections by industry, and growth and replacement need 
     projections by occupation;
       (iii) job openings, job locations, hiring requirements, and 
     application procedures;
       (iv) profiles of industries and employers in the local 
     labor market describing the nature of the work performed, 
     employment skill and experience requirements, specific 
     occupations, wages, hours, and benefits, and hiring patterns;
       (v) industries, occupations, and geographic locations 
     facing significant change or dislocation; and
       (vi) information maintained in a longitudinal manner on the 
     quarterly earnings, establishment, industry affiliation, and 
     geographic location of employment for all individuals for 
     whom such information is collected by the States;
       (B) labor supply, such as--
       (i) educational attainment, training, skills, skill levels, 
     and occupations of the population;
       (ii) demographic, socioeconomic characteristics, and 
     current employment status of the population, including self-
     employed, part-time, and seasonal workers;
       (iii) job seekers, including their education and training, 
     skills, skill levels, employment experience, and employment 
     goals;
       (iv) the number of workers displaced by permanent layoffs 
     and plant closings by industry, occupation, and geographic 
     location; and
       (v) current and projected training completers who have 
     acquired specific occupational or work skills and 
     competencies; and
       (C) consumer information, which shall be current, 
     comprehensive, localized, automated, and in a form useful for 
     immediate employment, entry into training and education 
     programs, and career exploration, including--
       (i) job openings, locations, hiring requirements, 
     application procedures, and profiles of employers in the 
     local labor market describing the nature of the work 
     performed, employment requirements, wages, benefits, and 
     hiring patterns;
       (ii) jobseekers, including their education and training, 
     skills, skill levels, employment experience, and employment 
     goals;
       (iii) the labor market experiences, in terms of wages and 
     annual earnings, by industry and occupation, of workers in 
     local labor markets, by sex and racial or ethnic group, 
     including information on hard-to-serve populations;
       (iv) education courses, training programs, and job 
     placement programs, including information derived from 
     statistically based performance evaluations and their user 
     satisfaction ratings; and
       (v) eligibility for funding and other assistance in job 
     training, job search, income support, supportive services, 
     and other employment services.
       (3) Technical standards.--The integrated labor market 
     information system shall use common standards that will 
     include--
       (A) standard classification and coding systems for 
     industries, occupations, skills, programs, and courses;
       (B) nationally standardized definitions of terms consistent 
     with sections 105 and 501(c)(2);
       (C) a common system for designating geographic areas 
     consistent with the unified service delivery areas;
       (D) data standards and quality control mechanisms; and
       (E) common schedules for data collection and dissemination.
       (4) Availability of information.--Data generated by the 
     labor market information system including information on 
     quarterly employment and earnings, together with matched data 
     on individuals who have participated in a federally supported 
     job training activity, shall be made available to the 
     National Board for use in the preparation of the National 
     Report Card. Aggregate level information will be made 
     available to consumers in automated information delivery 
     systems.
       (5) Dissemination, technical assistance, and research.--The 
     Secretary, in cooperation with the National Board, the 
     Governors, and State Councils, where appropriate, shall 
     oversee the development, maintenance, and continuous 
     improvement of--
       (A) dissemination mechanisms for data and analysis, 
     including mechanisms that may be standardized among the 
     States;
       (B) programs of technical assistance and staff development 
     for States and localities, including assistance in adopting 
     and utilizing automated systems and improving the access, 
     through electronic and other means, to labor market 
     information; and
       (C) programs of research and demonstration, on ways to 
     improve the products and processes authorized by this 
     section.

     SEC. 502. RESPONSIBILITIES OF THE NATIONAL BOARD.

       (a) In General.--The National Board shall plan, review, and 
     evaluate the Nation's integrated labor market information 
     system.
       (b) Duties.--The National Board shall--
       (1) be responsible for providing policy guidance;
       (2) evaluate the integrated labor market information system 
     and ensure the cooperation of participating agencies; and
       (3) recommend to the Secretary needed improvements in 
     Federal, State, and local information systems to support the 
     development of an integrated labor market information system.

     SEC. 503. RESPONSIBILITIES OF THE SECRETARY.

       (a) In General.--The Secretary shall manage the investment 
     in an integrated labor market information system by--
       (1) reviewing all requirements for labor market information 
     across all programs within the system;
       (2) developing a comprehensive annual budget, including 
     funds at the Federal level, funds allotted to States by 
     formula, and funds supplied to the States by contracts with 
     departmental entities;
       (3) administering grants allotted to States by formula;
       (4) negotiating and executing contracts with the States;
       (5) coordinating the activities of Federal workforce 
     development agencies responsible for collecting the 
     statistics and program administrative data that comprise the 
     integrated system and disseminating labor market information 
     at the National, State, regional, and local levels; and
       (6) ensuring that standards are designed to meet the 
     requirements of chapter 35 of title 44, United States Code, 
     and are coordinated and consistent with other appropriate 
     Federal standards established by the Bureau of Labor 
     Statistics and other statistical agencies;
       (b) Requirements.--In carrying out the duties of the 
     Secretary under this section, the Secretary shall--
       (1) in consultation with the States and the private sector, 
     define a common core set of labor market information data 
     elements as specified in section 501(c)(2) that will be 
     consistently available across States in an integrated labor 
     market information system; and
       (2) ensure that data is sufficiently timely and locally 
     detailed for use, including uses specified in subsections (b) 
     and (c)(2) of section 501.
       (c) Annual Plan.--
       (1) In general.--The Secretary shall annually prepare and 
     submit to the National Board for review, a plan for improving 
     the Nation's integrated labor market information system. The 
     Secretary shall also submit the plan, together with the 
     comments and recommendations of the National Board, to the 
     President and Congress.
       (2) Contents.--The plan shall describe the budgetary needs 
     of the labor market information system, and shall describe 
     the activities of such Federal agencies with respect to data 
     collection, analysis, and dissemination for each fiscal year 
     succeeding the fiscal year in which the plan is developed. 
     The plan shall--
       (A) establish goals for system development and improvement 
     based on information needs for achieving economic growth and 
     productivity, accountability, fund allocation equity, and an 
     understanding of labor market characteristics and dynamics;
       (B) specify the common core set of data that shall be 
     included in the integrated labor market information system;
       (C) describe the current spending on integrated labor 
     market information activities from all sources, assess the 
     adequacy of the funds and identify the specific budget needs 
     of the Federal and State workforce development agencies with 
     respect to implementing and improving an integrated labor 
     market information system and the activities of such agencies 
     with respect to data compilation, analysis, and dissemination 
     for each fiscal year in which the plan is developed;
       (D) develop a budget for an integrated labor market 
     information system that accounts for all funds in 
     subparagraph (C) and any new funds made available pursuant to 
     this Act, and describes the relative allotments to be made 
     for--
       (i) the operation of the cooperative statistical programs 
     under section 501(c)(2);
       (ii) ensuring that technical standards are met pursuant to 
     section 501(c)(3); and
       (iii) consumer information, analysis and dissemination, 
     technical assistance, and research under paragraphs (2)(C), 
     (4), and (6) of section 501(c);
       (E) describe the existing system, information needs, and 
     the development of new data programs, analytical techniques, 
     definitions and standards, dissemination mechanisms, 
     governance mechanisms, and funding processes to meet new 
     needs;
       (F) summarize the results of an annual review of the costs 
     to the States of meeting contract requirements for data 
     production, including a description of how the budget request 
     for an integrated labor market information system will cover 
     such costs;
       (G) describe how the State Councils will be reimbursed for 
     carrying out the duties for labor market information;
       (H) recommend methods to simplify and integrate automated 
     client intake and eligibility determination systems across 
     workforce development programs to permit easy determination 
     of eligibility for funding and other assistance in job 
     training, job search, income support, supportive services, 
     and other reemployment services; and
       (I) provide for the involvement of States in developing the 
     plan by holding formal consultations conducted in cooperation 
     with representatives of the Governor or State Council, where 
     appropriate, pursuant to a process established by the 
     National Board.
       (d) Assistance From Other Agencies.--The Secretary may 
     receive assistance from member and other Federal agencies 
     (such as the Bureau of Labor Statistics and the Employment 
     and Training Administration of the Department of Labor, the 
     Administration on Children and Families of the Department of 
     Health and Human Services, and the Office of Adult and 
     Vocational Education and the National Commission for 
     Education Statistics of the Department of Education) to 
     assist in the collection, analysis, and dissemination of 
     labor market information, and in the provision of training 
     and technical assistance to users of information, including 
     States, employers, youth, and adults.

     SEC. 504. RESPONSIBILITIES OF GOVERNORS.

       (a) Designation of State Agency.--The Governor of each 
     State and the State Council, where appropriate, shall 
     designate one State agency to be the agency responsible for--
       (1) the management and oversight of a statewide 
     comprehensive integrated labor market information system; and
       (2) developing a State unified labor market information 
     budget on an annual basis.
       (b) Requirements.--As a condition of receiving Federal 
     financial assistance under this title, the Governor or State 
     Council, where appropriate, shall--
       (1) develop, maintain, and continuously improve a 
     comprehensive integrated labor market information system, 
     which shall--
       (A) include the elements specified in section 501(c)(2);
       (B) be responsive to the needs of the State and the 
     localities of such State for planning and evaluative data, 
     including employment and economic analyses and projections, 
     and program outcome data on employment and earnings for the 
     quality assurance system under section 205; and
       (C) meet Federal standards under chapter 35 of title 44, 
     United States Code, and other appropriate Federal standards 
     established by the Bureau;
       (2) ensure the performance of contract and grant 
     responsibilities for data compilation, analysis, and 
     dissemination;
       (3) conduct such other data collection, analysis, and 
     dissemination activities as will ensure the availability of 
     comprehensive State and local labor market information;
       (4) coordinate the data collection, analysis, and 
     dissemination activities of other State and local agencies, 
     with particular attention to State education, economic 
     development, human services, and welfare agencies, to ensure 
     complementary and compatibility among data; and
       (5) cooperate with the National Board and the Secretary by 
     making available, as requested, data for the evaluation of 
     programs covered by the labor market information and the 
     quality assurance systems under section 205.
       (c) Noninterference With State Functions.--Nothing in this 
     Act shall limit the ability of the State agency designated 
     under this section to conduct additional data collection, 
     analysis, and dissemination activities with funds derived 
     from sources other than this Act.
                                  ____


               Job Training Consolidation and Reform Act


                              i. overview

       The federal government currently spends over $25 billion 
     each year on 154 different job training programs. There is 
     widespread consensus that these programs are not preparing 
     workers adequately for jobs in the increasingly competitive 
     world economy.
       This bill is intended to transform federally-funded job 
     training from a collection of free-standing programs into a 
     coherent, integrated, accountable workforce development 
     system. The goal is to consolidate and streamline duplicative 
     and overlapping programs, and create a more effective system 
     that will provide greater opportunities for workers to obtain 
     the job skills they need.


                            ii. key features

       Proposal will streamline and consolidate fragmented job 
     training programs
       One-stop shopping will make services accessible and user-
     friendly to job seekers, workers and business
       Businesses and workers will have a key role in designing 
     and overseeing job training programs and will help ensure 
     that workers have skills and labor market information needed 
     to obtain jobs in growth industries
       Programs will be held accountable for results
       Legislation builds on lessons learned from bipartisan 
     efforts underway in Massachusetts and other states
       Federal savings from job training consolidation will be 
     used as venture capital to reward leading-edge States and 
     communities


                         iii. major provisions

       A National Workforce Development Board will, within 6 
     months, make recommendations to the President and the 
     Congress on which of the 154 current job training programs 
     are redundant or ineffective and should be consolidated or 
     eliminated. This nine-member board will be comprised of the 
     Secretary of Labor, the Secretary of Education, the Secretary 
     of Health and Human Services and representatives of business 
     and organized labor.
       All states will be eligible for planning grants to 
     establish labor market systems to give policy makers and 
     citizens a sense of how well each program is preparing and 
     placing people in jobs.
       States and communities will be encouraged to experiment 
     with new approaches to integrating job training and 
     education. Competitive grants will be available to states 
     ready to adopt system-wide reforms in cooperation with the 
     private sector. These stats will be required to establish 
     one-stop career centers which will make services more 
     accessible to jobseekers, workers and businesses.
       The Board will also make matching grants to communities to 
     upgrade the skills of existing workers. It will make 
     recommendations for incentives to employers to increase 
     training of front-line workers, and propose strategies to 
     integrate existing youth employment and training programs 
     with the recently enacted School-to-Work Opportunities Act.
       By June 1, 1999, the Board must submit recommendations to 
     the President and Congress for a new public/private workforce 
     development system suitable for the needs of the 21st 
     century. These recommendations will be based upon the lessons 
     learned from the experience of leading-edge states and a 
     review of the performance of existing programs.


                              iv. funding

       Funding for the reforms will be primarily generated by 
     savings resulting from program elimination or consolidation. 
     In addition, the bill authorizes $250 million in fiscal year 
     1996 as seed money to help states and communities set up one-
     stop career centers, and to ensure that hard-to-serve 
     populations continue to receive services as the new system is 
     developed.
                                 ______

      By Mr. FORD:
  S. 2519. A bill to amend title IV of the Surface Mining Control and 
Reclamation Act of 1977, to provide for acquisition and reclamation of 
land adversely affected by past coal mining practices, and for other 
purposes; to the Committee on Energy and Natural Resources.
                                 ______

      By Mr. FORD:
  S. 2520. A bill to amend title IV, of the Surface Mining Control and 
Reclamation Act of 1977, to encourage the mining and reclamation of 
previously mind areas by active mining operations, and for other 
purposes; to the


                           MINING LEGISLATION

  Mr. FORD. Mr. President, the Surface Mining Control and Reclamation 
Act of 1977 has brought a degree of tangible gain to coal-producing 
areas. Today, I am introducing legislation to allow for cost-effective 
ways of dealing with abandoned mine emergencies through public-private 
partnership.
  For the past several years, the Interior Department's Office of 
Surface Mining and the Commonwealth of Kentucky have been working 
together to deal with a recurring crisis in administering the Abandoned 
Mine Lands Reclamation Program.
  The Office of Surface Mining has been exploring possible solutions to 
the annual dilemma of having too little money to abate all the 
abandoned coal mine emergencies in a timely manner. Although additional 
funding looks like an obvious solution, other management solutions are 
being sought that could be just as effective and more economical.
  For example, one area of the program being reexamined for possible 
improvements is the actual abatement process, in particular, the 
abatement of landslides. Mr. President, I am sure you are aware of the 
high potential for landslides to occur on the steeply minded slopes of 
eastern Kentucky. Moreover, I am sure it is no surprise to you that the 
cost of stabilizing those shifting masses of earth is extremely high.
  Sometimes the cost of abatement in that rugged country is more than 
the monetary value of the dwellings that the landslides are 
threatening. Emergency abatement is necessary when an occupied dwelling 
downhill is directly in the path of an advancing landslide. Mr. 
President, we appreciate the fact that these dwellings are not just 
houses, but peoples' homes. Yet there are times when it is in the best 
interest of the homeowner as well as the taxpayers to find a more cost-
effective way of eliminating the emergency condition.
  Therefore, today I am introducing legislation to provide the Office 
of Surface Mining and the affected citizens of eastern Kentucky and 
similarly affected areas a more practical option.
  One of my bills will provide the Office of Surface Mining with 
flexibility to abate the emergency condition by purchasing the land or 
dwelling that is being threatened, thereby eliminating the emergency 
condition. This option would be exercised only when it can be 
demonstrated that the purchase option will result in significant cost 
savings to the reclamation program and will be agreeable to the 
homeowner. If this option is exercised only a few times a year in 
Kentucky, the Commonwealth's annual allocation could be saved so it 
would be available to abate other abandoned mine emergencies.
  I recognize that eliminating an emergency condition in this manner 
does not eliminate landslides. However, by eliminating the emergency 
condition, the landslide problem can then be referred to the State for 
less costly nonemergency reclamation through the State's regularly, 
Federally-funded abandoned mine land program. Thus we will enable the 
State to continue reclaiming abandoned mined sites according to the 
priorities of their regular program, other than as dire emergencies.
  Another beneficial feature of my legislature is that it will allow 
the States to establish self-sustaining funds for the purpose of 
insuring private property against damages caused by abandoned coal mine 
landslides. This same concept is already working successfully in 
several coal mining States to insure property owners against subsidence 
damage caused by abandoned underground coal mines. My proposal is 
designed to operate in the same way to provide landowners with the 
ability to insure their homes against abandoned mine landslides damage 
in those instances where the landslides happens so fast that the 
responsible agency can only respond after the home has already been 
damaged.
  Together, those two features of my first bill offer the citizens of 
the coal fields a better expectation that funds already in the Treasury 
for dealing with abandoned coal mine emergencies will actually do them 
some good. This legislation will enable the responsible State or 
Federal reclamation agency, working with the people who are directly 
affected by the emergency conditions, to reach the best decision 
together as to how to abate the emergency condition. And, through the 
landslide insurance program, coal field homeowners who today have no 
financial options to protect their investments will, for the first 
time, have the opportunity to insure themselves against the constant 
threat of landslide damage to their homes.
  Mr. President, I am also introducing a second bill to provide 
incentives for commercial coal mine operators to extract coal from 
places that others have previously mined, abandoned and left 
unreclaimed or inadequately reclaimed. The incentives would apply when, 
in the process of remining those previously mined lands, the operators 
reclaim the land with no outlay of money from the national Abandoned 
Mine Reclamation Fund.
  As background, let me explain that the Abandoned Mine Land 
reclamation program was established in title IV of the 1977 Surface 
Mining Act in response to concern over extensive environmental damage 
caused by coal mining activities of the past, that is, before the 1977 
surface mining law was enacted.
  As enacted in 1977, lands and waters eligible for reclamation or 
drainage abatement expenditures under title IV are those that were 
mined for coal or which were affected by such mining, waste banks, coal 
processing, or other coal mining processes, then abandoned or left in 
an inadequate reclamation status, before August 3, 1977, and for which 
there is no continuing reclamation responsibility under State or other 
Federal laws. Reclamation funding is based on a priority system; sites 
representing a threat to the public health and safety get first 
priority for reclamation.
  Mr. President, the Abandoned Mine Land Reclamation program has 
mitigated many health, safety and environment hazards faced by people 
living in the coal mining regions of the United States. However, while 
progress has been made, the inventory of unreclaimed high-priority 
abandoned coal mine sites, the ones still threatening public health and 
safety, is still overwhelming. Moreover, little has been done to 
address the threats posed by lower priority environmental problems from 
pre-1977 coal mining.
  The need for amending title IV of the Surface Mining Act in this 
respect is premised on the large inventory of abandoned coal mine sites 
which may never be addressed by the current reclamation effort. The 
time has come to try a new approach, a cooperative effort between the 
government and private industry to reclaim more of those abandoned 
lands.
  My second bill would be the third time that Congress has addressed 
remining. First in 1987, we amended the Clean Water Act standards (30 
U.S.C. Sec. 1311) regarding pre-existing discharges as applied to 
remining operations. Such modified requirements apply the best 
technology economically achievable on a case-by-case basis, using best 
professional judgment, to set specific numerical effluent limitations 
for each permit. Second, as part of the Energy Policy Act of 1992, 
Public Law 102-486, we again attempted to provide additional incentives 
to encourage remining operations by shortening the revegetation success 
liability period for remining operations and eliminating the penalty of 
permit blocking under section 510(c) of the 1977 Surface Mining Act of 
1977, 30 U.S.C. 201 et seq., as amended, as long as the violation 
resulted from an unanticipated event or condition occurring on the 
remining site.
  Mr. President, now I am seeking to make coal available that otherwise 
would be bypassed by providing a financial incentive for industry to 
extract and reprocess, in an environmentally sound manner, coal that 
remains within an eligible abandoned coal mine site. The Secretary of 
the Interior, working through cooperative agreements with the States, 
would be authorized to provide a fee credit to operators if the 
Secretary makes a finding that the cost to the reclamation fund to 
reclaim the abandoned site would significantly exceed the reclamation 
fees that would be credited to the operator for mining and reclaiming 
the abandoned site, and that the mining and subsequent reclamation of 
the site is in the public interest.
  What I'm proposing saves the government money. Instead of laying out 
millions for Government-sponsored reclamation, we will get private 
industry to do it at a cost of no more than a few thousand in 
reclamation fees concessions. Moreover, many, if not most of the 
abandoned sites to be reclaimed in this way are beyond the foreseeable 
reach of conventional State and Federal reclamation programs. Despite 
the environmental blight these abandoned coal mine sites are 
responsible for, most of them rate too low on the priority scale for 
Government-financed reclamation.
  Mr. President, reclamation of abandoned mine lands through remining 
is the most practical way to achieve reclamation of these orphan lands. 
The reclamation already accomplished through remining validates the 
concept. Now is the time to broaden the scope and enlarge the scale of 
remining's benefits by providing a modest concession in fees charged to 
operators in exchange for an immense reclamation bonus to the Nation.
  Mr. President, I ask unanimous consent that the text of the two bills 
be printed in the Record.
  There being no objection, the bills were ordered to be printed in the 
Record, as follows:

                                S. 2519

       Be it enacted by the Senate and the House of 
     Representatives of the United States of America in Congress 
     assembled,


  ACQUISITION AND RECLAMATION OF LAND ADVERSELY AFFECTED BY PAST COAL 
                            MINING PRACTICES

       Section 1. Section 401(c) of the Surface Mining Control and 
     Reclamation Act of 1977 (30 U.S.C. 1231(c)) is amended by 
     inserting ``or landslides caused by past coal mining 
     activities'' after the phrase ``land subsidence resulting 
     from underground coal mining''.''
       Sec. 2. Section 407(c) of the Surface Mining Control and 
     Reclamation Act of 1977 (30 U.S.C. 1237(c)) is amended by--
       (1) inserting ``or dwellings'' after the phrase, ``may 
     acquire any land'';
       (2) inserting ``or dwellings'' after the phrase, 
     ``acquisition of such land''; and
       (3) inserting ``except paragraph 4'' after the phrase, ``to 
     successful reclamation''.
       Sec. 3. Section 407(c) of the Surface Mining Control and 
     Reclamation Act of 1977 (30 U.S.C. 1237(c)) is amended by 
     striking the period at the end of paragraph (3); inserting 
     ``; or'', and adding the following new paragraph at the end:
       ``(4) acquisition of any interest in the threatened site in 
     lieu of performing reclamation activities, will protect the 
     public health and safety, and will result in significant cost 
     savings to the Abandoned Mine Reclamation Fund over 
     performing emergency reclamation activities.''
       Sec. 4. Section 407(h) of the Surface Mining Control and 
     Reclamation Act of 1977 (30 U.S.C. 1237(h)) is amended by 
     striking the sentence stating: ``No part of the funds 
     provided under this title may be used to pay the actual 
     construction costs of housing.'', and inserting in lieu 
     thereof: ``Provided further, the Secretary or a State with an 
     approved program, is authorized to utilize available funds to 
     acquire comparable property, when necessary and when agreed 
     to by the homeowner, and to relocate private residences that 
     are threatened by past mining abuses in lieu of performing 
     emergency reclamation activities at the site if such 
     relocation will result in significant cost savings to the 
     program over performing emergency reclamation activities, and 
     safeguard the public health and safety.''.
                                  ____


                                S. 2520

       Be it enacted by the Senate and the House of 
     Representatives the United States of Representatives America 
     in Congress assembled.


                       ABANDONED MINE FEE CREDIT

       Section 1. Section 402(a) of the Surface Mining Control and 
     Reclamation Act of 1977 (30 U.S.C. 1322(a)) is amended as 
     follows:
       (1) Add the following after Sec. 402(a):
       ``(1) Except as provided in subsection 402(a)(2),''.
       (2) At the end of the paragraph add the following 
     paragraph:
       ``(2) The Secretary may grant a credit to any operator for 
     the reclamation fee otherwise required to be paid in section 
     402(a)(1) for coal within an eligible site, pursuant to 
     section 404, as an incentive to operators, to remine areas if 
     the Secretary finds that (1) the cost to reclaim the affected 
     area under this title would significantly exceed the 
     reclamation fee credit provided for the recoverable coal 
     within the affected site and (2) the mining and subsequent 
     reclamation of the affected site by a private operator is in 
     the public interest. In a primary State, the Secretary shall 
     administer the provision of this paragraph through a 
     cooperative agreement with that State and shall obtain the 
     recommendation of the State before granting the credit. The 
     Secretary may require a bond to ensure repayment of the 
     credit in the event the site is not fully reclaimed.''.
                                 ______

      By Mr. McCONNELL:
  S. 2522. A bill to amend the Federal Humane Methods of Livestock 
Slaughter Act to authorize the Secretary of Agriculture to regulate the 
commercial transportation of horses for slaughter, and for other 
purposes; to the Committee on Agriculture, Nutrition, and Forestry.


 the humane and safe commercial transportation of horses for slaughter 
                              act of 1994

 Mr. McCONNELL. Mr. President, today I am introducing 
legislation amending the Federal Humane Methods of Livestock Slaughter 
Act to regulate the commercial transportation of horses to slaughter 
facilities. This is an area of great concern to me, the horse industry, 
and animal welfare groups. I am pleased that my bill is supported by 
the American Horse Council, the American Association of Equine 
Practitioners, the American Horse Protection Association, the Society 
for Animal Protective Legislation, the American Humane Association.
  Currently, some horses are being transported for long periods in 
overcrowded conditions without rest, food or water. Some vehicles used 
for transport have inadequate headroom and are not intended to 
transport large animals. Further, some of the horses transported have 
serious injuries which can be severely aggravated by the journey.
  My legislation would give the Secretary of Agriculture the authority 
to correct these practices by regulating those in the business of 
transporting horses to processing facilities.
  I want to make it clear that it is not my intention to either promote 
or prevent the commercial slaughter of horses. This industry has been 
in existence for a long time in this country, and I expect that it will 
continue to operate long into the future. My purpose in this 
legislation is to protect horses from unduly harsh and unpleasant 
treatment as they are transported across the country.
  Horses occupy a central role in the traditions, history, and economy 
of Kentucky. Thousands of Kentuckians are employed either directly or 
indirectly by the horse industry. Horses have been good to Kentucky; 
and we should try to the maximum practical extent to be good to horses.
  This bill would require that horses be rested off the vehicle after 
24 hours, with access to food and water. Any vehicles used to transport 
the animals would have to have headroom of at least 6 feet 6 inches and 
interiors free of sharp edges. Transporting vehicles must be maintained 
in a sanitary condition, offer adequate ventilation and shelter from 
extremes of heat and cold, be large enough for the number of horses 
transported, and allow for the position of horses by sex and size. 
Finally, in order to be transported, horses must be physically fit to 
travel.
  Enforcement of the act is placed with the U.S. Department of 
Agriculture, which presently regulates the slaughter process itself 
under the Humane Methods of Slaughter Act. The Department would be 
authorized to work with State and local authorities to enforce the 
provisions of this bill. This bill, while correcting abuses that exist, 
will not be an excessive burden on the processing facilities, auctions, 
or the commercial transporters of these horses.
  Unlike other livestock, the transportation of horses to processing 
facilities is often a lengthy process, because there are fewer 
facilities that handle horses and they are located in only a few areas. 
Moreover, not all of them operate on a full-time basis. The result is 
that the transporting of these animals requires special protection.
  There are several States that have passed legislation to regulate the 
transportation of these horses, but most of the travel is interstate, 
across wide areas. This is why Federal legislation is needed. The 
shipment of horses over long distances in inappropriate trailers, 
without food or water, is unacceptable. This bill would extend Federal 
regulation to the commercial transport of horses to slaughter and 
assure the humane and safe conditions of that transport.
  I invite all groups that are concerned about these horses to work 
with me in passing this legislation.
                                 ______

      By Mr. WALLOP:
  S. 2523. A bill to amend the Internal Revenue Code of 1986 to permit 
certain foreign pension plans to invest in the United States on a 
nontaxable basis; to the Committee on Finance.


            THE FOREIGN PENSION PLAN INVESTMENT ACT OF 1994

 Mr. WALLOP. Mr. President, increasing capital investment in 
America is vital to our efforts to improve our country's international 
competitiveness. A larger capital pool leads to increased innovation, 
which in turn stimulates productivity and income growth. Today, I rise 
to introduce a bill--similar to one I introduced back in 1981 with 
Senator Moynihan, and to one I introduced in 1983 with then Senator, 
and now Treasury Secretary, Bentsen--which will increase capital 
investment in America by removing tax barriers now faced by foreign 
pension plans interested in long-term passive investments in U.S. 
industry and real estate.
  Private pension systems in Great Britain, Holland, Japan, and other 
countries have hundreds of billions of dollars in assets but presently 
invest very little of that money in the United States. Our tax system 
is largely to blame for this lack of investment. The 30-percent 
withholding tax on investment income and the FIRPTA tax on real estate 
gains place a prohibitive tax burden on foreign pension plan investment 
here in the United States which does not exist in the plans' home 
countries.
  Foreign pension plans are an excellent potential source of capital 
for the American economy. Increased U.S. investment by these plans 
would expand the available pool of capital for industrial, 
technological, and infrastructure growth. In this respect, the bill 
differs from many capital formation proposals of years past, which 
would have merely shifted capital already invested in the United States 
from one sector to another. U.S. investment by foreign pension plans 
also would have the distinct advantage of serving our capital needs 
without leading to foreign control of U.S. businesses. That is so 
because various provisions of our Federal securities laws, and 
diversification requirements imposed by the home countries of these 
plans effectively limit foreign control of U.S. business by foreign 
pension plans.
  Recently, there has been some very disturbing evidence that capital 
investment in the United States from certain traditional sources has 
faltered in recent years. For example, the Commerce Department reported 
in May 1993 that new foreign direct investment in the United States hit 
a 10-year low in 1992; such investment fell by 47 percent from the year 
before, the fourth straight annual decline. The Washington Post 
reported only last month that American's personal savings rate fell by 
nearly half from 1970 to 1990. In February 1993 and April 1994, the 
Wall Street Journal indicated that the outflow of U.S. pension monies 
to the Far East was accelerating. Foreign pension plan investment in 
the United States would help make up the shortfall in the U.S. capital 
pool created by these trends.
  U.S. taxes now levied on foreign pension plan investment here have 
also contributed to the fall in real estate sales and prices and the 
slowdown in new construction. Removing these tax barriers will give our 
real estate industry a needed stimulus and will go a long ways toward 
strengthening the entire economy.

  Exempting foreign pension plans from U.S. tax will not give these 
plans special advantage. On the contrary, the bill will remove an 
inequity in the current tax treatment of U.S. and foreign plans. Today, 
the investment income and gains of qualified U.S. pension plans are 
exempt from U.S. tax. However, U.S. investment income of foreign plans, 
including dividends on equity investments in U.S. companies, rental 
income, and capital gains on U.S. real property, and earnings from 
insurance company investment accounts, is often subject to full 
taxation, even though the foreign plan is exempt from tax in its home 
country.
  Present law prevents U.S. life insurance companies from economically 
offering to foreign pension plans investment accounts that lack annuity 
purchase features. A foreign plan administrator may not want annuity 
purchase features but will be forced to incur these costs because, 
without them, there is a significant tax penalty on the insurance 
company. Congress eliminated this problem for qualified U.S. pension 
plans in 1976. We should do the same for comparable foreign plans.
  Mr. President, let me point out that foreign governments would be 
expected to reciprocate. That is, the President would have the power to 
withdraw the tax exemption from any foreign pension plan if the country 
in which the plan was formed refuses to reduce its taxes on U.S. 
pension plans. The bill is to be used as a carrot. And in the absence 
of reciprocation, the carrot should be a disappearing one.
  Finally, Mr. President, because foreign pension plans are either not 
investing here on account of the present tax barriers, or are 
structuring their U.S. investments to minimize U.S. tax, the bill 
involves little or no revenue loss. In the long-term, the bill should 
raise revenue because increased long-term investment and a 
reinvigorated real estate industry will lead to increased GNP and 
higher Federal income tax collections. In addition, U.S. pension plans 
also should benefit from the bill because it would lead to an increase 
in the value of their U.S. investment portfolios.
  Those, in essence, are the major arguments for this bill. Now let me 
discuss the principal provisions.
  The bill would add a new subparagraph to section 501(c) of the 
Internal Revenue Code of 1986. A trust, corporation, or fund that is 
part of a foreign pension plan would be exempted from Federal income 
taxes if it passed four tests.
  First, the plan of which the trust, corporation, or fund is a part, 
must meet the pension plan definition in section (3)(2) of ERISA.
  Second, the plan's assets must be kept separately from the assets of 
the employer in accordance with the laws of the country where the plan 
is maintained.
  Third, the income of the plan must be taxed at preferential rates, or 
not at all, in the home country.
  Fourth, the plan must give benefits to a broad classification of 
employees, not merely highly compensated employees or owners.
  The bill would also make clear that the tax exemption is to be 
subject to adjustment under section 896 of the Internal Revenue Code. 
Section 896(b) requires the President to act whenever he finds that a 
foreign country is taxing U.S. citizens or corporations more heavily 
than United States nationals of the same country. The President must 
ask the foreign country ``to eliminate (the) higher effective rate of 
tax.'' And if that does not work, he ``shall proclaim'' that the U.S. 
taxes on the foreign nationals in question will be increased. The 
Senate and House must be given 30 days' notice.
  Those are the key provisions. The bill would take effect with respect 
to income earned on or after January 1 of this year. I ask unanimous 
consent that the text of the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2523

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. TAX EXEMPTION FOR CERTAIN FOREIGN PENSION PLANS 
                   INVESTING IN THE UNITED STATES.

       (a) In General.--Section 501(c) of the Internal Revenue 
     Code of 1986 (relating to organizations exempt from tax under 
     section 501(a)) is amended by adding at the end the following 
     new paragraph:
       ``(26)(A) Except as provided in subparagraph (B), a trust, 
     corporation, or fund which is formed pursuant to, or as part 
     of, a foreign pension plan--
       ``(i) which is described in section 3(2) of the Employee 
     Retirement Income Security Act (29 U.S.C. 1002(2));
       ``(ii) the assets of which are segregated from the assets 
     of the employer or employers maintaining the plan pursuant to 
     the laws of the foreign country in which such plan is 
     maintained;
       ``(iii) the income of which is, under the laws of the 
     foreign country in which the plan is maintained, exempt from 
     tax or is subject to a lower rate of taxation than is 
     generally imposed on other residents of such foreign country; 
     and
       ``(iv) which provides benefits to a broad classification of 
     employees, not merely highly compensated employees or owners.

     If all of the assets of a trust, corporation, or fund are 
     held for the benefit of one or more foreign pension plans 
     described in this subparagraph, such trust, corporation, or 
     fund shall be treated as described in this subparagraph.
       ``(B) The exemption provided by this paragraph shall be 
     subject to adjustment under section 896 (relating to the 
     adjustment of tax of nationals of foreign countries). The 
     President shall, no later than January 1, 1996, report to 
     Congress on the extent to which the President has exercised 
     the authority under that section with respect to relief from 
     foreign income taxes for plans described in section 401(a).''
       (b) Conforming Amendments.--(1) Section 512(a)(2) of the 
     Internal Revenue Code of 1986 (relating to the unrelated 
     business taxable income of certain foreign organizations) is 
     amended by inserting ``or section 501(c)(26)'' after 
     ``section 511''.
       (2) Clause (ii) of section 514(c)(9)(C) of such Code 
     (relating to unrelated debt-financed income of qualified 
     trusts) is amended by inserting ``or any foreign pension plan 
     described in section 501(c)(26)'' after ``section 401''.
       (3) Section 818(a) of such Code (relating to pension plan 
     contracts of life insurance companies) is amended by striking 
     ``or'' at the end of paragraph (5), by striking the period at 
     the end of paragraph (6) and inserting ``; or'', and by 
     adding at the end the following new paragraph:
       ``(7) entered into with trusts, corporations, or funds 
     which are formed pursuant to, or as part of, a foreign 
     pension plan described in section 501(c)(26).''
       (c) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1995.
                                 ______

      By Mr. HEFLIN:
  S. 2524. A bill to amend chapter 23 of title 28, United States Code, 
to authorize voluntary alternative dispute resolution programs in 
Federal courts, and for other purposes; to the Committee on the 
Judiciary.


            the voluntary alternative dispute resolution act

  Mr. HEFLIN. Mr. President, I am today introducing legislation that 
would authorize our Nation's Federal district courts to adopt and 
utilize voluntary alternative dispute resolution programs.
  The time has come for Congress and the Federal courts to realize that 
there must be alternative ways of settling disputes other than the 
traditional methods utilizing a Federal judge and jury. With criminal 
cases crowding the dockets, many litigants in civil cases, especially 
small businesses, simply cannot get their cases heard in a timely 
manner.
  Recent statistics from the Administrative Office of the United States 
Courts indicate that a majority of cases in the Federal courts are 
civil cases and that the number of filings since 1990 has increased 9 
percent. With criminal cases being put on a fast track, the time has 
come for Congress to assist the Federal courts in processing civil 
cases for the benefit of the American people.
  Our Federal court system is one of the best in the world, and our 
judges work long hours to hear cases which come before them. I believe 
the approach that my legislation takes will bring the Federal courts 
into the 21st century ahead of schedule by expressing Congress' intent 
that if parties want to voluntarily settle their civil disputes by such 
methods as court annexed arbitration, mediation, early neutral 
evaluation, mini-trials, or summary trials, then they should be allowed 
to do so.
  I am introducing this legislation as a result of a hearing which the 
Judiciary Subcommittee on Courts and Administrative Practice held last 
year on October 29, 1993. I am privileged to chair this subcommittee, 
and the hearing heard testimony from a number of distinguished 
witnesses including Judge Anne Williams, on behalf of the U.S. Judicial 
Conference; Judge Bill Wilson, U.S. District Court, E.D. Arkansas; 
Judge William Schwarzer on behalf of the Federal Judicial Center; U.S. 
Magistrate Judge Wayne Brazil, N.D. California; Judge Raymond 
Broderick, E.D. Pennsylvania; Stuart Grossman, on behalf of the 
American Board of Trial Advocates; Jack Watson, on behalf of the 
American Bar Association; and Dianne Nast, a practicing attorney in 
Philadelphia.
  The focus of the hearing last year was to consider, H.R. 1102, 
introduced by Congressman Bill Hughes of New Jersey, which would 
require, not merely authorize, each of the 94 Federal district courts 
to adopt either a mandatory or a voluntary court-annexed arbitration 
program which would operate under the existing authority of Chapter 44 
(sections 651-658) of title 28 of the United States Code. H.R. 1102 
would also increase the maximum amount in controversy for cases 
referred under the mandatory programs from $100,000 to $150,000.
  In 1988, Congress enacted legislation to authorize the continuation 
of 10 pilot programs of mandatory court-annexed arbitration that were 
in operation in the Federal courts, and this legislation also 
authorized 10 additional pilot programs that would be of a voluntary 
nature.
  This authorization was to terminate toward the end of last year, and 
H.R. 1102 would have made that authorization permanent and would have 
required each district court to adopt either a mandatory or a voluntary 
program of court-annexed arbitration. Because of strong concerns raised 
at last year's hearing regarding the mandatory nature of court-annexed 
arbitration, our subcommittee was unwilling to immediately go forward 
with H.R. 1102. Instead, S. 1732, which became Public Law 103-192, was 
introduced toward the end of last year which simply extended the 
existing authority for 1 year with regard to the 20 pilot districts 
utilizing court-annexed arbitration.
  Recently, I, along with my colleagues Senators Biden, Hatch, 
Grassley, and Specter, introduced S. 2407, the Judicial Amendments Act 
of 1994, to extend this authority for an additional 3 years until the 
end of 1997. S. 2407 was introduced and passed by voice vote on August 
19, and it is now in the House of Representatives for consideration.
  Let me return now to the hearing which the subcommittee held last 
year and which focused primarily on arbitration which is one of the 
programs of alternative dispute resolution as [ADR] is popularly 
called. Judge Ann Claire Williams of the U.S. District Court for the 
Northern District of Illinois appeared on behalf of the U.S. Judicial 
Conference which is the policymaking body of the Federal judiciary. The 
Judicial Conference has recommended that Congress should authorize all 
Federal district courts to have the discretion to utilize voluntary 
nonbinding court-annexed arbitration. Thus, the Judicial Conference did 
not recommend the expansion of mandatory court-annexed arbitration for 
the remainder of the Federal district courts.
  The legislation which I am introducing today builds on the 
recommendation of the Judicial Conference by authorizing each of the 94 
Federal district courts to adopt not only voluntary court-annexed 
arbitration but also other ADR programs, including but not limited to 
mediation, early neutral evaluation, mini-trials, summary jury or bench 
trials.
  My legislation also contains a provision that clearly states that 
``[a]n alternative dispute resolution program shall not in any way 
infringe on a litigant's right to trial de novo and shall impose no 
penalty on participating litigants.''
  Over the last year, I have talked with many people from both the bar 
and the business community, and I believe that it is an undeniable fact 
that civil litigation in the Federal courts has become more 
complicated, time-consuming, and expensive. Further, the Speedy Trial 
Act, requiring criminal cases to proceed on a fast track, has resulted 
in delays in civil cases being considered by the Federal courts.
  I want to make certain that the Congress clearly intends for our 
Federal courts to consider alternative means of dispute resolution, so 
that litigants can have a speedy and less expensive alternative to 
formal civil adjudication, consistent with the requirements of the 
seventh amendment to the U.S. Constitution. Where parties are willing 
to mutually participate in such alternatives, I believe there are 
merits that justify our support for such programs.
  I hope that this legislation will be carefully considered by my 
colleagues, and I look forward to further discussion on its merits in 
the days ahead.
                                 ______

      By Mr. LIEBERMAN (for himself, Mr. Mack, Mrs. Boxer, Mr. Smith, 
        Mrs. Feinstein, Mr. Robb, Mr. Gregg, and Mrs. Murray):
  S. 2525. A bill to require a majority vote of the Securities and 
Exchange Commission for the adoption of accounting standards and 
principles used in the preparation of financial statements required 
under the Securities Exchange Act of 1934; to the Committee on Banking, 
Housing, and Urban Affairs.


              the accounting standards reform act of 1994

 Mr. LIEBERMAN. Mr. President, last May the Senate approved a 
sense-of-the-Senate resolution by a vote of 88 to 9 urging the 
Financial Accounting Standards Board [FASB] to drop their controversial 
project on accounting for employee stock options and stock purchase 
plans. However, more than 4 months later, it is quite clear that FASB 
has chosen to ignore the will of the Senate, to move forward with this 
project, and to implement a final rule by the first quarter of 1995.
  I firmly believe that markets operate freely and efficiently only 
with full and accurate information. I also believe that financial 
statements must be credible and comparable, and that the accounting 
standards that drive financial reporting ought to be set by the private 
sector. Yet, FASB's choice to ignore the outcry from the pension fund 
managers, high-technology companies, individual investors, and the 
accounting profession in order to ram this proposal through has made 
many people think about how to improve the process by which accounting 
standards are adopted. I rise today for two purposes. First, I want to 
express my true discomfort over FASB's handling of this issue and the 
continuation of a process which, by any rational analysis, has run its 
course. Second, I rise to introduce the Accounting Standards Reform 
Act, legislation which is critical to bringing this problem to closure 
and crucial to correcting what I believe is a serious lack of 
accountability in the process for setting accounting standards.


                 i. the accounting standards reform act

  Mr. President, the legislation I am introducing today, the Accounting 
Standards Reform Act, merely states that the Securities and Exchange 
Commission [SEC] shall approve by a majority vote, any new change in 
accounting standards for publicly traded companies. Currently, unless 
the SEC affirmatively rejects a FASB pronouncement, the standard 
becomes part of the Generally Accepted Accounting Principles [GAAP] and 
is applicable to all publicly traded companies. In other words, SEC 
silence is tantamount to SEC approval.
  It's important to emphasize that this bill--unlike my earlier bill on 
this topic, S. 1175--does not specify the content of any financial 
standard, nor does it legislatively overturn any FASB standard. This 
bill only addresses the procedure that the SEC shall use to approve and 
enforce FASB standards in the future.
  This legislation is entirely consistent with the intent of the 
Securities Exchange Act of 1934 and will help strengthen the private-
sector standards setting process. It is not the intent of this 
legislation to diminish the legitimate role of the FASB. It is simply 
to bring back some accountability to the process.


                        ii. overview background

  For the benefit of those not familiar with this debate, a stock 
option represents the future right of an employee to purchase a set 
number of company shares at a fixed price. Presuming the company does 
well and the stock price increases, the employee shares some of the 
benefit. But if the stock price remains constant or decreases, the 
employee gets nothing.
  At present, stock options are accounted for in the same manner as 
other inherently difficult-to-value item--by disclosure. For example, 
since the cost of a pending law suit cannot be known in advance, 
current accounting rules--FASB 5--require the fact of the suit to be 
disclosed to investors. In the same way, since the value of an employee 
stock option depends on unknown variables, the proper accounting is 
full disclosure to the shareholders. This proposal would require 
companies to use a complex mathematical formula to estimate the value 
of an employee's option at the date of grant and to record that 
estimate as a reduction to earnings regardless whether the employee 
ever receives a benefit.
  When FASB first issued their proposed rule on June 30, 1993, SEC 
Chairman Arthur Levitt urged Congress to let the FASB process run its 
course, and avoid the politicalization of the accounting standard 
setting process. His advice was sound because the public commentary 
collected during the process has made the case against FASB's draft 
proposal stronger than ever.
  Mr. President, FASB's process has brought to life these facts about 
this proposal: First, this issue is about accounting, economic growth, 
and jobs--not about the level of CEO pay; second, FASB's proposal is 
not sound accounting, and it is almost universally opposed by all sides 
of the financial community; and third, any cost-benefit analysis 
requires a rejection of the proposal. Unfortunately, the Board is 
clearly determined to ignore these facts.
     A. This is not about executive pay
  First, the current accounting treatment for employee stock options is 
not the result of some conspiracy to enrich corporate executives. It is 
the result of a genuine accounting quandary. Moreover, this debate has 
nothing--nothing--to do with the level of executive compensation. This 
is one point where FASB and I are in compete agreement. FASB has 
pointed out over and over again that their proposal is about 
accounting, not pay. Let me quote Dennis Beresford, chairman of FASB in 
a recent interview with the Bureau of National Affairs: He states:

       Our project has gotten confused with the so-called 
     excessive executive pay issue. Many of the articles that have 
     been written, and some of the interested Members of Congress 
     have focused, at least initially, on some people making too 
     much money. Our project has gotten confused with that issue.
     B. FASB's proposal is not sound accounting, and is near-
         universally opposed
  Mr. President, this proposal is not sound accounting for the simple 
reason that placing an accurate estimate of the present value of an 
employees' stock option at the time the transaction takes place is 
impossible. It is true that the value of trade options can be 
estimated. But, comparisons between fixed employee stock options and 
traded options are invalid for four reasons: First, employee options 
are nontransferable, while market options are traded freely; second, 
employee options generally vest over a 5-year period and expire after 
10 years, while market options generally have a life of only 3 to 6 
months; and third, employee options are not liquid until they vest, 
while market options may be liquidated at any time. And, most 
important, there is no market for long-term, nonliquid employee stock 
options. Because of these differences, complex formulas designed to 
value exchange traded short-term options do not work when applied to 
employee options. If the required formulas will be erratic and the 
values overstated, financial statements will be less useful to 
investors than they are today.

  FASB has been inundated with testimony, letters, and studies 
criticizing their proposals. Their position is opposed by the 
overwhelming majority of the financial community including individual 
investors, institutional investors, pension funds, and the accounting 
professions; by both Commerce Secretary Brown and Treasury Secretary 
Bentsen; by the venture capital community; by the financial markets; by 
thousands of companies across the Nation; and by hundreds of thousands 
of employees.
  Even those who agree with FASB's contention that options have value 
and ought to be expensed, invariably they still acknowledge that a 
reasonable and accurate measurement formula remains exclusive. Even the 
American Institute of Certified Public Accountants, representing more 
than 310,000 CPA's, opposed FASB's proposal saying it is ``too complex 
and unreliable.'' Here are some of the other comments:
  Letter from Secretary Brown and Secretary Bentsen:

       Most troubling is the possibility that implementation of 
     the proposal might result in more volatile and less accurate 
     and consistent financial statements because of the extreme 
     difficulty of valuing long-term, nonmarketable, forfeitable 
     stock options.

  Testimony from the Council of Institutional Investors--representing 
hundreds of union and corporate pension funds:

       There is no group that has a greater interest in the 
     principled right answers to accounting questions than we do. 
     We are the people who invest real money--huge amounts of 
     money--based upon what we read in financial statements. We 
     are America's employees and America's retirees, and we will 
     not get our pensions if we do not invest wisely based on 
     accurate financial information. So no one will be hurt more 
     than we if any other agenda--however virtuous--is pursued at 
     the expense of the accuracy and usefulness of financial 
     statements. This is real people's grocery money.

  CII goes on to say:

       The exposure draft requires companies to put something in 
     their financial statements that simply isn't true.

  Letter from the United Shareholders Association--representing 65,000 
individual investors:

       As investors and regular users of corporate financial 
     reports, USA members are the very people the accounting rules 
     are designed to protect. Our members oppose charging earnings 
     for stock options. We do not believe FASB's proposal would 
     clarify the reports we receive. In fact, we believe that 
     including speculative estimates of future stock option values 
     in corporate earnings statements diminishes rather than 
     enhances their usefulness.
     C. The cost outweighs the benefits
  The FASB charter requires it to ``promulgate standards only when the 
expected benefits exceed the perceived costs.'' Almost everyone who has 
seriously considered this proposal has concluded that the costs in 
terms of potential damage to the economy far outweigh any benefits. In 
fact, try as I might, I don't see any benefits which will flow from the 
FASB change.
  We all agree that the goal of financial reporting should be to 
maximize the integrity and comparability of financial statements. But 
it is also apparent that purist accounting theory can be brought to 
illogical ends which benefit neither the investing public nor the 
economy as a whole. The stock option proposal is one such example. No 
one--let me say that again--no one is arguing that concerns over job 
creation justify bad accounting. But we are saying that an accounting 
standard ought not move forward if the economic consequences so clearly 
outweigh the accounting benefits. This case has been continually and 
persuasively made to FASB. Indeed, with the public comment period and 
the field hearings now behind us, we must conclude that the stock 
option project ought to be dropped in favor of a disclosure based 
alternative. To conclude otherwise simply ignores the extensive public 
record and makes a mockery out of FASB's public process.


                      iii. is the process working?

  Mr. President, unfortunately, I am forced to conclude that one of the 
casualties of this debate may be the Board's credibility. Members of 
the financial community are justifiably starting to question FASB's 
process and the Board's accountability.
  From the earliest days of this process FASB has regularly and 
continually prejudged the key issues. The central issues of this debate 
are: First, whether options and stock purchase plans are compensatory; 
second, whether options and stock purchase plans should be expenses on 
the income statement; and third, whether we can derive a reasonable 
estimate of their value. FASB has been willing to discuss the question 
of valuation, but has refused to discuss the questions of compensation, 
expense, or cost-benefit analysis.
  Mr. President, fundamental requirements of due process and fair 
administrative procedure require that those affected by proposed 
regulations have a right to have their views heard and considered 
before the regulations are implemented. These basic principles apply to 
all issues under consideration, not just those issues which FASB wishes 
to discuss. FASB should not be permitted to artificially limit the 
scope of discussion to a narrow set of issues.
  On the issue of process, FASB will soon be tested once again because 
it appears intent on adopting a standard even if the standard is 
flawed. At FASB's August 25th meeting, the Board explored the idea of 
changing the measurement date from grant date to vesting date to help 
solve some of the inherent difficulty in valuing options. But as the 
Board pointed out in its own exposure draft:

       The measurement date for equity instruments granted to 
     employees as compensation is the date at which the stock 
     price that enters into the measurement of the transaction is 
     fixed. Stock price changes after that date have no effect on 
     measuring the value of the equity instrument issued or the 
     related compensation cost.

  The exposure draft went on to argue:

       If compensation is measured at a later date, such as the 
     date at which the shares vest, not even the approximate 
     amount of compensation that would result from an award could 
     be known when the employer decides how many shares to grant.

  Now one would have to question why FASB is now revisiting approaches 
it has already considered and rejected. One can only guess that they 
are more interested in finding an answer than finding the right answer.
  Mr. President, 2 weeks ago, 600 chief financial officers sent a 
letter to FASB which said:

       It is central to the FASB's deliberative process that the 
     public be allowed to comment officially, on the record, on 
     any material change to the existing exposure draft. Given the 
     propensity of the Board to move forward with this project, 
     and the highly complex and technical nature of the Board's 
     current deliberations, we urge the FASB to reexpose its 
     proposal.

  The letter goes on to say:

       We hope you agree with us that given the controversial 
     nature and the outpouring of sentiment in opposition to the 
     exposure draft, the integrity of the Board's process dictates 
     that FASB issue a new exposure draft.

  It will be interesting to see now FASB will respond. If they make 
changes to either the measurement date or the measurement formula, the 
changes will be material and should be subject to another exposure 
draft. We will see, Mr. President, whether FASB plans to include the 
public in this process or whether they will continue to move forward in 
isolation.
  Mr. President, allow me to highlight just one part of FASB's 
deliberative process which I found particularly disturbing. As part of 
the exposure draft the Board committed to perform a field test, 
ostensibly to measure the ``effects of the exposure draft on individual 
companies'' and to measure implementation issues. One of the most 
perplexing pieces of the field test was FASB's utter failure to include 
small growth companies. Only 2 of FASB's 25 participants--8 percent--
had revenue of less than $100 million, while almost 60 percent of the 
companies in the SEC database have revenues in this category. 
Conversely, large companies--those with revenue of more than $5 
billion--accounted for 52 percent of FASB's sample group while these 
firms represent only slightly more than 3 percent of publicly traded 
companies. When asked about this distortion, FASB responded that the 
existing sample was sufficient for testing purposes. How can this be 
sufficient when the sector of the economy most affected by the proposal 
was barely considered?
  Each of the Big Six accounting firms recently signed a letter to FASB 
which stated:

       We believe that expanding the effort and spending 
     significant additional time trying to develop a reasonable 
     and reliable measurement method, including the recently 
     announced decision to reconsider finalizing measurement at 
     the vesting date, would not be a productive use of the 
     Board's limited resources. The Board's resources could be put 
     to far better use working on more critical financial 
     reporting issues, such as accounting for derivatives and 
     other financial instruments.

  Mr. President, to watch FASB deliberate on this issue for another 6 
months, no matter what the outcome, would merely confirm what many have 
alleged. The process is designed to yield only those outcomes which 
FASB prescribes.
  Mr. President, what has occurred in this debate is not a deliberative 
process, but a lack of governance. The existing exposure draft is 
fatally flawed. Its option-pricing models have proven unworkable. This 
process should end. FASB's efforts at this juncture will undermine--not 
advance--the private sector standard setting process. Indeed this 
debate has demonstrated that the threat to the private sector 
accounting standard setting process is real. I believe that this threat 
will not come from Congress, but from the private sector itself. An 
accounting system which is based upon Generally Accepted Accounting 
Principles, cannot continue in an environment of general unacceptance.


                            iv. fasb's myths

     A. Myth 1: There will be no real impact on the economy
  Mr. President, one of FASB's regular arguments is that there will be 
no impact on the economy, this is just an accounting change. The Board 
says the market will learn to overlook these charges and discern the 
true nature of the companies earnings. They regularly cite the 
accounting change regarding post-retirement health benefits and argue 
that many large companies experienced a large reduction in earnings 
which in some cases resulted in an increase in stock price. Presuming a 
thoroughly efficient marketplace, this could be true for the Fortune 
500, but nearly 50 percent of all NASDAQ stocks are never followed by 
any analyst. These companies--the smaller, more volatile, job-creating 
companies--will be seriously impacted. What the Board does not 
understand--and this came shining through in the field test--is that 
this is not about the Fortune 500. This is about the growth sector of 
the economy. The result of this change will be lower earnings which 
will impact the ability of these firms to raise capital and will 
curtail their ability to offer options to a broad-base of their 
workforce.
     B. Myth 2: S&L crisis
  Mr. President, shortly after the Senate passed my resolution last 
May, the Financial Accounting Standards Board sent a letter to all 535 
Members of Congress. Let me quote from the letter:

       We invite your attention to the record of attempts to tilt 
     accounting information in promoting social and economic 
     goals. Experience has shown that manipulating accounting 
     information does more harm than good. Regulatory accounting 
     for the savings and loan industry is one prominent example.

  Mr. President, this is just plain nonsense. Clearly there is no 
defense for Regulatory Accounting Practice [RAP] accounting adopted 
during the S&L debacle. But there is absolutely no comparison between 
accounting for stock options and the collapse of the savings and loan 
industry. No one seriously contends that companies are fraudulently 
hiding their imminent collapse through their accounting for stock 
options.
     C. Myth 3: This really like other accounting debates
  FASB claims is has no responsibility to take the economic impact of 
its actions into account. And, they argue that Congress should not 
become involved in the standard setting process. Generally speaking, I 
agree with both points. However, do not be fooled into thinking that 
this is like past accounting debates, despite FASB's attempt to raise 
the stakes of this proposal. This debate is not about post-retirement 
health benefits, unfunded pensions, or thrift accounting. There is no 
comparison because in this case, there are not identifiable victims of 
the present accounting approach. In fact, the very people who should 
benefit from accounting rules--investors--are crying out against this 
proposal.

  Myth 4: There is a problem with current financial statements:
  FASB states that ``Current accounting produces financial statements 
that are neither credible nor representational faithful.'' This 
statement--like the statement comparing this debate to the Savings and 
Loan crisis--is an outrageous exaggeration of the facts. Let me quote 
Jim Bunt, Comptroller of General Electric, at last year's Senate 
hearing testifying on behalf of the Financial Executives Institute:

       I can assert that during the past 20 years, not one share 
     owner, securities analyst, not one member of the business 
     press, has ever suggested that my Company's financial 
     statements are flawed or misleading as a result of our 
     accounting for employee stock options.

  This is simply not an area in which the public needs nor wants a 
complex new formula.
  Myth 5: Stock purchase plans:
  Mr. President, one other issue I would like to mention falls into the 
category of what FASB does not say rather than what they do say. This 
exposure draft explicitly applies to section 423 plans, commonly known 
as employee stock purchase plans. These plans, by statute, are broadly 
disseminated throughout the company work force. FASB does not wish to 
talk about these plans because it is convenient to allow the CEO pay 
perception to fester. Instead, what's really at stake are employee 
dreams of owning a piece of the company they work for. Simply stated, 
the hundreds of thousands of employees who participate in stock 
purchase plans will lose an important part of their livelihood if this 
rule goes forward.


                    V. IS THERE A ROLE FOR CONGRESS?

  Pursuant to the Securities Exchange Act of 1934, Congress granted the 
Securities and Exchange Commission broad statutory authority to ensure 
the integrity and effectiveness of our capital markets. I agree that 
the private sector is best suited to deal with these difficult and 
often controversial issues. Historically, the SEC has looked to the 
private sector to promulgate accounting standards for U.S. companies. 
However, it is the SEC's acceptance of these standards which gives them 
standing in the financial community. Let me quote from FASB's 
publication, An Introduction to the FASB:

       Throughout its history, the SEC has relied on the private 
     sector for this function [setting accounting standards], to 
     the extent that the private sector demonstrates an ability to 
     fulfill the responsibility in the public interest. The SEC 
     and congressional committees maintain an active oversight of 
     the FASB to ensure that the public interest is served.

  Clearly, Mr. President, it is desirable for the SEC to defer to the 
private sector in matters of financial accounting. But it is also clear 
that the SEC, as well as the Congress, have not--and should not--give 
up legitimate oversight responsibilities. That is, FASB knows this, but 
more importantly, that is what the law says. Congress granted 
responsibility to set accounting standards to the SEC because they are 
an independent, but accountable, commission charged to act in the 
public interest. We did not grant this authority to a nonaccountable 
private board.


               vi. where should the process go from here?

  Mr. President, at this juncture of the debate there is only one 
logical and legitimate outcome. The SEC should immediately adopt a 
disclosure-based alternative to FASB's proposal. From the SEC 
perspective, the marketplace has yet to receive any meaningful 
information regarding an individual company's use of option plans. The 
SEC can move forward independently with disclosure on the financial 
statements. SEC Chairman Arthur Levitt can and should justify this move 
in defense of small investors and institutional investors. FASB could 
then take as much time as it needs to develop an option valuation 
formula which is truly generally accepted.

          FASB'S FLAWED FIELD TEST: LOOKING IN THE WRONG PLACE          
------------------------------------------------------------------------
                                  No. of                                
                                   stock  Percentage   FASB             
            Revenue               option               field  Percentage
                                  plans                test             
------------------------------------------------------------------------
Less than $100 million..........   3,656     59.06         2         8  
$100 million to $249.99 million.     864     13.96         4        16  
$250 million to $499.99 million.     566      9.14                      
$500 million to $1.99 billion...     665     10.74      \1\6        24  
$2 billion to $4.99 billion.....     247      3.99                      
More than $5 billion............     192      3.10        13       52   
                                 ---------------------------------------
      Total.....................   6,190  ..........      25  ..........
------------------------------------------------------------------------
\1\The Financial Accounting Standards Board field test included only one
  category for companies with annual revenues of $250 million to $5     
  billion. According to the FASB field test there were six companies    
  which fit this category. As a result, the three SEC categories $250   
  million to $499.99 million; $500 million to $1.99 billion; and $2     
  billion to $4.99 billion were combined.                               
                                                                        
Sources: The Disclosure, Inc. database (SEC data represents publicly-   
  traded companies listed as of March, 1994); Financial Accounting      
  Standards Board Field Test, Accounting for Stock Based Compensation.  


  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2525

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Accounting Standards Reform 
     Act of 1994''.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress finds that--
       (1) under the Securities Exchange Act of 1934, the Congress 
     granted the Securities and Exchange Commission (hereafter in 
     this Act referred to as the ``Commission'') broad authority 
     to set financial accounting and reporting standards for 
     publicly held companies;
       (2) historically, the Commission has delegated such 
     responsibility to the private sector, to the extent that the 
     private sector demonstrates an ability to fulfill such 
     responsibility in the public interest; and
       (3) although the Commission has reserved the right to 
     disapprove standards proposed by the private sector, a more 
     affirmative process in needed to ensure that the public 
     interest is protected.
       (b) Purposes.--The purposes of this Act are--
       (1) to clarify the Securities Exchange Act of 1934 with 
     regard to the Commission's responsibility in setting 
     financial accounting and reporting standards for publicly 
     held companies; and
       (2) to ensure that the public interest is served in the 
     financial accounting standards setting process.

     SEC. 3. ADOPTION OF ACCOUNTING STANDARDS AND PRINCIPLES FOR 
                   PURPOSES OF THE SECURITIES EXCHANGE ACT OF 
                   1934.

       Section 13(b)(1) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78m(b)(1)) is amended by adding at the end the 
     following: ``On and after the date of enactment of the 
     Accounting Standards Reform Act of 1994, any new accounting 
     standard or principle, and any modification to an existing 
     accounting standard or principle, to be used on the 
     preparation of financial statements required to be filed 
     pursuant to this title shall become effective only following 
     an affirmative vote of a majority of a quorum of the members 
     of the Commission.''.
                                 ______

      By Mr. HARKIN (for himself and Mr. Simon):
  S. 2526. A bill to prohibit any charges on telephone bills for calls 
to 800 numbers; to the Committee on Commerce, Science, and 
Transportation.


                the toll-free 800 number protection act

  Mr. HARKIN. Mr. President, I want to speak about a problem being 
faced by families across the country--a problem that has cost families 
hundreds and even thousands of dollars. This problem exposes families 
to rip-off schemes in their own homes. Worst of all, young people are 
being exposed to dial-a-porn phone sex services, even when the families 
take the step of placing a block on extra-cost 900 number calls from 
their home.
  Most people believe that when they dial 1-800 at the beginning of a 
call, they are calling toll free. Toll-free 800 number calling has had 
a dramatically positive impact on many businesses, allowing catalog 
sales to take off, and providing helpful customer services. My State of 
Iowa is prominent in providing these telemarketing services. So I 
strongly believe that we must ensure public confidence in toll-free 800 
numbers.
  Federal law prohibits most practices that would allow people calling 
an 800 number to be charged for the call. Callers cannot be assessed a 
charge by virtue of completing the call, and they cannot be connected 
to a pay-per-call service--which are usually called 900 number 
services. They also cannot be charged for information conveyed during 
the call--with one exception. If there is a preexisting agreement to be 
charged, a charge is allowed. This provision was added, because there 
was concern that the provision might be read to prevent people buying 
merchandise with a credit card on an 800 number, or for nationwide 
access numbers for long distance providers.

  Unfortunately, Mr. President, this small loophole has allowed some 
sleazy operators to set up phone sex services on 800 numbers--and to 
make the caller pay the bill. They use the loophole allowing a charge 
when there is a preexisting arrangement to turn a toll-free 800 number 
call into a toll call.
  Families are being hurt by these services. Youngsters run across the 
ads, like the ads shown on this exhibit, and thinking the call will be 
free, call numbers like 1-800-HOT TALK. These numbers appear in all 
kinds of publications--from the City Paper here in Washington; Rolling 
Stone magazine; and a host of adult magazines. The ads on this exhibit 
were the least offensive ones we could find. The worst ones could not 
be displayed here.
  A woman from Fort Dodge, IA, recently wrote to me about this problem. 
I will not give out her name in the interest of her privacy. Her 16-
year-old son was found to be using phone sex services. She has tried 
putting phone blocks on to prevent him from calling 900 numbers and 
international numbers. But these 800 numbers cannot be blocked. She 
says, Why can't this be stopped? Why are the phone companies handling 
these lines? The answer to her question is, the phone companies are 
common carriers. They are not allowed to discriminate based on the 
content of calls. Only by congressional action can we put a halt to 
these outrageous practices.

  Here's how the companies do it. A caller calls an 800 number. He or 
she is directed to enter an access code, in order to be connected to a 
service--without knowing that, by entering the number, they are 
authorizing the service to charge for the call. Another scam is for the 
call to be switched to international numbers in small countries around 
the world. Phone sex companies set up in these companies, where local 
law allows them to receive a cut from the charges. One service operated 
out of Suriname charges some $50 per minute.
  Under another so-called preexisting agreement, the first call from a 
number establishes the agreement, and subsequent calls are charged to 
the phone number the first call was made from. This means that anyone 
making a telephone call from your phone could make you liable for 
hundreds of dollars of calls--even if the person never makes another 
call from that phone. A person making a call from a model can set up 
one of these agreements with a phone-sex service, and the motel could 
be forced to pay for subsequent calls from anywhere in the country. At 
the Motel 6 chain alone, porn calls have cost a quarter of a million 
dollars in the last year. In our own offices here at the Senate, a 
courier who uses the courtesy telephone, supposedly to call his 
dispatcher, could charge phone-sex calls back to your office account.
  How many people are concerned about this problem? All you need 
to know is how many families have signed up for 900 number blocking. 
These families have said that they have no intention of using pay-per-
call services. In Iowa, about one in four lines are restricted from 
calling 900 numbers, most of which are homes, rather than businesses.

  Recently, the Federal Communications Commission took action to clamp 
down on these services. It would require that the service providers 
have a written agreement with the person being billed. While this is a 
first step, it will not eliminate the problem. When you look at the 
tiny loophole in the law that allowed the abusive practices I just 
described, I feel that Congressional action is needed to slam the 
loophole shut, once and for all.
  Today, I am offering a bill that would prohibit this abuse. My bill, 
a companion to which has been introduced by my House colleague, 
Representative Bart Gordon of Tennessee, would simply clarify that the 
loophole does not allow charges to be placed on the phone bill. It 
would have no impact on the 800 number services that have made all of 
our lives more convenient, and helped our businesses grow. While we 
obviously will not have time to fully consider this legislation in this 
Congress, I wanted to start a discussion of it so that it can be acted 
on promptly next year. I believe we must act to stop this abuse.
  I ask unanimous consent that a copy of the bill and a recent article 
in the New York Times on this subject be included in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2526

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. FINDINGS.

       The Congress finds the following:
       (1) Reforms required by the Telephone Disclosure and 
     Dispute Resolution Act (Public Law 102-556) have improved the 
     reputation of the pay-per-call industry and resulted in 
     regulations that have reduced the incidence of misleading 
     practices that are harmful to the public interest.
       (2) Among the successful reforms is a prohibition on 
     charges being assessed for calls to 800 telephone numbers or 
     other telephone numbers advertised or widely understood to be 
     toll free.
       (3) Nevertheless, certain interstate pay-per-call 
     businesses are taking advantage of an exception in the 
     prohibition on charging for information conveyed during a 
     call to a ``toll-free'' number to continue to engage in 
     misleading practices. These practices are not in compliance 
     with the intent of Congress in passing the Telephone 
     Disclosure and Dispute Resolution Act.
       (4) Therefore, it is necessary for Congress to clarify that 
     its intent is that charges for information provided during a 
     call to an 800 number or other number widely advertised and 
     understood to be toll free shall not, under any 
     circumstances, be included or transmitted with a bill for 
     telephone services.

     SEC. 2. AMENDMENT TO THE COMMUNICATIONS ACT OF 1934.

       (a) Amendment.--Section 228(c)(6)(C) of the Communications 
     Act of 1934 (47 U.S.C. 228(c)(6)(C) is amended by inserting 
     before the semicolon the following: ``, except that nothing 
     in this paragraph shall permit the calling party to be 
     charged for the information or the call by means of a charge 
     included on, or transmitted with, a bill for telephone 
     exchange service or telephone toll service''.
       (b) Regulations.--The Federal Communications Commission 
     shall revise its regulations to comply with the amendment 
     made by subsection (a) of this section within 30 days after 
     the date of enactment of this Act.
                                  ____


           [From the New York Times, Thursday, Aug. 18, 1994]

                             1-800-$$$-$$$$

       True or false? Calls to 800 numbers are free.
       Mostly true, but there is a loophole. Some 800-number calls 
     carry a charge, sometimes steep, and the caller is probably 
     not aware of it. A lot of duped customers are angry, to the 
     point where phone companies are finally cracking down, the 
     Federal Communications Commission has proposed some new rules 
     and Representative Bart Gordon of Tennessee has a bill that 
     would ban the charges outright.
       The trouble stems from a 1992 law to curb abuses on 900-
     number calls. That law also said 800-number calls shall be 
     toll-free. However, in case toll-free was taken to mean, for 
     example, that a catalogue company could not charge for a 
     shirt sold over its 800 line, the law says it is all right to 
     charge for the business transacted so long as there is an 
     agreement--for example, where the caller has contracted for a 
     computer information service on an 800 line, or where the 
     caller gives a credit card number to order that shirt.
       The loophole was not meant for pornography, psychics, 
     sports lines and others scheming to exploit it. They work 
     their trickery by answering with a recording that tells 
     callers to punch a numerical ``code.'' The code is deemed an 
     agreement to pay; once punched in, it transfers the call to a 
     pay-per-call number, sometimes overseas. The charge then 
     appears on the caller's bill.
       The F.C.C. now proposes that callers must give written 
     agreement to pay for a service that charges for 800 calls. 
     Representative Gordon's bill seems simpler and surer: Permit 
     no charges on telephone bills for calls placed to 800 
     numbers. That would cut off the money and, pretty quickly, 
     the service. If a business wants to charge for phone 
     services, it can get a 900 number, or put the charge on the 
     caller's credit card, or bill the caller directly.
                                 ______

      By Mr. MURKOWSKI:
  S. 2527. A bill to amend section 257(e) of the Balanced Budget and 
Emergency Deficit Control Act of 1985 to modify the treatment of losses 
from asset sales; to the Committee on the Budget and the Committee on 
Governmental Affairs, jointly, pursuant to the order of August 4, 1977, 
with instructions that if one Committee reports, the other Committee 
have thirty days to report or be discharged.


                THE ASSET SALE BUDGET RULES ACT OF 1994

 Mr. MURKOWSKI. Mr. President, I introduce legislation that 
would modify the budget rules governing the sale of Federal assets. It 
is my hope that Congress next year will review many of the perverse and 
unintended effects of our budget rules and consider including this 
legislation in a budget process reform package.
  Under current law, the sale of an asset does not alter the deficit or 
produce any net deficit reduction in the budget baseline. My 
legislation maintains this principle. Although an asset sale would not 
be counted in calculating the deficit, future revenue generated by the 
asset which the Government would have received if the asset had not 
been sold could be offset by the revenue generated from the sale. I 
want to emphasize that this rule is narrowly crafted so that revenue 
gained from an asset sale could not be used to offset a separate 
revenue losing program.
  Mr. President, the current budget rules governing asset sales make it 
nearly impossible for the Federal Government to sell assets. For 
example, during the last several years, both the Bush and Clinton 
administrations have sought to sell the Alaska Power Administration 
[APA]. The Department of Energy (DOE) has entered into sale agreements 
and negotiated a price of more than $80 million for these electric 
generating assets.
  Unfortunately, legislation needed to implement this sale has been 
delayed for several years, in part because of the budget rules 
governing asset sales. Since the APA takes in approximately $11 million 
per year from the sale of electricity, under our pay-as-you-go rules, 
the sale if scored by the Congressional Budget Office [CBO] as losing 
the Federal Government $11 million annually. In other words, even 
though the Federal Government will receive up-front more than $80 
million by selling the APA, our budget scoring rules require that the 
sale proceeds be ignored, but that the stream of lost future revenues 
be counted.
  The end result of these rules is that for the sale to proceed, the 
lost $11 million per year must be offset by other unrelated spending 
reductions. This is Alice-In-Wonderland accounting that has no 
relationship to the real world. Presumably, the Department of Energy 
negotiated what it believed was a fair price for the APA assets. 
Certainly DOE factored in the amount of revenue that will no longer be 
coming to the Federal Government as a result of the sale as well as the 
fact that the Federal Government will no longer have to staff and 
maintain these operations. Yet when it comes to Congressional budget 
scoring rules, all that is counted is the lost stream of future 
revenues.
  The legislation I am introducing today would rationalize the asset 
sale rules by allowing the price the Federal Government receives from 
the asset sale to offset future revenue lost as a result of the 
transfer of the asset from the Government to private parties. Thus, in 
the APA example, if over the next 5 years, it is assumed that 
electricity sales from APA would generate $11 million per year, $55 
million over 5 years, for purposes of the Budget Act, the $83 million 
sales price could offset the $55 million loss of revenue to the 
government. And I want to emphasize that under my legislation, the 
remaining $28 million associated with the sale could neither count 
toward deficit reduction, nor could it be used to increase spending in 
any other program.
  I look forward to working with the members of the Budget Committee to 
resolve the current asset sale anomaly. I ask unanimous consent that 
the text of the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2527

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1, OFFSETTING LOSSES FROM ASSET SALES.

       Section 257(e) of the Balanced Budget and Emergency Deficit 
     Control Act of 1985 is amended by striking the semicolon at 
     the end thereof and inserting the following: ``. Effective 
     beginning fiscal year 1995, the proceeds from the sale of an 
     asset may be applied to offset the loss of any revenue or 
     receipts resulting from such sale.''.
                                 ______

      By Mrs. FEINSTEIN (for herself, Mr. Sasser, and Mr. Pell):
  S. 2528. A bill to improve and strengthen the child support 
collection system; to the Committee on Finance.


                  THE CHILD SUPPORT RESPONSIBILITY ACT

  Mrs. FEINSTEIN. Madam President, I rise today to join with Senators 
Sasser and Pell to introduce legislation that will provide 
comprehensive reform of our Nation's system of child support.
  The Child Support Responsibility Act is companion legislation to a 
measure which has been introduced in the House of Representatives and 
which has been moving quickly in several committees with strong 
bipartisan support.
  This legislation builds upon legislation which was introduced by 
Senator Bradley last year, and which was based on the recommendations 
of the U.S. Commission of Interstate Child Support. I was proud to be a 
cosponsor of that bill, and I want to take this opportunity to commend 
the Senator from New Jersey for his early leadership in this area.
  In this Nation, one in four children grow up in poverty. One of the 
principal reasons for this is the absence of child support. According 
to the Department of Health and Human Services, in 1990, noncustodial 
parents paid a total of $14 billion in child support.
  However, the Department reports that, if child support orders had 
been established, based on the absent parents' ability to pay, and if 
those orders had been enforced, $48 billion would have been paid that 
year. That is an annual shortfall of $34 billion, $34 billion that 
could be paid each year--and $34 billion that is not paid, and that 
does not reach the children of those absent parents. In California 
alone, $3 billion goes uncollected each year.
  Madam President, this is a national disgrace.
  The annual cost of AFDC to Federal and State governments is $22 
billion. In July, in testimony before the Senate, Mary Jo Bane, 
Assistant Secretary for Children and Families at the Department of 
Health and Human Services, acknowledged that a substantial increase in 
child support collections would yield a reduction of 25 percent in AFDC 
payments.
  But this problem is not limited just to AFDC recipients. In that same 
hearing, the Children's Defense Fund testified that the nonwelfare 
caseload of child support agencies around the country has quadrupled, 
from 1.7 million in 1983, to 6.5 million in 1992.
  The Children's Defense Fund also reported another statistic. And 
this, I must say, is a statistic which absolutely confounds me. 
According to the Children's Defense Fund, in 1992 the default rate for 
used car loans was less than 3 percent. However, the delinquency rate 
for child support was 49 percent in 1990.
  What does this say about our society?
  What it says to me is that people care more about their cars than 
they do about their children. And this is a very sad commentary indeed. 
But it also says to me that the time has come for the Federal 
Government to assert its jurisdiction over a worsening national 
problem. In fact, almost one-third of unpaid child support is due from 
parents living in another State, and without adequate interstate 
enforcement, noncustodial parents can simply become child support 
scofflaws.
  As I stated before, it is a national disgrace that these parents are 
allowed to willfully shirk their obligations to their families and to 
society. Even if parents walk away from their families, they should not 
be permitted to walk away from the law. And our laws should have teeth 
in them. The message should be loud, and it should be clear: ``No 
longer will you burden the taxpayer with your obligations; if you run, 
we will find out.''
  And that is precisely what this legislation does. This legislation 
will create a new Federal registry of child support orders issued by 
State courts. In addition, a new W-4 form is created which contains 
child support information indicating if child support is owned, to whom 
it is payable, and whether it is to be paid through wage withholding.
  This new W-4 form will be filed with Federal Child Support Registry 
where data will be compared to the information on file and transmitted 
to the State registry where the noncustodial parent is employed.
  States are also required to establish child support registries. They 
will transmit wage withholding orders to employers, receive funds from 
employers that have withheld wages, and distribute all funds received 
within 3 days.
  In addition, this legislation provides for reconciliation of child 
support payments on Federal income tax returns. Withheld child support 
will be shown on a revised W-2 form. Arrearages will be deducted by the 
Internal Revenue Service from any refund due and funds will be 
forwarded to State registries.
  Social Security numbers will be required on marriage licenses, 
divorce decrees, parentage decrees, and birth certificates.
  Let me turn for a moment to the issue of parentage. We know that, 
more and more, ours is a society which, over the past few decades, has 
witnessed a dramatic increase in the number of families headed by one 
parent. In fact, in 1991, 14.6 million children lived in a female-
headed family. Of those, 56 percent were living in poverty. And for 
most children born to single mothers, paternity is not established.
  There are many who question what has happened to our family 
structure, and we know these circumstances are complex and not without 
controversy. Indeed, many wonder what, if anything, government can or 
should do about it.
  There is, however, one thing upon which I think we can all agree. 
Irrespective of their marital status or living arrangement, both 
parents must be held accountable for their children. This is impossible 
if paternity is never established.
  Therefore, this bill strengthens our ability to establish paternity 
early on. States will be required to provide for hospital-based 
paternity establishment. If is widely believed that the most likely 
time for voluntary acknowledgment of paternity is in the days 
immediately following birth, when there is the initial euphoria around 
the birth and the baby's father will often visit mother and child in 
the hospital.
  In this legislation, we outline procedures and specify information 
which must be given to each of the parents about their rights and 
responsibilities. This information includes the availability of genetic 
testing.
  A new National Paternity Acknowledgment Affidavit is created for 
voluntary acknowledgment and, after an initial 30-day challenge period, 
this document will be conclusively presumed to create a legal finding 
of paternity with the effect of a final judgment at law.
  And so, with these new registries, and with strengthened paternity 
establishment procedures, we will have the tools and information to 
monitor, at the Federal and State levels, the payment record of the 
noncustodial parents. And this legislation says: ``You'd better pay 
your child support.'' If you don't, we'll make you pay with tough new 
enforcement measures. We will track you from employer to employer, and 
State to State, and we will make you pay. We will garnishee your wages 
if necessary, across State lines if necessary. We will reconcile your 
payment record with your income tax return, and if you owe child 
support, we'll deduct it from any refund due.

  And if you still don't pay, we will take away your driver's license. 
We will take away your business license or your professional license. 
If you are a doctor, or a lawyer, or a member of any profession 
requiring State or Federal licensing, you will pay your child support 
or you will lose your license. You can forget about foreign travel 
because we won't issue you a passport.
  And those cars, about which you care so much? We will even place a 
lien on your vehicle title until you have paid your child support. 
We'll attach your bank account. We will seize your State lottery 
winnings, your insurance settlements, any judgments you may win, and 
any bequests you may inherit. And we'll also file a report with the 
credit bureau.
  This law will apply to everyone. It applies to those in the private 
sector, as well as Federal workers and members of the armed services. 
Garnishment will be authorized not only for wages but also for Federal 
death benefits and veterans' benefits.
  Finally, this legislation will establish a stronger Federal role. It 
creates a new Assistant Secretary of Child Support Enforcement, 
reporting directly by the Secretary of Health and Human Services, and 
confirmed by the Senate. The Secretary is directed to study the 
staffing of each State's child support enforcement program and report 
to Congress within 1 year of enactment of this legislation.
  Demonstration projects are established in four States to create a 
system of assured minimum child support payments. And a new children's 
trust fund is established which allows for voluntary contributions from 
taxpayers on their Federal tax returns. This fund will be dedicated to 
programs aimed at the prevention of child poverty.
  Madam President, years of study have gone into our Nation's failed 
child support system. There is consensus on the steps that need to be 
taken to overhaul that system. There are those who believe that child 
reform should be coupled with welfare reform. That is not my view. We 
have consensus, and our children cannot wait.
  Our Nation and its children are being cheated by irresponsible 
parents. We cannot wait for welfare reform to right this wrong. It 
takes two people to bring a child into this world, and two people must 
be held responsible.
  This is legislation whose time has come.
  Madam President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2528

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; REFERENCE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Child 
     Support Responsibility Act of 1994''.
       (b) Reference to Social Security Act.--Except as otherwise 
     specifically provided, wherever in this Act an amendment is 
     expressed in terms of an amendment to or repeal of a section 
     or other provision, the reference shall be considered to be 
     made to that section or other provision of the Social 
     Security Act.
       (c) Table of Contents.--The table of contents of this Act 
     is as follows:
Sec. 1. Short title; reference; table of contents.

                   TITLE I--LOCATE AND CASE TRACKING

Sec. 101. Federal child support order registry.
Sec. 102. Expansion of Federal parent locator systems.
Sec. 103. National reporting of employees and child support 
              information.
Sec. 104. State role.
Sec. 105. Reconciliation of child support obligation and payments on 
              income tax return.

                        TITLE II--ESTABLISHMENT

Sec. 201. Service of process on Federal employees and members of the 
              armed services in connection with proceedings relating to 
              child support and parentage obligations.
Sec. 202. Presumed address of obligor and obligee.
Sec. 203. Fair Credit Reporting Act amendment.
Sec. 204. National child support guideline commission.
Sec. 205. Duration of support.
Sec. 206. Evidence.
Sec. 207. Telephonic appearance in interstate cases.
Sec. 208. Uniform terms in orders.
Sec. 209. Social security numbers on marriage licenses, divorce 
              decrees, parentage decrees, and birth certificates.
Sec. 210. Administrative subpoena power.
Sec. 211. Support orders outreach and demonstrations.
Sec. 212. Health care support.
Sec. 213. Rules governing modification of child support orders.

                          TITLE III--PARENTAGE

Sec. 301. Paternity establishment procedures.

                         TITLE IV--ENFORCEMENT

Sec. 401. Direct wage withholding.
Sec. 402. Priorities in application of withheld wages.
Sec. 403. Additional benefits subject to garnishment.
Sec. 404. Consumer Credit Protection Act amendments.
Sec. 405. Prohibition against use of election of remedies doctrine to 
              prevent collection of child support.
Sec. 406. Hold on occupational, professional, and business licenses.
Sec. 407. Driver's licenses and vehicle registrations denied to persons 
              failing to appear in child support cases.
Sec. 408. Liens on certificates of vehicle title.
Sec. 409. Attachment of bank accounts.
Sec. 410. Seizure of lottery winnings, settlements, payouts, awards, 
              and bequests, and sale of forfeited property, to pay 
              child support arrearages.
Sec. 411. Fraudulent transfer pursuit.
Sec. 412. Full IRS collection.
Sec. 413. Tax refund offset program expanded to cover non-AFDC post-
              minor children.
Sec. 414. Attachment of public and private retirement funds.
Sec. 415. Reporting of child support arrearages to credit bureaus.
Sec. 416. Elimination of statutes of limitations in child support 
              cases.
Sec. 417. Interest.
Sec. 418. Bankruptcy.
Sec. 419. Federal government cooperation in enforcement of support 
              obligations of members and former members of the Armed 
              Forces.
Sec. 420. States required to enact the Uniform Interstate Family 
              Support Act.
Sec. 421. Denial of passports to noncustodial parents subject to State 
              arrest warrants in cases of nonpayment of child support.
Sec. 422. Denial of Federal benefits, loans, guarantees, and employment 
              to certain persons with large child support arrearages.
Sec. 423. States required to order courts to allow assignment of life 
              insurance benefits to satisfy child support arrearages.
Sec. 424. Interests in jointly held property subject to assignment to 
              satisfy child support arrearages.
Sec. 425. International child support enforcement.
Sec. 426. Nonliability for depository institutions providing financial 
              records to State child support enforcement agencies in 
              child support cases.
Sec. 427. Cost-of-living adjustment of child support awards.
Sec. 428. Annual exchange of financial information by parties to child 
              support order.
Sec. 429. Criminal penalties for failure to pay child support.

                  TITLE V--COLLECTION AND DISTRIBUTION

Sec. 501. Priorities in distribution of collected child support.
Sec. 502. State claims against noncustodial parent limited to 
              assistance provided to the child.
Sec. 503. Fees for non-AFDC clients.
Sec. 504. Collection and disbursement points for child support.

                         TITLE VI--FEDERAL ROLE

Sec. 601. Placement and role of the Office of Child Support 
              Enforcement.
Sec. 602. Training.
Sec. 603. Staffing.
Sec. 604. Child support definition.
Sec. 605. Technical correction to ERISA definition of medical child 
              support order.
Sec. 606. Audits.
Sec. 607. Establishment of child support assurance demonstration 
              projects.
Sec. 608. Children's Trust Fund.
Sec. 609. Study of reasons for nonpayment of child support; report.
Sec. 610. Study of effectiveness of administrative processes; report.
Sec. 611. Compendium of State child support statutes.
Sec. 612. Establishment of permanent child support advisory committee.

                         TITLE VII--STATE ROLE

Sec. 701. Advocation of children's economic security.
Sec. 702. Duties of State child support agencies.
Sec. 704. Administrative process for change of payee in IV-D cases.
Sec. 705. Financial incentives.
Sec. 706. Avoidance of conflicts of interest.
                   TITLE I--LOCATE AND CASE TRACKING

     SEC. 101. FEDERAL CHILD SUPPORT ORDER REGISTRY.

       (a) Establishment.--Not later than October 1, 1995, the 
     Secretary shall establish a Federal registry of child support 
     orders issued or modified by any State court or 
     administrative process established under State law.
       (b) Comparison of Information on W-4 Forms With Information 
     in Child Support Orders.--Within 10 days after the registry 
     established under subsection (a) receives a W-4 form of an 
     employee, the registry shall--
       (1) compare the information on the form with the 
     information in the registry on the child support obligations 
     of the employee; and
       (2) transmit to the registry established under section 
     466(a)(12) of the State in which the employee is employed a 
     notice as to whether the amount specified on the W-4 form as 
     the monthly child support obligation of the employee is 
     accurate or not.
       (c) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out this section, 
     especially in cases involving an employee who has 2 or more 
     employers or child support obligations.
       (d) State Access to the Registry.--The Secretary shall, 
     upon request of any State, provide the State with access to 
     the information contained in the registry established under 
     subsection (a).
       (e) Definitions.--As used in this section:
       (1) Child support order.--The term ``child support order'' 
     means an order requiring payments for support and maintenance 
     of a child or of a child and the parent with whom the child 
     is living (including an order requiring health insurance to 
     be provided to such a child or parent).
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.
       (3) State.--The term ``State'' includes the several States, 
     the District of Columbia, the Commonwealth of Puerto Rico, 
     the Commonwealth of the Northern Mariana Islands, the United 
     States Virgin Islands, Guam, American Samoa, and the Trust 
     Territory of the Pacific Islands.

     SEC. 102. EXPANSION OF FEDERAL PARENT LOCATOR SYSTEMS.

       (a) Expansion of Functions.--Section 453(a) (42 U.S.C. 
     653(a)) is amended by striking ``enforcing support 
     obligations against such parent'' and inserting 
     ``establishing parentage, establishing, modifying, and 
     enforcing child support obligations''.
       (b) Access to Additional Data Bases.--Section 453 (42 
     U.S.C. 653) is amended--
       (1) in subsection (b), by striking ``the most recent 
     address and place of employment'' and inserting ``the most 
     recent residential address, employer name and address, and 
     amounts and nature of income and assets'';
       (2) in subsection (c)(3), by striking ``resident'' and 
     inserting ``custodial''; and
       (3) in subsection (e), by adding at the end the following:
       ``(4) The Secretary of the Treasury shall enter into an 
     agreement with the Secretary to provide prompt access by the 
     Secretary (in accordance with this subsection and section 
     6103(l)(6) of the Internal Revenue Code of 1986) to all 
     Federal income tax returns filed by individuals with the 
     Internal Revenue Service.''.
       (c) Expansion of Access to the National Parent Locator 
     Network.--Section 453 (42 U.S.C. 653) is amended by adding at 
     the end the following:
       ``(g) The Secretary shall expand the Parent Locator Service 
     to establish a national network based on the comprehensive 
     statewide child support enforcement systems developed by the 
     States, to--
       ``(1) allow each State to--
       ``(A) locate any absent parent who owes child support or 
     for whom a child support obligation is being established, 
     by--
       ``(i) to the extent practicable, accessing the records of 
     other State agencies and sources of locate information 
     directly from one computer system to another; and
       ``(ii) accessing Federal sources of locate information in 
     the same fashion;
       ``(B) access the files of other States to determine whether 
     there are other child support orders and obtain the details 
     of those orders;
       ``(C) provide for both on-line and batch processing of 
     locate requests, with on-line access restricted to cases in 
     which the information is needed immediately (for such reasons 
     as court appearances) and batch processing used to `troll' 
     data bases to locate individuals or update information 
     periodically; and
       ``(D) direct locate requests to individual States or 
     Federal agencies, broadcast requests to selected States, or 
     broadcast cases to all States when there is no indication of 
     the source of needed information;
       ``(2) provide for a maximum of 48-hour turnaround time for 
     information to be broadcast and returned to a requesting 
     State;
       ``(3) provide ready access to courts and administrative 
     agencies of the information on the network by location of a 
     computer terminal in each court; and
       ``(4) access the registries of child support orders 
     maintained by States pursuant to section 466(a)(12).''.

     SEC. 103. NATIONAL REPORTING OF EMPLOYEES AND CHILD SUPPORT 
                   INFORMATION.

       (a) In General.--Not later than Janauary 1, 1995, the 
     Secretary of the Treasury, in consultation with the Secretary 
     of Labor, shall establish a system of reporting of employees 
     by requiring employers to provide a copy of every employee's 
     W-4 form to the Federal child support order registry 
     established pursuant to section 101(a) of the Child Support 
     Responsibility Act of 1994 and to the child support order 
     registry established pursuant to section 466(a)(12) of the 
     Social Security Act by the State in which the employment is 
     located--
       (1) in the case of employees hired on or after the 
     effective date of this section, on the date the employee is 
     hired; or
       (2) in the case of employees hired before such effective 
     date, within 10 days after such effective date.
       (b) Inclusion of Child Support Information on W-4 Forms.--
     The Secretary of the Treasury shall modify the W-4 form to 
     enable the employee to indicate on the form--
       (A) whether the employee owes child support, and if so--
       (i) to whom the support is payable and the amount of the 
     support payable; and
       (ii) whether the support is to be paid through wage 
     withholding; and
       (B) whether health care insurance is available to the new 
     employee, and, if so, whether the employee has obtained such 
     insurance for the dependent children of the employee.

     SEC. 104. STATE ROLE.

       (a) State Child Support Order Registries.--Section 466(a) 
     (42 U.S.C. 666(a)) is amended by inserting after paragraph 
     (11) the following:
       ``(12) Procedures under which the--
       ``(A) State child support enforcement agency shall--
       ``(i) establish and maintain a child support order registry 
     which shall include--

       ``(I) a copy of each child support order issued or modified 
     in the State on or after the effective date of this 
     paragraph;
       ``(II) a copy of each child support order issued or 
     modified in the State before the effective date of this 
     paragraph that is being enforced under the State plan; and
       ``(III) a copy of each child support order issued or 
     modified in the State before the enactment of this paragraph 
     that a party to the order has requested be included in the 
     Federal child support order registry established pursuant to 
     section 101(a) of the Child Support Responsibility Act of 
     1994;

       ``(ii)(I) immediately upon receipt of a child support order 
     referred to in subclause (I) or (II) of clause (i), transmit 
     an abstract of the order to the Federal registry; and
       ``(II) beginning 2 years after such date of enactment, 
     transmit to the Federal registry an abstract of each child 
     support order referred to in clause (i)(III); and
       ``(iii) distribute in accordance with section 457(b) all 
     amounts received from employers that have been deducted and 
     withheld from the wages of employees for the payment of child 
     support obligations, and all amounts received from the 
     Internal Revenue Service pursuant to section 7524(f) of the 
     Internal Revenue Code of 1986, within 3 days after receipt;
       ``(B) allow any individual owed support pursuant to a child 
     support order issued or modified in the State who alleges 
     that an employer has failed to comply subsection 
     (b)(11)(B)(ii) with respect to the order, or that a State 
     official has failed to comply with subparagraph (A)(iii) of 
     this paragraph with respect to amounts withheld from wages 
     pursuant to the order and paid to the State, to bring an 
     action against the employer or the official (in the 
     official's personal capacity), as the case may be, in any 
     State court and recover damages, including interest; and
       ``(C) the State agency referred to in section 402(a)(3) 
     shall notify the State child support enforcement agency of 
     the commencement or termination of aid under the State plan 
     approved under part A to any individual or family, within 10 
     days after such commencement or termination.''.
       (b) Direct Wage Withholding.--Section 466(b) (42 U.S.C. 
     666(b)) is amended by adding at the end the following:
       ``(11)(A)(i) Upon the issuance or modification by a State 
     court or administrative agency of an order imposing a child 
     support obligation on an individual, the State shall transmit 
     to any employer of the individual a wage withholding order 
     developed under section 452(a)(12) directing the employer to 
     withhold amounts from the wages of the individual pursuant to 
     the order, or such greater amount as the State child support 
     order registry established pursuant to subsection (a)(12)(A) 
     of this section may determine is the total amount of the 
     child support obligations of the individual.
       ``(ii) Clause (i) shall not apply to an order upon 
     agreement of the parties to the order and the court or 
     administrative agency that issued or modified the order.
       ``(iii) An agreement referred to in clause (ii) may be 
     unilaterally rescinded only by the individual to whom child 
     support is payable under the order.
       ``(B) Any individual or entity engaged in commerce, as a 
     condition of doing business in the State, shall, on receipt 
     of a wage withholding order developed under section 
     452(a)(12) that is regular on its face and has been issued by 
     a court of any State--
       ``(i) comply with the order by forwarding to the State 
     registry established pursuant to subsection (a)(12)(A) of 
     this section, within 5 days after the end of each payroll 
     period ending after receipt of the order, the greater of--
       ``(I) the amount required to be withheld pursuant to the 
     order; or
       ``(II) the amount that the State registry has notified the 
     employer is the amount required to be withheld from the wages 
     of the employee for payment of child support obligations of 
     the employee; and
       ``(ii) keep records of the amounts so withheld.
       ``(C) Such an order may be served on the income source 
     directly or by first-class mail.
       ``(D) An individual or entity who complies with 
     subparagraph (B)(i) with respect to such an order may not be 
     held liable for wrongful withholding of income from the 
     employee subject to the order.
       ``(E) The State shall impose a civil fine of $1,000 on any 
     individual or entity who receives such an order for each 
     failure to comply with subparagraph (B)(i) with respect to 
     the order.
       ``(F) The State shall have in effect procedures for 
     carrying out this paragraph in cases involving an employee 
     who has 2 or more employers or child support obligations.
       ``(12) If the State transmits to an individual or entity 
     engaged in commerce only outside the State a wage withholding 
     order issued by the State with respect to an employee of the 
     individual or entity, and the individual or entity contests 
     or refuses to comply with the order, the State shall send an 
     informational copy of the order to the registry established 
     under subsection (a)(12)(A) of any other State in which the 
     individual or entity is engaged in commerce.
       ``(13) If an employee requests a hearing to contest wage 
     withholding based on claim of a mistake of fact, the hearing 
     may be held in the State from which the income is paid or in 
     which the employee is employed, and, within 45 days after the 
     income source receives the withholding order, the entity 
     conducting the hearing must adjudicate the claim. The State 
     in which the hearing is held shall provide appropriate 
     services in cases enforced under the State plan to ensure 
     that the interests of the individual to whom the withheld 
     income is to be paid are adequately represented.''.
       (c) Priorities in Application of Withheld Wages.--Section 
     466(b) (42 U.S.C. 666(b)), as amended by subsection (b) of 
     this section, is amended by inserting after paragraph (13) 
     the following:
       ``(14) Procedures under which the amounts withheld pursuant 
     to a child support or wage withholding order are to be 
     applied in the following order:
       ``(A) To payments of support due during the month of 
     withholding.
       ``(B) To payments of premiums for health care insurance 
     coverage for dependent children.
       ``(C) To payments of support due before the month of 
     withholding, and of unreimbursed health-care expenses.''.
       (d) Access to Various Data Bases.--Section 466(a) (42 
     U.S.C. 666(a)), as amended by subsection (a) of this section, 
     is amended by inserting after paragraph (12) the following:
       ``(13) Procedures under which the State child support 
     enforcement agency shall have automated on-line or batch 
     access (or, if necessary, nonautomated access) to information 
     regarding residential addresses, employers and employer 
     addresses, income and assets, and medical insurance benefits 
     with respect to absent parents that is available through any 
     data base maintained by--
       ``(A) any agency of the State or any political subdivision 
     thereof, that contains information on residential addresses, 
     or on employers and employer addresses, as the State deems 
     appropriate;
       ``(B) any publicly regulated utility company located in the 
     State; and
       ``(C) any credit reporting agency located in the State.''.
       (e) Expanded Interaction With the National Parent Locator 
     Network.--Section 454(16) (42 U.S.C. 654(16)) is amended--
       (1) by striking ``and (E)'' and inserting ``(E)''; and
       (2) by striking ``enforcement;'' and inserting 
     ``enforcement, and (F) to provide access to the national 
     network developed pursuant to section 453(g);''.

     SEC. 105. RECONCILIATION OF CHILD SUPPORT OBLIGATION AND 
                   PAYMENTS ON INCOME TAX RETURN.

       (a) In General.--Chapter 77 of the Internal Revenue Code of 
     1986 (relating to miscellaneous provisions) is amended by 
     adding at the end thereof the following new section:

     ``SEC. 7524. RECONCILIATION OF CHILD SUPPORT OBLIGATION AND 
                   PAYMENTS ON INCOME TAX RETURN.

       ``(a) In General.--Each applicable child support obligation 
     of any individual for months ending with or within any 
     taxable year shall be paid--
       ``(1) not later than the last date (determined without 
     regard to extensions) prescribed for filing the individual's 
     return of tax imposed by chapter 1 for such taxable year, and
       ``(2)(A) if such return is filed not later than such date, 
     with such return, or
       ``(B) in any case not described in subparagraph (A), in 
     such manner as the Secretary may by regulations prescribe.
       ``(b) Offset for Withheld Child Support, Etc.--There shall 
     be allowed as a credit against the amount required to be paid 
     under subsection (a) by an individual the sum of--
       ``(1) the amount (if any) deducted and withheld pursuant to 
     State law from the wages received by such individual during 
     the taxable year,
       ``(2) the amount (if any) paid by such individual under 
     section 6654 by reason of subsection (f)(3) thereof for such 
     taxable year, and
       ``(3) the amount paid by such individual directly to the 
     person to whom the obligation is owed (or, if such person has 
     assigned to a State the right to collect the obligation, the 
     State).
       ``(c) Credit or Refund for Payments in Excess of Actual 
     Obligation.--There shall be allowed as a credit against the 
     tax imposed by subtitle A for the taxable year an amount 
     equal to the excess (if any) of--
       ``(1) the aggregate of the amounts described in paragraphs 
     (1), (2), and (3) of subsection (a) for such taxable year, 
     over
       ``(2) the aggregate of the child support obligations of the 
     taxpayer for such taxable year.

     The credit allowed by this subsection shall be treated for 
     purposes of this title as allowed by subpart C of part IV of 
     subchapter A of chapter 1.
       ``(d) Failure To Pay Amount Owing.--If an individual fails 
     to pay the full amount required to be paid under subsection 
     (a) on or before due date for such payment, the Secretary 
     shall assess and collect the unpaid amount in the same 
     manner, with the same powers, and subject to the same 
     limitations applicable to a tax imposed by subtitle C the 
     collection of which would be jeopardized by delay.
       ``(e) Applicable Child Support Obligation.--For purposes of 
     this section, the term `applicable child support obligation' 
     means a legal obligation to provide child support (as defined 
     in section 462(b) of the Social Security Act).
       ``(f) Amounts Collected by Secretary Paid to State 
     Registries.--Amounts collected under this section and section 
     6654 by reason of an applicable child support obligation 
     shall be paid by the Secretary to the appropriate State 
     registry established pursuant to section 466(a)(12)(A)(i) of 
     the Social Security Act.''.
       (b) Withheld Child Support To Be Shown on W-2.--Subsection 
     (a) of section 6051 of such Code is amended by striking 
     ``and'' at the end of paragraph (8), by striking the period 
     at the end of paragraph (9) and inserting ``, and'', and by 
     inserting after paragraph (9) the following new paragraph:
       ``(10) the total amount of child support obligations 
     withheld pursuant to State law.''.
       (c) Application of Estimated Tax Penalty.--
       (1) Subsection (f) of section 6654 of such Code (relating 
     to failure by individual to pay estimated income tax) is 
     amended by striking ``minus'' at the end of paragraph (2) and 
     inserting ``plus'', by redesignating paragraph (3) as 
     paragraph (4), and by inserting after paragraph (2) the 
     following new paragraph:
       ``(3) the aggregate applicable child support obligation (as 
     defined in section 7524(a)) of the taxpayer for months ending 
     with or within the taxable year, minus''.
       (2) Paragraph (1) of section 6654(d) of such Code is 
     amended by adding at the end the following new subparagraph:
       ``(D) Determination of required annual payment for 
     taxpayers required to pay child support.--In the case of a 
     taxpayer who is required under section 7524 to pay an 
     applicable child support obligation (as defined in section 
     7524) for any month ending with or within the taxable year, 
     the required annual payment shall be the sum of--
       ``(i) the amount determined under subparagraph (B) without 
     regard to subsection (f)(3), plus
       ``(ii) the aggregate amount of such obligation for all 
     months ending with or within the taxable year.''.
       (3) Credit for withheld amounts, etc.--Subsection (g) of 
     section 6654 of such Code is amended by adding at the end the 
     following new paragraph:
       ``(3) Child support.--For purposes of applying this 
     section, the sum of--
       ``(A) amounts deducted and withheld under State law for 
     applicable child support obligations, and
       ``(B) amounts paid by the individual directly to the person 
     to whom the obligation is owed (or, if such person has 
     assigned to a State the right to collect the obligation, the 
     State),

     shall be deemed to be a payment of the amount described in 
     subsection (f)(3) on the date such amounts were actually 
     withheld or paid, as the case may be.''.
       (d) Clerical Amendment.--The table of sections for chapter 
     77 of such Code is amended by adding at the end thereof the 
     following new item:

``Sec. 7524. Reconciliation of child support obligation and payments on 
              income tax return.''.
       (e) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.
                        TITLE II--ESTABLISHMENT

     SEC. 201. SERVICE OF PROCESS ON FEDERAL EMPLOYEES AND MEMBERS 
                   OF THE ARMED SERVICES IN CONNECTION WITH 
                   PROCEEDINGS RELATING TO CHILD SUPPORT AND 
                   PARENTAGE OBLIGATIONS.

       Part D of title IV (42 U.S.C. 651-670) is amended by 
     inserting after section 460 the following:

     ``SEC. 460A. SERVICE OF PROCESS ON FEDERAL EMPLOYEES AND 
                   MEMBERS OF THE ARMED SERVICES IN CONNECTION 
                   WITH PROCEEDINGS RELATING TO CHILD SUPPORT AND 
                   PARENTAGE OBLIGATIONS.

       ``(a) In General.--The head of each Government agency 
     shall, in accordance with applicable regulations under 
     subsection (b), designate an agent for receipt of service of 
     process, for any Federal employee or member of the Armed 
     Forces serving in or under such agency, in connection with an 
     action, brought in a court of competent jurisdiction within 
     any State, territory, or possession of the United States, for 
     obtaining a child support order or for establishing 
     parentage.
       ``(b) Regulations.--Regulations governing the 
     implementation of this section with respect to the executive, 
     legislative, or judicial branch of the Government shall be 
     promulgated by the authority or authorities responsible for 
     promulgating regulations under section 461 with respect to 
     the branch of Government involved.
       ``(c) Interpretive Rule.--This section shall not be 
     construed to prevent any otherwise eligible individual from 
     requesting or being granted a stay or continuance in any 
     judicial proceeding, including under the Soldiers' and 
     Sailors' Civil Relief Act of 1940.
       ``(d) Government Agency Defined.--For purposes of this 
     section, the term `Government agency' means each agency of 
     the Federal Government, including--
       ``(1) an Executive agency (as defined by section 105 of 
     title 5, United States Code);
       ``(2) the Department of Defense, to the extent that any 
     Federal employee serving in or under that agency or any 
     member of the armed services is involved;
       ``(3) the United States Postal Service and the Postal Rate 
     Commission;
       ``(4) the government of the District of Columbia;
       ``(5) an agency within the legislative or judicial branch 
     of the Government; and
       ``(6) an advisory committee to which the Federal Advisory 
     Committee Act applies.''.

     SEC. 202. PRESUMED ADDRESS OF OBLIGOR AND OBLIGEE.

       Section 466(a) (42 U.S.C. 666(a)), as amended by section 
     104 of this Act, is amended by inserting after paragraph (13) 
     the following:
       ``(14) Procedures under which the State shall--
       ``(A) require the court or administrative agency with 
     authority to issue the final order in a child support or 
     parentage case to require each party subject to the order to 
     file with the court or administrative agency, on or before 
     the date the order is issued--
       ``(i) the party's residential address or addresses;
       ``(ii) the party's mailing address or addresses;
       ``(iii) the party's home telephone number or numbers;
       ``(iv) the party's driver's license number;
       ``(v) the party's social security account number;
       ``(vi) the name of each employer of the party;
       ``(vii) the addresses of each place of employment of the 
     party; and
       ``(viii) the party's work telephone number or numbers;
       ``(B) require the court or administrative agency in any 
     action related to child support to presume, for the purpose 
     of providing sufficient notice (other than the initial notice 
     in an action to establish parentage or a child support 
     order), that the noncustodial parent resides at the last 
     residential address given by the noncustodial parent to the 
     court or agency; and
       ``(C) ensure that information concerning the location of a 
     custodial parent or a child of the custodial parent is not 
     released to a noncustodial parent if a court order has been 
     issued against the noncustodial parent for the physical 
     protection of the custodial parent or the child.''.

     SEC. 203. FAIR CREDIT REPORTING ACT AMENDMENT.

       Section 604 of the Consumer Credit Protection Act (15 
     U.S.C. 1681b) is amended by adding at the end the following:
       ``(4) To a State agency administering a State plan under 
     section 454 of the Social Security Act, for use to establish 
     or modify a child support award.''.

     SEC. 204. NATIONAL CHILD SUPPORT GUIDELINE COMMISSION.

       (a) Establishment.--There is hereby established a 
     commission to be known as the National Child Support 
     Guidelines Commission (in this section referred to as the 
     ``Commission'').
       (b) General Duties.--The Commission shall convene a 
     conference to study the desirability of a national child 
     support guideline, and if such guideline is advisable, the 
     Commission shall develop for congressional consideration a 
     national child support guideline that is based on the 
     conference's study of various guideline models, the 
     deficiencies of such models and any needed improvements.
       (c) Membership.--
       (1) Number; appointment.--
       (A) In general.--The Commission shall be composed of 9 
     individuals appointed jointly by the Secretary of Health and 
     Human Services and the Congress, not later than January 15, 
     1995.
       (B) Qualifications of members.--Members of the Commission 
     shall be appointed from among those who are able to provide 
     expertise and experience in the evaluation and development of 
     child support guidelines. At least 2 of the members shall 
     represent parent child support advocacy groups.
       (2) Terms of office.--Each member shall be appointed for a 
     term of 1 year. A vacancy in the Commission shall be filled 
     in the manner in which the original appointment was made.
       (d) Commission Powers, Compensation, Access to Information, 
     and Supervision.--The first sentence of subparagraph (C), the 
     first and third sentences of subparagraph (D), subparagraph 
     (F) (except with respect to the conduct of medical studies), 
     clauses (ii) and (iii) of subparagraph (G), and subparagraph 
     (H) of section 1886(e)(6) of the Social Security Act shall 
     apply to the Commission in the same manner in which such 
     provisions apply to the Prospective Payment Assessment 
     Commission.
       (e) Report.--Not later than 1 year after the appointment of 
     members, the Commission shall report to the President and the 
     Congress on the results of the study described in subsection 
     (b) and the final assessment by the Commission of issues 
     relating to a national child support guideline.
       (f) Termination.--The Commission shall terminate upon the 
     submission of the report described in subsection (e).

     SEC. 205. DURATION OF SUPPORT.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104 and 202 of this Act, is amended by inserting after 
     paragraph (14) the following:
       ``(15) Procedures under which the State--
       ``(A) imposes on 1 or both parents of a child an obligation 
     to continue to provide support for the child until not 
     earlier than the later of the date the child attains 18 years 
     of age or the date the child is graduated from or is no 
     longer enrolled in secondary school or its equivalent, unless 
     the child is married or is otherwise emancipated by a court 
     of competent jurisdiction or by operation of State law;
       ``(B) provides that courts with jurisdiction over child 
     support cases may, in accordance with criteria established by 
     the State, order--
       ``(i) child support, payable to an adult child, at least up 
     to the age of 22 years for a child enrolled in an accredited 
     postsecondary or vocational school or college who is a 
     student in good standing; and
       ``(ii) either or both parents to pay for postsecondary 
     school support based on each parent's financial ability to 
     pay; and
       ``(C) provides for child support to continue beyond the 
     child's minority if the child is disabled, unable to be self-
     supportive, and the disability arose during the child's 
     minority.''.

     SEC. 206. EVIDENCE.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104 and 205 of this Act, is amended by inserting after 
     paragraph (15) the following:
       ``(16) Procedures under which--
       ``(A) a certified copy of an out-of-State order, decree, or 
     judgment related to child support or parentage shall be 
     admitted once offered in the courts of the State if the 
     order, decree, or judgment is regular on its face; and
       ``(B) electronically transmitted information and documents 
     faxed to a court or administrative agency that contain 
     information related to the amount of a child support 
     obligation and the terms of the order imposing the obligation 
     may be offered as evidence of the amount and the terms, and 
     electronically transmitted records of payment of a child 
     support agency that are regular on their face shall be 
     admissible as evidence in a child support or parentage 
     proceeding to prove the truth of the matter asserted in the 
     records.''.

     SEC. 207. TELEPHONIC APPEARANCE IN INTERSTATE CASES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, and 206 of this Act, is amended by inserting after 
     paragraph (16) the following:
       ``(17) Procedures under which the parties to an interstate 
     parentage or child support administrative or judicial 
     proceeding may appear and participate by telephonic means in 
     lieu of appearing personally.''.

     SEC. 208. UNIFORM TERMS IN ORDERS.

       (a) In General.--Section 452(a) (42 U.S.C. 652(a)) is 
     amended--
       (1) by striking ``and'' at the end of paragraph (9);
       (2) by striking the period at the end of the 2nd sentence 
     of paragraph (10) and inserting ``; and''; and
       (3) by adding at the end the following:
       ``(11) not later than 12 months after the date of the 
     enactment of this paragraph, develop, in conjunction with 
     State executive and judicial organizations, a uniform 
     abstract of a child support order, for use by all State 
     courts to record, with respect to each child support order in 
     the child support order registry established under section 
     466(a)(12)--
       ``(A) the date support payments are to begin under the 
     order;
       ``(B) the circumstances upon which support payments are to 
     end under the order;
       ``(C) the amount of child support payable pursuant to the 
     order expressed as a sum certain to be paid on a monthly 
     basis, arrearages expressed as a sum certain as of a certain 
     date, and any payback schedule for the arrearages;
       ``(D) whether the order awards support in a lump sum 
     (nonallocated) or per child;
       ``(E) if the award is in a lump sum, the event causing a 
     change in the support award and the amount of any change;
       ``(F) other expenses covered by the order;
       ``(G) the names of the parents subject to the order;
       ``(H) the social security account numbers of the parents;
       ``(I) the name, date of birth, and social security account 
     number (if any) of each child covered by the order;
       ``(J) the identification (FIPS code, name, and address) of 
     the court that issued the order;
       ``(K) any information on health care support required by 
     the order; and
       ``(L) the party to contact if additional information is 
     obtained.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall take effect on the date of the enactment of this Act.

     SEC. 209. SOCIAL SECURITY NUMBERS ON MARRIAGE LICENSES, 
                   DIVORCE DECREES, PARENTAGE DECREES, AND BIRTH 
                   CERTIFICATES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, and 207 of this Act, is amended by inserting 
     after paragraph (17) the following:
       ``(18) Procedures under which the social security account 
     number (if any) of--
       ``(A) each individual applying for a marriage license is to 
     be listed by the individual's name on the license;
       ``(B) each party granted a divorce decree is to be listed 
     by the party's name on the decree, if any party to the decree 
     is pregnant or a parent;
       ``(C) each individual determined to be a parent of a child 
     in an action to establish parentage is to be listed by the 
     individual's name on the decree containing the determination; 
     and
       ``(D) each parent of a child is to be listed by the 
     parent's name on the child's birth certificate, except that, 
     if the State agency determines (in accordance with standards 
     prescribed by the Secretary which shall take into 
     consideration the best interests of the child) that there is 
     good cause for not so listing the social security account 
     number of a parent.''.

     SEC. 210. ADMINISTRATIVE SUBPOENA POWER.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, and 209 of this Act, is amended by 
     inserting after paragraph (18) the following:
       ``(19) Procedures under which the State child support 
     enforcement agency may issue a subpoena which--
       ``(A) requires the individual served to produce and deliver 
     documents to, or to appear at, a court or administrative 
     agency on a certain date; and
       ``(B) penalizes an individual for failing to comply with 
     the subpoena.''.

     SEC. 211. SUPPORT ORDERS OUTREACH AND DEMONSTRATIONS.

       (a) States Required To Conduct Surveys of Underserved 
     Populations.--
       (1) In general.--Part D of title IV (42 U.S.C. 651-669) is 
     amended by adding at the end the following:

     ``SEC. 470. STATE SURVEYS OF UNDERSERVED POPULATIONS.

       ``Each State, as a condition for having a State plan 
     approved under this part, must conduct surveys to identify 
     populations underserved by child support services, and 
     develop outreach programs to serve such populations in places 
     such as child care centers, parenting classes, prenatal 
     classes, and unemployment offices.''.
       (2) Federal financial participation.--Section 455(a)(1) (42 
     U.S.C. 655(a)(1)) is amended--
       (A) in subparagraph (B), by striking ``and'' at the end;
       (B) in subparagraph (C) by adding ``and'' at the end; and
       (C) by inserting after subparagraph (C) the following:
       ``(D) equal to 90 percent of so much of the sums expended 
     during such quarter as are attributable to operating programs 
     described in section 470,''.
       (b) Materials To Assist Persons With Low Literacy Levels.--
     The Secretary of Health and Human Services shall fund 
     demonstration projects and technical assistance grants to 
     States to develop applications and informational materials 
     directed to individuals with low literacy levels or 
     difficulties reading English.
       (c) Review of Written Materials.--The Secretary of Health 
     and Human Services shall review all written materials 
     provided to persons served by the Office of Child Support 
     Enforcement to ensure that any requirement contained in the 
     materials is presented clearly and in a manner that is easily 
     understandable by such persons.
       (d) Demonstration Projects To Improve Coordination Between 
     Certain State Public Assistance Agencies.--The Secretary of 
     Health and Human Services shall make grants to States to 
     conduct demonstration projects to test various methods for 
     improving the coordination of services and case processing 
     between the State agency referred to in section 402(a)(3) of 
     the Social Security Act and the State agency referred to in 
     section 454(3) of such Act.
       (e) Referral of Custodial Parents to Community Resources To 
     Combat Domestic Violence.--Section 454 (42 U.S.C. 654) is 
     amended--
       (1) by striking ``and'' at the end of paragraph (23);
       (2) by striking the period at the end of paragraph (24) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (24) the following:
       ``(25) provide that the agency administering the plan must 
     refer to appropriate community resources custodial parents 
     against whom or whose children violence has been threatened 
     as a result of cooperation with a State agency in 
     establishing or enforcing a child support order, in 
     accordance with procedures developed by the State to reduce 
     the risk of violence, such as exempting the custodial parent 
     from any requirement of face-to-face meetings with persons 
     other than from the agency.''.

     SEC. 212. HEALTH CARE SUPPORT.

       (a) Inclusion in Child Support Orders.--
       (1) State guidelines.--Section 467 (42 U.S.C. 667) is 
     amended by adding at the end the following:
       ``(d)(1) Not later than the beginning of the 9th calendar 
     month that begins after the date the Secretary prescribes 
     final regulations in accordance with paragraph (2), each 
     State, as a condition for having its State plan approved 
     under this part, must establish guidelines for the coverage 
     of the health care costs of children pursuant to child 
     support orders issued or modified in the State, which 
     guidelines shall create a streamlined process that meets the 
     minimum standards established by the Secretary in such 
     regulations.
       ``(2)(A) The Secretary shall promulgate regulations which 
     set forth minimum standards that any set of guidelines 
     established pursuant to paragraph (1) must meet in providing 
     for the coverage of the health care costs of children 
     pursuant to child support orders issued or modified in the 
     State, including--
       ``(i) the contents of such an order with respect to the 
     coverage of such costs;
       ``(ii) the distribution of responsibility for such costs;
       ``(iii) to the extent that such costs are to be covered 
     through health insurance--
       ``(I) the provision of such insurance;
       ``(II) the payment of insurance claims; and
       ``(III) the rights of the noncustodial parent and the 
     custodial parent to insurance information;
       ``(iv) the circumstances under which a provider of health 
     insurance may or may not deny coverage to a child who is the 
     subject of such an order;
       ``(v) penalties to be imposed on providers of health 
     insurance who fail to comply with the guidelines; and
       ``(vi) how changes in the circumstances of the noncustodial 
     parent and the custodial parent are to be taken into account 
     with respect to the coverage of such costs.
       ``(B) In developing such standards, the Secretary shall 
     ensure that, in establishing guidelines pursuant to paragraph 
     (1), the State considers the following matters in the 
     following order of importance:
       ``(i) The best interests of the child.
       ``(ii) The financial and other circumstances of the parents 
     of the child.
       ``(iii) Cost-effectiveness.
       ``(3) The preceding subsections of this section shall apply 
     in like manner to the guidelines established pursuant to this 
     subsection.''.
       (2) Regulations.--
       (A) Proposed regulations.--Within 9 months after the date 
     of the enactment of this Act, the Secretary of Health and 
     Human Services shall issue proposed regulations to implement 
     the amendments made by this subsection.
       (B) Final regulations.--Within 14 months after the date of 
     the enactment of this Act, the Secretary of Health and Human 
     Services shall issue final regulations to implement the 
     amendments made by this subsection.
       (b) Inclusion in Incentive Payments Program of Dependent 
     Health Insurance Provided Due to Successful Enforcement.--
       (1) In general.--Section 458(b) (42 U.S.C. 658(b)) is 
     amended by adding at the end the following:
       ``(5)(A) For purposes of this section, the successful 
     enforcement by the State of a provision of a support order 
     requiring an absent parent to obtain health insurance for 1 
     or more children shall be considered the collection of 
     support from the absent parent, without regard to the means 
     by which such support is provided.
       ``(B) The amount of support collected in any case in which 
     the State successfully enforces a provision of a support 
     order requiring an absent parent to obtain health insurance 
     for 1 or more children shall be the savings to the State from 
     the provision of such health insurance to such children, as 
     determined in accordance with a health insurance savings 
     methodology adopted by the State in accordance with 
     regulations prescribed by the Secretary.''.
       (2) Regulations.--Within 6 months after the date of the 
     enactment of this Act, the Secretary of Health and Human 
     Services shall prescribe such regulations as may be necessary 
     to implement the amendment made by paragraph (1).
       (3) Study; report.--
       (A) Study.--The Secretary of Health and Human Services 
     shall conduct a study to determine the incentives that should 
     be provided to encourage States to enforce obligations of 
     noncustodial parents to pay (and obtain medical insurance 
     coverage with respect to) the reasonable and necessary health 
     and dental expenses of the children to whom the noncustodial 
     parents owe such obligations.
       (B) Report.--Not later than 12 months after the date of the 
     enactment of this Act, the Secretary of Health and Human 
     Services shall submit to the Committee on Ways and Means of 
     the House of Representatives and the Committee on Finance of 
     the Senate the results of the study required by subparagraph 
     (A).

     SEC. 213. RULES GOVERNING MODIFICATION OF CHILD SUPPORT 
                   ORDERS.

       (a) In General.--Chapter 115 of title 28, United States 
     Code, is amended by inserting after section 1738A the 
     following:

     ``Sec. 1738B. Rules governing modification of child support 
       orders

       ``(a) In General.--A court of a State may not modify a 
     child support order issued or modified with respect to a 
     child by a court of another State, unless--
       ``(1) the child does not reside in the other State;
       ``(2) an individual who is a party to the order (other than 
     the party seeking modification of the order) does not reside 
     in the other State; or
       ``(3) all parties to the order have consented in writing to 
     the modification.
       ``(b) Definitions.--As used in this section:
       ``(1) Child.--The term `child' means an individual for whom 
     a child support order has been issued pursuant to the laws of 
     a State.
       ``(2) Child support order.--The term `child support order' 
     means a judgment, decree, or order that requires child 
     support (as defined in section 462(b) of the Social Security 
     Act) to be provided with respect to a child.
       ``(3) Court.--The term `court' means a court or 
     administrative agency of a State which is authorized by State 
     law to establish or modify a child support order.
       ``(4) State.--The term `State' means a State of the United 
     States, the District of Columbia, the Commonwealth of Puerto 
     Rico, the territories and possessions of the United States, 
     and Indian country as defined in section 1151 of title 18.''.
                          TITLE III--PARENTAGE

     SEC. 301. PATERNITY ESTABLISHMENT.

       (a) State Plan Requirements.--Section 454 (42 U.S.C. 654), 
     as amended by section 211(e) of this Act, is amended--
       (1) by striking ``and'' at the end of paragraph (25);
       (2) by striking the period at the end of paragraph (26) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (26) the following:
       ``(27) in order to encourage voluntary paternity 
     acknowledgement, provide for--
       ``(A) the development and distribution of material at 
     schools, hospitals, agencies administering the programs under 
     part A of this title and title XIX, prenatal health-care 
     providers, WIC programs, health departments, clinics, and 
     other appropriate locations that describe the benefits and 
     responsibilities of paternity establishment and the process 
     by which paternity services may be obtained,
       ``(B) outreach programs at hospitals and birthing 
     facilities and programs for prenatal care, child birth, and 
     parenting, and
       ``(C) the use of consent procedures.''.
       (b) Required Procedures.--Section 466(a)(5)(C) (42 U.S.C. 
     666(a)(5)(C)) is amended--
       (1) by redesignating the 1st sentence as clause (i)(I);
       (2) by inserting after such clause the following:
       ``(II) Such procedures must provide that any such 
     explanation to a mother include the following information:
       ``(aa) Signing a paternity acknowledgment affidavit is 
     voluntary.
       ``(bb) Once paternity of a child is established, the father 
     of the child has the right to seek custody of the child or 
     visitation rights with respect to the child.
       ``(cc) Once paternity of a child is established, the mother 
     of the child has the right to seek from the father of the 
     child financial and medical support for the child.
       ``(dd) The effect that the courts of the State will give to 
     a signed paternity acknowledgment affidavit.
       ``(III) Such procedures must provide that any such 
     explanation to a possible father include the following 
     information:
       ``(aa) Signing a paternity acknowledgment affidavit is 
     voluntary.
       ``(bb) Genetic testing is available and will be provided 
     upon request.
       ``(cc) The policy of the State with respect to payment for 
     the cost of genetic testing.
       ``(dd) Once paternity of a child is established, the father 
     of the child has the right to seek custody of the child or 
     visitation rights with respect to the child.
       ``(ee) Once paternity of a child is established, the mother 
     of the child has the right to seek from the father of the 
     child financial and medical support for the child.
       ``(ff) The effect that the courts of the State will give to 
     a signed paternity acknowledgment affidavit.
       ``(IV) Such procedures must provide that the information 
     required to be provided under subclause (II) or (III) must be 
     provided--
       ``(aa) orally and in writing;
       ``(bb) where appropriate, in the language of the individual 
     to whom the information is required to be provided; and
       ``(cc) if the individual is blind or hearing-impaired, in a 
     manner accessible to the individual.'';
       (3) by indenting the 2nd sentence 2 ems and redesignating 
     such sentence as clause (ii); and
       (4) by inserting after such clause (ii) the following:
       ``(iii) Such procedures must require the State agency 
     responsible for maintaining birth records to offer voluntary 
     paternity establishment services.
       ``(iv) Such procedures must require the State to use only 
     the affidavit developed under section 452(a)(7) for the 
     voluntary acknowledgment of paternity, and to give full faith 
     and credit to such an affidavit signed in any other State.
       ``(v) The Secretary shall prescribe regulations governing 
     voluntary paternity establishment services offered by 
     entities other than hospitals, which shall include a 
     requirement that any State agency that provides such services 
     must use the same materials used by, provide the personnel 
     providing such services with the same training provided by, 
     and evaluate the provision of such services in the same 
     manner as hospital-based voluntary paternity establishment 
     programs.''.
       (c) National Paternity Acknowledgment Affidavit.--Section 
     452(a)(7) (42 U.S.C. 652(a)(7)) is amended by inserting ``, 
     and develop an affidavit to be used for the voluntary 
     acknowledgment of paternity'' before the semicolon.
       (d) Signed Paternity Acknowledgment Affidavit Conclusively 
     Presumed to Establish Paternity.--Section 466(a)(5)(D) (42 
     U.S.C. 666(a)(5)(D)) is amended--
       (1) by inserting ``(i)'' after ``(D)''; and
       (2) by adding at the end the following:
       ``(ii)(I) Such procedures shall provide that the written 
     voluntary acknowledgment of the paternity of a child shall, 
     upon the expiration of the challenge period, create a legal 
     finding of paternity that has the effect of a final judgment 
     at law which can be revised, or which can be set aside based 
     on criteria established by the State for setting aside 
     judgments, other than by reason of the minority of the person 
     who executed the acknowledgment--
       ``(aa) without any further action; or
       ``(bb) at the option of the State, after a court or 
     administrative agency with which the document containing the 
     acknowledgment has been filed within 5 business days after 
     the expiration of the challenge period issues an order 
     establishing such paternity.
       ``(II) As used in subclause (I), the term `challenge 
     period' means, with respect to an acknowledgment of 
     paternity--
       ``(aa) the 30-day period that begins on the date of the 
     acknowledgment; or
       ``(bb) if the person who executed the acknowledgment 
     undergoes genetic testing within 30 days after the date of 
     the acknowledgment, the 30-day period that begins with the 
     date the person is notified of the results of the genetic 
     testing.''.
                         TITLE IV--ENFORCEMENT

     SEC. 401. DIRECT WAGE WITHHOLDING.

       (a) State Law.--Section 466(b) (42 U.S.C. 666(b)), as 
     amended by section 104 of this Act, is amended by adding at 
     the end the following:
       ``(15)(A) Upon the issuance or modification by a State 
     court or administrative agency of an order imposing a child 
     support obligation on an individual, the State shall transmit 
     to any employer of the individual a wage withholding order 
     developed under section 452(a)(12) directing the employer to 
     withhold amounts from the wages of the individual pursuant to 
     the order.
       ``(B) Any individual or entity engaged in commerce, as a 
     condition of doing business in the State, shall, on receipt 
     of a wage withholding order developed under section 
     452(a)(12) that is regular on its face and has been issued by 
     a court of any State--
       ``(i) within 3 days after receipt of the order, comply with 
     the order;
       ``(ii) forward the amount withheld pursuant to the order to 
     the State or custodial parent specified in the order; and
       ``(iii) keep records of the amounts so withheld.
       ``(C) Such an order may be served on the income source 
     directly or by first-class mail.
       ``(D) An individual or entity who complies with such an 
     order may not be held liable for wrongful withholding of 
     income from the employee subject to the order.
       ``(E) The State shall impose a civil fine of $1,000 on any 
     individual or entity who receives such an order, and fails to 
     comply with the order within 10 days after receipt. The 
     preceding sentence shall not be construed to affect the 
     authority of any court to stay the effectiveness of the fine.
       ``(16) If the State transmits to an individual or entity 
     engaged in commerce in another State a wage withholding order 
     issued by the State with respect to an employee of the 
     individual or entity, and the individual or entity contests 
     or refuses to comply with the order, the State shall send an 
     informational copy of the order to the registry established 
     under subsection (a)(12) of such other State or of the State 
     from which the income of the employee is paid.
       ``(17) If an employee requests a hearing to contest wage 
     withholding based on claim of a mistake of fact, the hearing 
     may be held in the State from which the income is paid or in 
     which the employee is employed, and, within 45 days after the 
     income source receives the withholding order, the entity 
     conducting the hearing must adjudicate the claim. The State 
     in which the hearing is held shall provide appropriate 
     services in cases enforced under the State plan to ensure 
     that the interests of the individual to whom the withheld 
     income is to be paid are adequately represented.''.
       (b) Uniform Withholding Order.--Section 452(a) (42 U.S.C. 
     652(a)), as amended by section 208(a) of this Act, is 
     amended--
       (1) by striking ``and'' at the end of paragraph (10);
       (2) by striking the period at the end of paragraph (11) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (11) the following:
       ``(12) develop a uniform order to be used in all cases in 
     which income is to be withheld for the payment of child 
     support, which shall contain the name of the individual whose 
     income is to be withheld, the number of children covered by 
     the order, and the individual or State to whom the withheld 
     income is to be paid, and be generic to allow for the service 
     of the order on all sources of income.''.

     SEC. 402. PRIORITIES IN APPLICATION OF WITHHELD WAGES.

       Section 466(b) (42 U.S.C. 666(a)), as amended by section 
     401(a) of this Act, is amended by inserting after paragraph 
     (13) the following:
       ``(14) Procedures under which the amounts withheld pursuant 
     to a child support or wage withholding order are to be 
     applied in the following order:
       ``(A) To payments of support due during the month of 
     withholding.
       ``(B) To payments of premiums for health care insurance 
     coverage for dependent children.
       ``(C) To payments of support due before the month of 
     withholding, and of unreimbursed health-care expenses.''.

     SEC. 403. ADDITIONAL BENEFITS SUBJECT TO GARNISHMENT.

       (a) Federal Death Benefits, Black Lung Benefits, and 
     Veterans Benefits.--Section 462(f)(2) (42 U.S.C. 662(f)(2)) 
     is amended by striking ``(not including'' and all that 
     follows through ``compensation)''.
       (b) Workers' Compensation.--Section 462(f) (42 U.S.C. 
     662(f)) is amended--
       (1) by striking ``or'' at the end of paragraph (1);
       (2) by striking the period at the end of paragraph (2) and 
     inserting ``, or''; and
       (3) by adding at the end the following:
       ``(3) workers' compensation benefits.''.

     SEC. 404. CONSUMER CREDIT PROTECTION ACT AMENDMENTS.

       (a) Preemption of State Laws.--Section 307 of the Consumer 
     Credit Protection Act (15 U.S.C. 1677) is amended--
       (1) by striking ``This'' and inserting ``(a) In General.--
     Subject to subsection (b), this'';
       (2) by striking ``or'' at the end of paragraph (1);
       (3) by striking the period at the end of paragraph (2) and 
     inserting ``, or''; and
       (4) by adding at the end the following:
       ``(3) providing a cause of action, either by the State or a 
     private individual, to enforce a Federal or State law related 
     to garnishment for the purpose of securing child support.
       ``(b) Exception.--Subsection (a)(1) shall not apply to the 
     laws of any State that prohibit or restrict garnishments for 
     the purpose of securing support for any person.''.
       (b) Other Forms of Income.--Title III of such Act (15 
     U.S.C. 1671 et seq.) is amended by adding at the end the 
     following:

     ``SEC. 308. OTHER FORMS OF INCOME.

       ``This title does not apply to forms of income that are not 
     earnings within the definition contained in section 
     302(a).''.
       (c) Priority of Debts.--Title III of such Act (15 U.S.C. 
     1671 et seq.) is further amended by adding after section 308, 
     as added by subsection (b) of this section, the following:

     ``SEC. 309. PRIORITY OF DEBTS.

       ``If an individual's disposable earnings are not sufficient 
     to pay--
       ``(1) a garnishment intended to satisfy a debt owed to the 
     Federal Government; and
       ``(2) a garnishment intended to satisfy a debt related to 
     the support of any child,

     the debt owed to the Federal Government shall be satisfied 
     through garnishment only after the debt related to child 
     support has first been satisfied.''.
       (d) Additional Indebtedness in Anti-Discharge Section.--
     Section 304 of such Act (16 U.S.C. 1674) is amended--
       (1) by redesignating subsection (b) as subsection (c);
       (2) in subsection (c) (as so redesignated) by striking 
     ``subsection (a) of''; and
       (3) by inserting after subsection (a) the following:
       ``(b) No employer may discharge any employee by reason of 
     the fact that the earnings of the employee have been 
     subjected to garnishment for more than one indebtedness, if 
     not more than one indebtedness arises from a debt other than 
     an order for the support of a child.''.
       (e) Clerical Amendment.--The table of sections at the 
     beginning of the title III of the Truth in Lending Act (15 
     U.S.C. 1671 et seq.) is amended by adding at the end the 
     following:

``308. Other forms of income.
``309. Priority of debts.''.

     SEC. 405. PROHIBITION AGAINST USE OF ELECTION OF REMEDIES 
                   DOCTRINE TO PREVENT COLLECTION OF CHILD 
                   SUPPORT.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, and 212 of this Act, is amended 
     by inserting after paragraph (20) the following:
       ``(21) Procedures which prohibit any State court from 
     applying the doctrine of election of remedies to prevent a 
     custodial parent from collecting or seeking to collect child 
     support from a noncustodial parent.''.

     SEC. 406. HOLD ON OCCUPATIONAL, PROFESSIONAL, AND BUSINESS 
                   LICENSES.

       (a) State Hold Based on Warrant or Support Delinquency.--
     Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, and 405 of this Act, is 
     amended by inserting after paragraph (21) the following:
       ``(22) Procedures under which the State occupational 
     licensing and regulating departments and agencies may not 
     issue or renew any occupational, professional, or business 
     license of--
       ``(A) a noncustodial parent who is the subject of an 
     outstanding failure to appear warrant, capias, or bench 
     warrant related to a child support proceeding that appears on 
     the State's crime information system, until removed from the 
     system; and
       ``(B) an individual who is delinquent in the payment of 
     child support, until the obligee or a State prosecutor 
     responsible for child support enforcement consents to, or a 
     court that is responsible for the order's enforcement orders, 
     the release of the hold on the license, or an expedited 
     inquiry and review is completed while the individual is 
     granted a 60-day temporary license.''.
       (b) Federal Hold Based on Support Delinquency.--A Federal 
     agency may not issue or renew any occupational, professional, 
     or business license of an individual who is delinquent in the 
     payment of child support, until the obligee, the obligee's 
     attorney or a State prosecutor responsible for child support 
     enforcement consents to, or a court that is responsible for 
     the order's enforcement orders, the release of the hold on 
     the license, or an expedited inquiry and review is completed 
     while the individual is granted a 60-day temporary license.

     SEC. 407. DRIVER'S LICENSES AND VEHICLE REGISTRATIONS DENIED 
                   TO PERSONS FAILING TO APPEAR IN CHILD SUPPORT 
                   CASES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, and 406(a) of this 
     Act, is amended by inserting after paragraph (22) the 
     following:
       ``(23) Procedures under which the State motor vehicle 
     department--
       ``(A) may not issue or renew the driver's license or any 
     vehicle registration (other than temporary) of any 
     noncustodial parent who is the subject of an outstanding 
     failure to appear warrant, capias, or bench warrant related 
     to a child support proceeding that appears on the State's 
     crime information system, until removed from the system;
       ``(B) upon receiving notice that an individual to whom a 
     State driver's license or vehicle registration has been 
     issued is the subject of a warrant related to a child support 
     proceeding, shall issue a show cause order to the individual 
     requesting the individual to demonstrate why the individual's 
     driver's license or vehicle registration should not be 
     suspended until the warrant is removed by the State 
     responsible for issuing the warrant; and
       ``(C) in any case in which a show cause order has been 
     issued as described in subparagraph (B), may grant a 
     temporary license or vehicle registration to the individual 
     pending the show cause hearing or the removal of the warrant, 
     whichever occurs first.''.

     SEC. 408. LIENS ON CERTIFICATES OF VEHICLE TITLE.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, 406(a), and 407 of 
     this Act, is amended by inserting after paragraph (23) the 
     following:
       ``(24) Procedures under which the State shall 
     systematically place liens on vehicle titles for child 
     support arrearages determined under a court order or an order 
     of an administrative process established under State law, 
     using a method for updating the value of the lien on a 
     regular basis or allowing for an expedited inquiry to and 
     response from a governmental payee for proof of the amount of 
     arrears, with an expedited method for the titleholder or the 
     individual owing the arrearage to contest the arrearage or to 
     request a release upon fulfilling the support obligation, and 
     under which such a lien has precedence over all other 
     encumbrances on a vehicle title other than a purchase money 
     security interest, and that the individual owed the arrearage 
     may execute on, seize, and sell the property in accordance 
     with State law.''.

     SEC. 409. ATTACHMENT OF BANK ACCOUNTS.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, 406(a), 407, and 408 
     of this Act, is amended by inserting after paragraph (24) the 
     following:
       ``(25) Procedures under which--
       ``(A) amounts on deposit in a bank account may be seized to 
     satisfy child support arrearages determined under a court 
     order or an order of an administrative process established 
     under State law, solely through an administrative process, 
     pending notice to and an expedited opportunity to be heard 
     from the account holder or holders; and
       ``(B) if the account holder or holders fail to successfully 
     challenge the seizure (as determined under State law), the 
     bank may be required to pay from the account to the entity 
     with the right to collect the arrearage the lesser of--
       ``(i) the amount of the arrearage; or
       ``(ii) the amount on deposit in the account.''.

     SEC. 410. SEIZURE OF LOTTERY WINNINGS, SETTLEMENTS, PAYOUTS, 
                   AWARDS, AND BEQUESTS, AND SALE OF FORFEITED 
                   PROPERTY, TO PAY CHILD SUPPORT ARREARAGES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, 406(a), 407, 408, and 
     409 of this Act, is amended by inserting after paragraph (25) 
     the following:
       ``(26) Procedures, in addition to other income withholding 
     procedures, under which a lien is imposed against property 
     with the following effect:
       ``(A) The distributor of the winnings from a State lottery 
     or State-sanctioned or tribal-sanctioned gambling house or 
     casino shall--
       ``(i) suspend payment of the winnings from the person 
     otherwise entitled to the payment until an inquiry is made to 
     and a response is received from the State child support 
     enforcement agency as to whether the person owes a child 
     support arrearage; and
       ``(ii) if there is such an arrearage, withhold from the 
     payment the lesser of the amount of the payment or the amount 
     of the arrearage, and pay the amount withheld to the agency 
     for distribution.
       ``(B) The person required to make a payment under a policy 
     of insurance or a settlement of a claim made with respect to 
     the policy shall--
       ``(i) suspend the payment until an inquiry is made to and a 
     response received from the agency as to whether the person 
     otherwise entitled to the payment owes a child support 
     arrearage; and
       ``(ii) if there is such an arrearage, withhold from the 
     payment the lesser of the amount of the payment or the amount 
     of the arrearage, and pay the amount withheld to the agency 
     for distribution.
       ``(C) The payor of any amount pursuant to an award, 
     judgment, or settlement in any action brought in Federal or 
     State court shall--
       ``(i) suspend the payment of the amount until an inquiry is 
     made to and a response is received from the agency as to 
     whether the person otherwise entitled to the payment owes a 
     child support arrearage; and
       ``(ii) if there is such an arrearage, withhold from the 
     payment the lesser of the amount of the payment or the amount 
     of the arrearage, and pay the amount withheld to the agency 
     for distribution.
       ``(D) If the State seizes property forfeited to the State 
     by an individual by reason of a criminal conviction, the 
     State shall--
       ``(i) hold the property until an inquiry is made to and a 
     response is received from the agency as to whether the 
     individual owes a child support arrearage; and
       ``(ii) if there is such an arrearage, sell the property 
     and, after satisfying the claims of all other private or 
     public claimants to the property and deducting from the 
     proceeds of the sale the attendant costs (such as for towing, 
     storage, and the sale), pay the lesser of the remaining 
     proceeds or the amount of the arrearage directly to the 
     agency for distribution.
       ``(E) Any person required to make a payment in respect of a 
     decedent shall--
       ``(i) suspend the payment until an inquiry is made to and a 
     response received from the agency as to whether the person 
     otherwise entitled to the payment owes a child support 
     arrearage; and
       ``(ii) if there is such an arrearage, withhold from the 
     payment the lesser of the amount of the payment or the amount 
     of the arrearage, and pay the amount withheld to the agency 
     for distribution.''.

     SEC. 411. FRAUDULENT TRANSFER PURSUIT.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, 406(a), 407, 408, 
     409, and 410 of this Act, is amended by inserting after 
     paragraph (26) the following:
       ``(27) Procedures requiring that, in any case related to 
     child support, any transfer of property by an individual who 
     owes a child support arrearage shall be presumed to be made 
     with the intent to avoid payment of the arrearage, and may be 
     rebutted by evidence to the contrary.''.

     SEC. 412. FULL IRS COLLECTION.

       The Secretary of the Treasury, in consultation with the 
     Secretary of Health and Human Services, shall by regulation 
     simplify the full collection process under section 6305 of 
     the Internal Revenue Code of 1986 and reduce the amount of 
     child support arrearage needed before an individual may apply 
     for collection under such section.

     SEC. 413. TAX REFUND OFFSET PROGRAM EXPANDED TO COVER NON-
                   AFDC POST-MINOR CHILDREN.

       Section 464(c) (42 U.S.C. 664(c)) is amended--
       (1) by striking ``(1) Except as provided in paragraph (2), 
     as'' and inserting ``As'';
       (2) by inserting ``(whether or not a minor)'' after ``a 
     child'' each place such term appears; and
       (3) by striking paragraphs (2) and (3).

     SEC. 414. ATTACHMENT OF PUBLIC AND PRIVATE RETIREMENT FUNDS.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, 406(a), 407, 408, 
     409, 410, and 411 of this Act, is amended by inserting after 
     paragraph (27) the following:
       ``(28) Procedures under which an individual owed a child 
     support arrearage (determined under a court order or an order 
     of an administrative process established under State law) 
     may, notwithstanding section 401(a)(13) of the Internal 
     Revenue Code of 1986, attach any interest in any public or 
     private retirement plan of the individual who owes the 
     support, without the requirement of a separate court order, 
     and with notice and an expedited hearing provided if 
     requested by the individual who owes the support.''.

     SEC. 415. REPORTING OF CHILD SUPPORT ARREARAGES TO CREDIT 
                   BUREAUS.

       Section 466(a)(7)(A) (42 U.S.C. 666(a)(7)(A)) is amended by 
     striking ``$1,000'' and inserting ``the amount of the monthly 
     support obligation''.

     SEC. 416. ELIMINATION OF STATUTES OF LIMITATIONS IN CHILD 
                   SUPPORT CASES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, 406(a), 407, 408, 
     409, 410, 411, and 414 of this Act, is amended by inserting 
     after paragraph (28) the following:
       ``(29) Procedures which ensure that there is no limit to 
     the period in which any court order, or order of an 
     administrative process established under State law, for 
     support or maintenance of a child, may be enforced.''.

     SEC. 417. INTEREST.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, 406(a), 407, 408, 
     409, 410, 411, 414, and 416 of this Act, is amended by 
     inserting after paragraph (29) the following:
       ``(30) Procedures under which the State child support 
     enforcement agency must assess and collect interest on all 
     child support judgments, at the rate determined for interest 
     on money judgments, in addition to any late payment fee 
     imposed by the State under section 454(21).''.

     SEC. 418. BANKRUPTCY.

       (a) Definition.--Section 101 of title 11, United States 
     Code, is amended by inserting after paragraph (12) the 
     following:
       ``(12A) `debt for child support' means a debt of a kind 
     specified in section 523(a)(5) of this title for maintenance 
     or support of a child of the debtor;''.
       (b) Exception From Automatic Stay.--Section 362(b) of title 
     11, United States Code, is amended--
       (1) by inserting ``(A)'' after ``(2);
       (2) by inserting ``or'' after the semicolon; and
       (3) by adding at the end the following:
       ``(B) under subsection (a) of the commencement or 
     continuation of a civil action or administrative proceeding 
     against the debtor--
       ``(i) to establish parentage;
       ``(ii) to establish, review, adjust, or modify a judgment 
     or order creating a debt for child support; or
       ``(iii) to enforce such judgment or order to collect a debt 
     for child support;''.
       (c) Treatment of Debt for Child Support in Proceedings 
     Under Chapters 11, 12, and 13.--
       (1) Chapter 11.--Section 1123(a) of title 11, United States 
     Code, is amended--
       (A) by striking ``and'' at the end of paragraph (6);
       (B) by striking the period at the end of paragraph (7) and 
     inserting ``; and''; and
       (C) by adding at the end the following:
       ``(8) provide for the full payment when due of debts for 
     child support unless the parent with custody, or the 
     guardian, of the child agrees otherwise.''.
       (2) Chapter 12.--Section 1222(a) of title 11, United States 
     Code, is amended--
       (A) by striking ``and'' at the end of paragraph (2);
       (B) by striking the period at the end of paragraph (3) and 
     inserting ``; and''; and
       (C) by adding at the end the following:
       ``(4) provide for the full payment when due of debts for 
     child support unless the parent with custody, or the 
     guardian, of the child agrees otherwise.''.
       (3) Chapter 13.--Section 1322(a) of title 11, United States 
     Code, is amended--
       (A) by striking ``and'' at the end of paragraph (2);
       (B) by striking the period at the end of paragraph (3) and 
     inserting ``; and''; and
       (C) by adding at the end the following:
       ``(4) provide for the full payment when due of debts for 
     child support unless the parent with custody, or the 
     guardian, of the child agrees otherwise.''.
       (d) Assertion of Claim for Child Support.--Subchapter I of 
     chapter 5 of title 11, United States Code, is amended by 
     adding at the end the following:

     ``Sec. 511. Assertion of claim for child support

       ``(a) Fee.--No fee shall be charged for filing of claim for 
     a debt for child support.
       ``(b) Requirements for Appearance.--A claim for a debt for 
     child support may be made in any court by a individual 
     appearing--
       ``(1) personally; or
       ``(2) through an attorney admitted to practice in any 
     district court of the United States, without the attorney's 
     being required to meet any admission requirements other than 
     those applicable in the judicial district of the United 
     States in which the attorney is admitted to practice.''.
       (e) Clarification of the Nondischargeability of State 
     Public Debts and Assigned Child Support Based on the 
     Provision of Expenditures Under Parts A and E of Title IV of 
     the Social Security Act.--Section 523 of title 11, United 
     States Code, is amended by adding at the end the following:
       ``(f) For the purposes of subsection (a)(5), a debt to a 
     child of the debtor for maintenance for or support of the 
     child includes State public debts and assigned child support 
     based on the provision of expenditures under parts A and E of 
     title IV of the Social Security Act.''.
       (f) Priority of Claims.--(1) Section 507 of title 11, 
     United States Code, is amended--
       (A) in subsection (a)--
       (i) in paragraph (8) by striking ``(8) Eighth'' and 
     inserting ``(9) Ninth'',
       (ii) in paragraph (7) by striking ``(7) Seventh'' and 
     inserting ``(8) Eighth'', and
       (iii) by inserting after paragraph (6) the following:
       ``(7) Seventh, allowed unsecured claims due to a spouse, 
     former spouse, or child of the debtor for maintenance for or 
     support of a child, in connection with a separation 
     agreement, divorce decree, or other order of a court of 
     record, a determination made in accordance with State or 
     territorial law by a governmental unit, or a property 
     settlement agreement, but not to the extent that--
       ``(A) such debt is assigned to another entity, voluntarily, 
     by operation of law, or otherwise (other than debts assigned 
     pursuant to section 402(a)(26) of the Social Security Act, or 
     any such debt which has been assigned to the Federal 
     Government or to a State or any political subdivision of such 
     State); or
       ``(B) such debt includes a liability designated as 
     maintenance or support unless such liability is actually in 
     the nature of maintenance or support;'', and
       (B) in subsection (d) by striking ``or (6)'' and inserting 
     ``(6), or (7)''.
       (2) Title 11 of the United States Code is amended--
       (A) in sections 502(i), 503(b)(1)(B)(i), 523(a)(1)(A), and 
     1123(a)(1) by striking ``507(a)(7)'' and inserting 
     ``507(a)(8)'',
       (B) in section 724(b)(2) by striking ``or 507(a)(6)'' and 
     inserting ``507(a)(6), or 507(a)(7)'',
       (C) in section 726(b) by striking ``or (7)'' and inserting 
     ``, (7), or (8)'', and
       (D) in section 1129(a)(9)--
       (i) in subparagraph (B) by striking ``or 507(a)(6)'' and 
     inserting ``, 507(a)(6), or 507(a)(7)'', and
       (ii) in subparagraph (C) by striking ``507(a)(7)'' and 
     inserting ``507(a)(8)''.
       (g) Protection of Liens.--Section 522(f)(1) of title 11, 
     United States Code, is amended to read as follows:
       ``(1) a judicial lien (other than a judicial lien that 
     secures a debt to a spouse, former spouse, or child of the 
     debtor for maintenance for or support of a child, in 
     connection with a separation agreement, divorce decree or 
     other order of a court of record, determination made in 
     accordance with State or territorial law by a governmental 
     unit, or property settlement agreement, to the extent that 
     the debt--
       ``(A) is not assigned to another entity, voluntarily, by 
     operation of law, or otherwise; and
       ``(B) includes a liability designated as maintenance or 
     support, unless such liability is actually in the nature of 
     maintenance or support).''.
       (h) Exception to Discharge.--Section 523 of title 11, 
     United States Code, is amended--
       (1) in subsection (a)--
       (A) in paragraph (11) by striking ``or'' at the end,
       (B) in paragraph (12) by inserting ``or'' after the 
     semicolon at the end, and
       (C) by adding at the end the following:
       ``(13) assumed or incurred by the debtor in the course of a 
     divorce or separation or in connection with a separation 
     agreement, divorce decree or other order of a court of 
     record, a determination made in accordance with State or 
     territorial law by a governmental unit, or property 
     settlement agreement, unless--
       ``(A) excepting such debt from discharge under this 
     paragraph would impose an undue hardship for the debtor; and
       ``(B) discharging such debt would result in a benefit to 
     the debtor that outweighs the detrimental consequences to a 
     child of the debtor.'', and
       (2) in subsection (c)(1) by striking ``or (6)'' each place 
     it appears and inserting ``, or (13)''.
       (i) Protection Against Trustee Avoidance.--Section 547(c) 
     of title 11, United States Code, is amended--
       (1) by striking ``or'' at the end of paragraph (6);
       (2) by redesignating paragraph (7) as paragraph (8); and
       (3) by inserting after paragraph (6) the following new 
     paragraph:
       ``(7) to the extent that the transfer was a bona fide 
     payment of a debt to a spouse, former spouse, or child of the 
     debtor for maintenance for or support of such child, in 
     connection with a separation agreement, divorce decree or 
     other order of a court of record, determination made in 
     accordance with State or territorial law by a governmental 
     unit, or property settlement agreement, but not to the extent 
     that such debt--
       ``(A) is assigned to another entity, voluntarily, by 
     operation of law, or otherwise; or
       ``(B) includes a liability designated as maintenance or 
     support, unless such liability is actually in the nature of 
     maintenance or support; or''.

     SEC. 419. FEDERAL GOVERNMENT COOPERATION IN ENFORCEMENT OF 
                   SUPPORT OBLIGATIONS OF MEMBERS AND FORMER 
                   MEMBERS OF THE ARMED FORCES.

       (a) Availability of Current Locator Information.--
       (1) Maintenance of address information.--Each worldwide 
     personnel locator service of the Armed Forces and each 
     personnel locator service of the Armed Forces maintained for 
     a military installation shall include the residential address 
     of each member of the Armed Forces listed in such service. 
     Within 30 days after a change of duty station or residential 
     address of a member listed in a locator service, the 
     Secretary concerned shall update the locator service to 
     indicate the new residential address of the member.
       (2) Availability of information.--The Secretary of Defense 
     shall prescribe regulations to make information regarding the 
     residential address of a member of the Armed Forces 
     available, on request, to any authorized person for the 
     purposes of part D of title IV of the Social Security Act.
       (3) Definitions.--For purposes of this subsection:
       (A) The term ``authorized person'' has the meaning given 
     that term in section 453(c) of the Social Security Act (42 
     U.S.C. 653(c)).
       (B) The term ``Secretary concerned'' has the meaning given 
     that term in section 101(a)(9) of title 10, United States 
     Code.
       (b) Facilitating the Granting of Leave for Attendance at 
     Hearings.--
       (1) Regulations required.--The Secretary concerned shall 
     prescribe regulations to facilitate the granting of a leave 
     of absence to a member of the Armed Forces under the 
     jurisdiction of that Secretary when necessary for the member 
     to attend a hearing of a court that is conducted in 
     connection with a civil action--
       (A) to determine whether the member is a natural parent of 
     a child; or
       (B) to determine an obligation of the member to provide 
     child support.
       (2) Waiver authority.--The regulations prescribed under 
     paragraph (1) may authorize a waiver of the applicability of 
     the regulations to a member of the Armed Forces when--
       (A) the member is serving in an area of combat operations; 
     or
       (B) such a waiver is otherwise necessary in the national 
     security interest of the United States.
       (3) Definitions.--For purposes of this subsection:
       (A) The term ``court'' has the meaning given that term in 
     section 1408(a) of title 10, United States Code.
       (B) The term ``child support'' has the meaning given such 
     term in section 462 of the Social Security Act (42 U.S.C. 
     662).
       (C) The term ``Secretary concerned'' has the meaning given 
     that term in section 101(a)(9) of title 10, United States 
     Code.
       (c) Payment of Military Retired Pay in Compliance With 
     Court Orders.--
       (1) Date of certification of court order.--Section 1408 of 
     title 10, United States Code, is amended--
       (A) by redesignating subsection (i) as subsection (j); and
       (B) by inserting after subsection (h) the following new 
     subsection:
       ``(i) Certification Date.--It is not necessary that the 
     date of a certification of the authenticity or completeness 
     of a copy of a court order for child support received by the 
     Secretary concerned for the purposes of this section be 
     recent in relation to the date of receipt.''.
       (2) Payments consistent with assignments of rights to 
     states.--
       (A) Authority.--Subsection (d)(1) of such section is 
     amended by inserting after the first sentence the following: 
     ``In the case of a spouse or former spouse who, pursuant to 
     section 402(a)(26) of the Social Security Act (42 U.S.C. 
     602(26)), assigns to a State the rights of the spouse or 
     former spouse to receive support, the Secretary concerned may 
     make the child support payments referred to in the preceding 
     sentence to that State in amounts consistent with the 
     assignment of rights.''.
       (B) Rule of construction.--Subsection (c)(2) of such 
     section is amended--
       (i) by inserting after the first sentence the following: 
     ``The second sentence of subsection (d)(1) shall not be 
     construed to create any such right, title, or interest.'';
       (ii) by inserting ``(A)'' after ``(2)''; and
       (iii) by designating the last sentence as subparagraph (B) 
     and conforming the margins accordingly.
       (3) Arrearages owed by members of the uniformed services.--
     Part D of title IV (42 U.S.C. 651-669) is amended by 
     inserting after section 465 the following:

     ``SEC. 465A. PAYMENT OF CHILD SUPPORT ARREARAGES OWED BY 
                   MEMBERS OF THE UNIFORMED SERVICES.

       ``Any authority, requirement, or procedure provided in this 
     part or section 1408 of title 10, United States Code, that 
     applies to the payment of child support owed by a member of 
     the uniformed services (as defined in section 101 of title 
     37, United States Code) shall apply to the payment of child 
     support arrearages as well as to amounts of child support 
     that are currently due.''.

     SEC. 420. STATES REQUIRED TO ENACT THE UNIFORM INTERSTATE 
                   FAMILY SUPPORT ACT.

       (a) In General.--Section 466 (42 U.S.C. 666) is amended by 
     adding at the end the following:
       ``(f) In order to satisfy section 454(20)(A), each State 
     must have in effect laws which adopt the officially approved 
     version of the Uniform Interstate Family Support Act adopted 
     by the National Conference of Commissioners on Uniform State 
     Laws in August 1992.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to payments under part D of title IV of the 
     Social Security Act for calendar quarters ending 2 or more 
     years after the date of the enactment of this Act.

     SEC. 421. DENIAL OF PASSPORTS TO NONCUSTODIAL PARENTS SUBJECT 
                   TO STATE ARREST WARRANTS IN CASES OF NONPAYMENT 
                   OF CHILD SUPPORT.

       The Secretary of State is authorized to refuse a passport 
     or revoke, restrict, or limit a passport in any case in which 
     the Secretary of State determines or is informed by competent 
     authority that the applicant or passport holder is a 
     noncustodial parent who is the subject of an outstanding 
     State warrant of arrest for nonpayment of child support, 
     where the amount in controversy is not less than $10,000.

     SEC. 422. DENIAL OF FEDERAL BENEFITS, LOANS, GUARANTEES, AND 
                   EMPLOYMENT TO CERTAIN PERSONS WITH LARGE CHILD 
                   SUPPORT ARREARAGES.

       (a) Benefits, Loans, and Guarantees.--Notwithstanding any 
     other provision of law, each agency or instrumentality of the 
     Federal Government may not, under any program that the agency 
     or instrumentality supervises or administers, provide a 
     benefit to, make a loan to, or provide any guarantee for the 
     benefit of, any person--
       (1) whose child support arrearages, determined under a 
     court order or an order of an administrative process 
     established under State law, exceed $1,000; and
       (2) who is not in compliance with a plan or an agreement to 
     repay the arrearages.
       (b) Employment.--
       (1) In general.--Notwithstanding any other provision of 
     law, an individual shall be considered ineligible to accept 
     employment in a position in the Federal Government if--
       (A) such individual has child support arrearages, 
     determined under a court order or an order of an 
     administrative process established under State law, exceeding 
     $1,000; and
       (B) such individual is not in compliance with a plan or 
     agreement to repay the arrearages.
       (2) Regulations.--Regulations to carry out paragraph (1) 
     shall--
       (A) with respect to positions in the executive branch, be 
     prescribed by the President (or his designee);
       (B) with respect to positions in the legislative branch, be 
     prescribed jointly by the President pro tempore of the Senate 
     and the Speaker of the House of Representatives (or their 
     designees); and
       (C) with respect to positions in the judicial branch, be 
     prescribed by the Chief Justice of the United States (or his 
     designee).
       (3) Child support defined.--For purposes of this 
     subsection, the term ``child support'' has the meaning given 
     such term in section 462 of the Social Security Act.

     SEC. 423. STATES REQUIRED TO ORDER COURTS TO ALLOW ASSIGNMENT 
                   OF LIFE INSURANCE BENEFITS TO SATISFY CHILD 
                   SUPPORT ARREARAGES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, 406(a), 407, 408, 
     409, 410, 411, 414, 416, and 417 of this Act, is amended by 
     inserting after paragraph (30) the following:
       ``(31) Procedures allowing State courts to--
       ``(A) order the issuer of a life insurance policy to change 
     the beneficiary provisions of the policy to effect an 
     assignment of the benefits payable to a beneficiary under the 
     policy, in whole or in part, to a child to satisfy a child 
     support arrearage, determined under a court order or an order 
     of an administrative process established under State law, 
     owed by the beneficiary with respect to the child; and
       ``(B) prohibit the sale, assignment, or pledge as 
     collateral of the policy, in whole or in part, by the 
     beneficiary of the policy.''.

     SEC. 424. INTERESTS IN JOINTLY HELD PROPERTY SUBJECT TO 
                   ASSIGNMENT TO SATISFY CHILD SUPPORT ARREARAGES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, 406(a), 407, 408, 
     409, 410, 411, 414, 416, 417, and 423 of this Act, is amended 
     by inserting after paragraph (31) the following:
       ``(32) Procedures allowing State courts to order the 
     assignment of an interest in jointly held property to an 
     individual owed a child support arrearage (determined under a 
     court order or an order of an administrative process 
     established under State law) by a holder of an interest in 
     the property, to the extent of the arrearage.''.

     SEC. 425. INTERNATIONAL CHILD SUPPORT ENFORCEMENT.

       (a) Sense of the Congress That the United States Should 
     Ratify the United Nations Convention of 1956.--It is the 
     sense of the Congress that the United States should ratify 
     the United Nations Convention of 1956.
       (b) Treatment of International Child Support Cases as 
     Interstate Cases.--Section 454 (42 U.S.C. 654), as amended by 
     sections 211(e) and 301(a) of this Act, is amended--
       (1) by striking ``and'' at the end of paragraph (25);
       (2) by striking the period at the end of paragraph (26) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (26) the following:
       ``(27) provide that the State must treat international 
     child support cases in the same manner as the State treats 
     interstate child support cases.''.

     SEC. 426. NONLIABILITY FOR DEPOSITORY INSTITUTIONS PROVIDING 
                   FINANCIAL RECORDS TO STATE CHILD SUPPORT 
                   ENFORCEMENT AGENCIES IN CHILD SUPPORT CASES.

       (a) In General.--Notwithstanding any other provision of 
     Federal or State law, a depository institution shall not be 
     liable under any Federal or State law to any person for 
     disclosing any financial record of an individual to a State 
     child support enforcement agency attempting to establish, 
     modify, or enforce a child support obligation of such 
     individual.
       (b) Prohibition of Disclosure of Financial Record Obtained 
     by State Child Support Enforcement Agency.--A State child 
     support enforcement agency which obtains a financial record 
     of an individual from a financial institution pursuant to 
     subsection (a) may disclose such financial record only for 
     the purpose of, and to the extent necessary in, establishing, 
     modifying, or enforcing a child support obligation of such 
     individual.
       (c) Civil Damages for Unauthorized Disclosure.--
       (1) Disclosure by state officer or employee.--If any 
     officer or employee of a State knowingly, or by reason of 
     negligence, discloses a financial record of an individual in 
     violation of subsection (b), such individual may bring a 
     civil action for damages against the officer or employee in 
     the personal capacity of the officer or employee, in a 
     district court of the United States.
       (2) No liability for good faith but erroneous 
     interpretation.--No liability shall arise under this 
     subsection with respect to any disclosure which results from 
     a good faith, but erroneous, interpretation of subsection 
     (b).
       (3) Damages.--In any action brought under paragraph (1), 
     upon a finding of liability on the part of the defendant, the 
     defendant shall be liable to the plaintiff in an amount equal 
     to the sum of--
       (A) the greater of--
       (i) $1,000 for each act of unauthorized disclosure of a 
     financial record with respect to which such defendant is 
     found liable; or
       (ii) the sum of--

       (I) the actual damages sustained by the plaintiff as a 
     result of such unauthorized disclosure; plus
       (II) in the case of a willful disclosure or a disclosure 
     which is the result of gross negligence, punitive damages; 
     plus

       (B) the costs of the action.
       (d) Definitions.--For purposes of this section:
       (1) The term ``depository institution'' means--
       (A) a depository institution, as defined by section 3(c) of 
     the Federal Deposit Insurance Act;
       (B) an institution-affiliated party, as defined by section 
     3(u) of such Act; and
       (C) any Federal credit union or State credit union, as 
     defined by section 101 of the Federal Credit Union Act, 
     including an institution-affiliated party of such a credit 
     union, as defined by section 206(r) of such Act.
       (2) The term ``financial record'' has the meaning given 
     such term by section 1101 of the Right to Financial Privacy 
     Act of 1978.
       (3) The term ``State child support enforcement agency'' 
     means a State agency which administers a State program for 
     establishing and enforcing child support obligations.

     SEC. 427. COST-OF-LIVING ADJUSTMENT OF CHILD SUPPORT AWARDS.

       Part D of title IV (42 U.S.C. 651-669) is amended by 
     inserting after section 467 the following:

     ``SEC. 467A. COST-OF-LIVING ADJUSTMENT OF CHILD SUPPORT 
                   AWARDS.

       ``(a) In General.--Each State, as a condition for having 
     its State plan approved under this part, shall have in effect 
     such laws and procedures as are necessary to ensure that each 
     child support order issued or modified in the State after the 
     effective date of this section shall provide that amount of 
     any child support award specified in the order shall, on each 
     anniversary of the 1st day of the calendar month in which the 
     order is so issued or modified, increase by the percentage 
     (if any) by which--
       ``(1) the average of the Consumer Price Index (as defined 
     in section 1(f)(5) of the Internal Revenue Code of 1986) for 
     the 12-month period that ends with the anniversary; exceeds
       ``(2) the average of the Consumer Price Index (as so 
     defined) for the 12-month period that ends on such 1st day.
       ``(b) Rule of Interpretation.--Subsection (a) shall not be 
     construed to eliminate other grounds for modifying a child 
     support award.''.

     SEC. 428. ANNUAL EXCHANGE OF FINANCIAL INFORMATION BY PARTIES 
                   TO CHILD SUPPORT ORDER.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, 406(a), 407, 408, 
     409, 410, 411, 414, 416, 417, 423, and 424 of this Act, is 
     amended by inserting after paragraph (32) the following:
       ``(33) Procedures to ensure that each party to a child 
     support order issued or modified in the State discloses to 
     the other party to the order a complete statement of the 
     financial condition of the party.''.

     SEC. 429. CRIMINAL PENALTIES FOR FAILURE TO PAY CHILD 
                   SUPPORT.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, 406(a), 407, 408, 
     409, 410, 411, 414, 416, 417, 423, and 424 of this Act, is 
     amended by inserting after paragraph (33) the following:
       ``(34) Procedures under which--
       ``(A) criminal penalties may be imposed for the failure to 
     pay child support; and
       ``(B) use immunity may be granted to compel testimony in 
     civil child support proceedings in which the defendant claims 
     a Fifth Amendment privilege against self-incrimination, and 
     if granted, bars Federal or other State criminal prosecution 
     for failure to pay child support based on the testimony given 
     in the civil proceeding with respect to which use immunity 
     was granted.''.
                  TITLE V--COLLECTION AND DISTRIBUTION

     SEC. 501. PRIORITIES IN DISTRIBUTION OF COLLECTED CHILD 
                   SUPPORT.

       (a) State Distribution Plan.--Section 457 (42 U.S.C. 657) 
     is amended by adding at the end the following:
       ``(e) Beginning on September 1, 1995, the amounts that a 
     State collects as child support (including interest) pursuant 
     to a plan approved under this part, other than amounts so 
     collected through a tax refund offset, shall (subject to 
     subsection (d)) be paid--
       ``(1) first to the individual owed the support or (if the 
     individual assigned to the State the payment of the support) 
     to the State, to the extent necessary to satisfy the current 
     month's support obligation;
       ``(2) then to the individual owed the support, to the 
     extent necessary to satisfy any arrearage;
       ``(3) then, at the option of the State, to the State, to 
     the extent necessary to reimburse the State for assistance 
     provided with respect to the child under this title (without 
     interest); and
       ``(4) then to other States, to the extent necessary to 
     reimburse such other States for assistance provided with 
     respect to the child under this title (without interest), in 
     the order in which such assistance was provided.''.
       (b) Study and Pilot Projects.--
       (1) In general.--The Comptroller General of the United 
     States shall conduct studies and pilot projects of systems 
     under which States would be required to pay the child support 
     collected pursuant to a State plan approved under part D of 
     title IV of the Social Security Act to the individuals to 
     whom the support is owed before making any payment to 
     reimburse any State for assistance provided with respect to 
     the child under part A of such title.
       (2) Report to the congress.--Within 3 years after the date 
     of the enactment of this Act, the Comptroller General shall 
     submit to the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate a 
     report on each study and pilot project conducted pursuant to 
     paragraph (1), including a cost-benefit analysis and an 
     analysis of the costs that would be avoided under the program 
     of aid to families with dependent children under part A of 
     title IV of the Social Security Act, the program of medical 
     assistance under title XIX of such Act, and the food stamp 
     program under the Food Stamp Act of 1977, if the various 
     systems studied were implemented.
       (c) Revision of Federal Income Tax Refund Offset.--Section 
     6402 of the Internal Revenue Code of 1986 (relating to 
     authority to make credits or refunds) is amended--
       (1) in subsection (c), by striking ``after any other 
     reductions allowed by law (but before'' and inserting 
     ``before any other reductions allowed by law (and before''; 
     and
       (2) in subsection (d), by striking ``with respect to past-
     due support collected pursuant to an assignment under section 
     402(a)(26) of the Social Security Act''.
       (d) $50 Disregarded for All Means-Tested Programs.--Section 
     457(b)(1) (42 U.S.C. 657(b)(1)) is amended by inserting 
     ``under this part or under any other Federal program which 
     determines eligibility for or the amount of assistance based 
     on the income or assets of the applicant for or recipient of 
     the assistance'' after ``during such month''.
       (e) Fill-The-Gap Policies Allowed.--Section 402(a)(28) (42 
     U.S.C. 602(a)(28)) is amended by striking the open 
     parenthesis and all that follows through the close 
     parenthesis.

     SEC. 502. STATE CLAIMS AGAINST NONCUSTODIAL PARENT LIMITED TO 
                   ASSISTANCE PROVIDED TO THE CHILD.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, 406(a), 407, 408, 
     409, 410, 411, 414, 416, 417, 423, 424, 428, and 429 of this 
     Act, is amended by inserting after paragraph (34) the 
     following:
       ``(35)(A) Procedures under which any claims the State may 
     have against a noncustodial parent for a child's portion of 
     the assistance provided under a State plan approved under 
     part A shall not exceed the amount specified as child support 
     under a court or administrative order.
       ``(B) As used in subparagraph (A), the term `child's 
     portion' means the assistance that would have been provided 
     with respect to the child if the needs of the caretaker 
     relative of the child had not been taken into account in 
     making the determination with respect to the child's family 
     under section 402(a)(7).''.

     SEC. 503. FEES FOR NON-AFDC CLIENTS.

       (a) In General.--Section 454(6) (42 U.S.C. 654(6)) is 
     amended--
       (1) in subparagraph (B), by striking ``or recovered'' and 
     all that follows through ``program)'';
       (2) in subparagraph (C), by inserting ``on the parent who 
     owes the child or spousal support obligation involved'' after 
     ``imposed'';
       (3) in subparagraph (D), by striking ``individual who'' and 
     inserting ``the noncustodial parent if the child whose 
     parentage is to be determined through the tests''; and
       (4) in subparagraph (E), by striking all that follows ``may 
     be collected'' and inserting ``from the parent who owes the 
     child or spousal support obligation involved, but only after 
     all current and past-due support and interest charges have 
     been collected''.
       (b) Publication of Fee Schedules.--Section 454(10) (42 
     U.S.C. 654(10)) is amended by inserting ``, and shall publish 
     guidelines and schedules of fees which may be imposed under 
     paragraph (6), and which shall be reasonable'' before the 
     semicolon.

     SEC. 504. COLLECTION AND DISBURSEMENT POINTS FOR CHILD 
                   SUPPORT.

       Section 454 (42 U.S.C. 654), as amended by sections 211(e), 
     301(a), and 425 of this Act, is amended--
       (1) by striking ``and'' at the end of paragraph (26);
       (2) by striking the period at the end of paragraph (27) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (27) the following:
       ``(28) provide for only 1 location, or several local or 
     regional locations for the collection of, accounting for, and 
     disbursement of child support in cases enforced under the 
     State plan under this part.''.
                         TITLE VI--FEDERAL ROLE

     SEC. 601. PLACEMENT AND ROLE OF THE OFFICE OF CHILD SUPPORT 
                   ENFORCEMENT.

       Section 452(a) (42 U.S.C. 652(a)), as amended by sections 
     208(a) and 401(b) of this Act, is amended--
       (1) in the matter preceding paragraph (1), by striking ``, 
     under the direction'' and all that follows through ``and 
     who'' and inserting ``which shall be known as the Office of 
     Child Support Enforcement, shall be under the direction of an 
     Assistant Secretary appointed by the President with the 
     advice and consent of the Senate, and shall have its own 
     legal counsel. The Assistant Secretary shall report directly 
     to the Secretary and'';
       (2) in paragraph (10)--
       (A) in subparagraph (A), by inserting ``using a methodology 
     that reflects cost-avoidance as well as cost-recovery'' after 
     ``the States and the Federal Government'';
       (B) by redesignating subparagraphs (H) and (I) as 
     subparagraphs (I) and (J), respectively; and
       (C) by inserting after subparagraph (G) the following:
       ``(H) the budgetary allocation of the $50 pass through 
     equally between part A and this part;'';
       (3) by striking ``and'' at the end of paragraph (11);
       (4) by striking the period at the end of paragraph (12) and 
     inserting ``; and''; and
       (5) by inserting after paragraph (12) the following:
       ``(13) initiate and actively pursue with other Federal 
     agencies, such as the Department of Defense, coordinated 
     efforts on Federal legislation.''.

     SEC. 602. TRAINING.

       (a) Federal Training Assistance.--Section 452(a)(7) (42 
     U.S.C. 652(a)(7)) is amended by inserting ``and training'' 
     after ``technical assistance''.
       (b) State Training Program.--Section 454 (42 U.S.C. 654), 
     as amended by sections 211(e), 301(a), 425, and 504 of this 
     Act, is amended--
       (1) by striking ``and'' at the end of paragraph (27);
       (2) by striking the period at the end of paragraph (28) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (28) the following:
       ``(29) provide that the State will develop and implement a 
     training program under which training is to be provided not 
     less frequently than annually to all personnel performing 
     functions under the State plan.''.
       (c) Report.--Section 452(a)(10) (42 U.S.C. 652(a)(10)), as 
     amended by section 601(2) of this Act, is amended by 
     redesignating subparagraphs (I) and (J) as subparagraphs (J) 
     and (K), respectively, and by inserting after subparagraph 
     (H) the following:
       ``(I) the training activities at the Federal and State 
     levels, the training audit, and the amounts expended on 
     training;''.

     SEC. 603. STAFFING.

       (a) Methodogy.--Not later than 1 year after the date of the 
     enactment of this Act, the Secretary of Health and Human 
     Services shall develop the methodology to be used to 
     determine the staffing requirements of each State program 
     operated under part D of title IV of the Social Security Act, 
     including each agency and court involved in the program.
       (b) Implementation.--Not later than 2 years after the date 
     of the enactment of this Act, each State with a plan approved 
     under part D of title IV of the Social Security Act shall--
       (1) use the methodology developed pursuant to subsection 
     (a) to determine the staffing requirements of the State 
     program operated under the plan, including each agency and 
     court involved in the program; and
       (2) staff the program, and each agency and court involved 
     in the program, in accordance with the staffing requirements 
     determined pursuant to paragraph (1).
       (c) Implementation.--The Secretary of Health and Human 
     Services shall reduce by 2 percent the amount otherwise 
     payable to a State pursuant to section 455(a)(1)(A) of the 
     Social Security Act for any calendar quarter ending 2 or more 
     years after the date of the enactment of this Act, if the 
     Secretary determines that, during the quarter, the State is 
     not in substantial compliance with subsection (b)(2).

     SEC. 604. CHILD SUPPORT DEFINITION.

       (a) In General.--Section 452 (42 U.S.C. 652) is amended by 
     adding at the end the following:
       ``(j) For purposes of this part, the term `child support' 
     shall have the meaning given such term in section 462(b).''.
       (b) Conforming Amendments.--Section 462(b) (42 U.S.C. 
     662(b)) is amended--
       (1) by inserting ``and lump sum'' after ``periodic'', and
       (2) by inserting ``child care,'' after ``clothing,''.

     SEC. 605. TECHNICAL CORRECTION TO ERISA DEFINITION OF MEDICAL 
                   CHILD SUPPORT ORDER.

       (a) In General.--Section 609(a)(2)(B) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 
     1169(a)(2)(B)) is amended--
       (1) by striking ``issued by a court of competent 
     jurisdiction'';
       (2) by striking the period at the end of clause (ii) and 
     inserting a comma; and
       (3) by adding, after and below clause (ii), the following:

     ``if such judgment, decree, or order (I) is issued by a court 
     of competent jurisdiction or (II) is issued by an 
     administrative adjudicator and has the force and effect of 
     law under applicable State law.''.
       (b) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     take effect on the date of the enactment of this Act.
       (2) Plan amendments not required until january 1, 1995.--
     Any amendment to a plan required to be made by an amendment 
     made by this section shall not be required to be made before 
     the first plan year beginning on or after January 1, 1995, 
     if--
       (A) during the period after the date before the date of the 
     enactment of this Act and before such first plan year, the 
     plan is operated in accordance with the requirements of the 
     amendments made by this section, and
       (B) such plan amendment applies retroactively to the period 
     after the date before the date of the enactment of this Act 
     and before such first plan year.

     A plan shall not be treated as failing to be operated in 
     accordance with the provisions of the plan merely because it 
     operates in accordance with this paragraph.

     SEC. 606. AUDITS.

       (a) Study.--
       (1) Contract authority.--The Secretary of Health and Human 
     Services shall enter into a contract for a study of the audit 
     process of the Office of Child Support Enforcement to develop 
     criteria and methodology for auditing the activities of State 
     child support enforcement agencies pursuant to part D of 
     title IV of the Social Security Act.
       (2) Design of study.--The study shall be designed to--
       (A) identify ways to improve the auditing process, 
     including by--
       (i) reducing the resources required to perform the audit;
       (ii) simplifying procedures for States to follow in 
     obtaining samples;
       (iii) studying the feasibility of sampling cases for needed 
     action rather than requiring sampling plans for each audit 
     criterion; and
       (iv) a more timely audit period of review; and
       (B) develop a penalty process which--
       (i) focuses on improving the delivery of child support 
     services and not harming families;
       (ii) uses a penalty not tied to any reduction of funds 
     payable to States under part A of title IV of the Social 
     Security Act; and
       (iii) should include the escrowing of funds withheld as 
     penalties for use by States to improve their child support 
     programs in a manner approved by the Secretary of Health and 
     Human Services.
       (b) Report.--Not later than 90 days after completion of the 
     study required by subsection (a), the Secretary of Health and 
     Human Services shall submit to the Committee on Ways and 
     Means of the House of Representatives and the Committee on 
     Finance of the Senate a report on the results of the study.
       (c) Limitation on Cases Included in Audits.--Section 
     452(a)(4) (42 U.S.C. 652(a)(4)) is amended--
       (1) by inserting ``(A)'' after ``(4)'';
       (2) by adding ``and'' at the end; and
       (3) by adding after and below the end the following:
       ``(B) notwithstanding subparagraph (A), each audit under 
     subparagraph (A) shall be limited to cases open on the date 
     the audit begins and cases closed within 180 days before such 
     date, unless the Secretary has determined, in accordance with 
     regulations, that there is a need for a longitudinal review 
     of case handling that includes cases that have been closed 
     for more than 180 days;''.

     SEC. 607. ESTABLISHMENT OF CHILD SUPPORT ASSURANCE 
                   DEMONSTRATION PROJECTS.

       (a) In General.--In order to encourage States to provide a 
     guaranteed minimum level of child support for every eligible 
     child not receiving such support, the Secretary of Health and 
     Human Services (hereafter in this section referred to as the 
     ``Secretary'') shall make grants to 4 qualified States to 
     conduct demonstration projects for the purpose of 
     establishing or improving a system of assured minimum child 
     support payments in accordance with this section.
       (b) Contents of Application.--An application for grants 
     under this section shall be submitted by the Governor of a 
     State and shall--
       (1) contain a description of the proposed child support 
     assurance project to be established, implemented, or improved 
     using amounts provided under this section, including the 
     level of the assured benefit to be provided, the specific 
     activities to be undertaken, and the agencies that will be 
     involved;
       (2) specify that the project will be carried out throughout 
     the State;
       (3) estimate the number of children who will be eligible 
     for assured minimum child support payments under the project, 
     and the amounts to which they will be entitled on average as 
     individuals and in the aggregate;
       (4) describe the child support guidelines and review 
     procedures which are in use in the State and any expected 
     modifications;
       (5) contain a commitment by the State to carry out the 
     project during a period of not less than 3 and not more than 
     5 consecutive fiscal years beginning with fiscal year 1996;
       (6) contain assurances that the State--
       (A) is currently at or above the national median paternity 
     establishment rate (as defined in section 452(g)(2) of the 
     Social Security Act),
       (B) will improve the performance of the agency designated 
     by the State to carry out the requirements under part D of 
     title IV of the Social Security Act by at least 4 percent 
     each year in which the State operates a child support 
     assurance project under this section in--
       (i) the number of cases in which paternity is established 
     when required;
       (ii) the number of cases in which child support orders are 
     obtained; and
       (iii) the number of cases with child support orders in 
     which collections are made; and
       (C) to the maximum extent possible under current law, will 
     use Federal, State, and local job training assistance to 
     assist individuals who have been determined to be unable to 
     meet such individuals' child support obligations;
       (7) describe the extent to which multiple agencies, 
     including those responsible for administering the Aid to 
     Families With Dependent Children Program under part A of 
     title IV of the Social Security Act and child support 
     collection, enforcement, and payment under part D of such 
     title, will be involved in the design and operation of the 
     child support assurance project; and
       (8) contain such other information as the Secretary may 
     require by regulation.
       (c) Use of Funds.--A State shall use amounts provided under 
     a grant awarded under this section to carry out a child 
     support assurance project designed to provide a minimum 
     monthly child support benefit for each eligible child in the 
     State to the extent that such minimum child support is not 
     paid in a month by the noncustodial parent.
       (d) Requirements.--(1) A child support assurance project 
     funded under this section shall provide that--
       (A) any child (as defined in paragraph (2)) with a living 
     noncustodial parent for whom a child support order has been 
     sought (as defined in paragraph (3)) or obtained and any 
     child who meets ``good cause'' criteria for not seeking or 
     enforcing a support order is eligible for the assured child 
     support benefit;
       (B) the assured child support benefit shall be paid 
     promptly to the custodial parent at least once a month and 
     shall be--
       (i) an amount determined by the State which is--
       (I) not less than $1,500 per year for the first child, 
     $1,000 per year for the second child, and $500 per year for 
     the third and each subsequent child, and
       (II) not more than $3,000 per year for the first child and 
     $1,000 per year for the second and each subsequent child;
       (ii) offset and reduced to the extent that the custodial 
     parent receives child support in a month from the 
     noncustodial parent;
       (iii) indexed and adjusted for inflation; and
       (iv) in the case of a family of children with multiple 
     noncustodial parents, calculated in the same manner as if all 
     such children were full siblings, but any child support 
     payment from a particular noncustodial parent shall only be 
     applied against the assured child support benefit for the 
     child or children of that particular noncustodial parent;
       (C) for purposes of determining the need of a child or 
     relative and the level of assistance, one-half of the amount 
     received as a child support payment shall be disregarded from 
     income until the total amount of child support and Aid to 
     Families With Dependent Children benefit received under part 
     A of title IV of the Social Security Act equals the Federal 
     poverty level for a family of comparable size;
       (D) in the event that the family as a whole becomes 
     ineligible for Aid to Families With Dependent Children under 
     part A of the Social Security Act due to consideration of 
     assured child support benefits, the continuing eligibility of 
     the caretaker for Aid to Families With Dependent Children 
     under such title shall be calculated without consideration of 
     the assured child support benefit; and
       (E) in order to participate in the child support assurance 
     project, the child's caretaker shall apply for services of 
     the State's child support enforcement program under part D of 
     title IV of the Social Security Act.
       (2) For purposes of this section, the term ``child'' means 
     an individual who is of such an age, disability, or 
     educational status as to be eligible for child support as 
     provided for by the law of the State in which such individual 
     resides.
       (3) For purposes of this section, a child support order 
     shall be deemed to have been ``sought'' where an individual 
     has applied for services from the State agency designated by 
     the State to carry out the requirements of part D of title IV 
     of the Social Security Act or has sought a child support 
     order through representation by private or public counsel or 
     pro se.
       (e) Consideration and Priority of Applications.--(1) The 
     Secretary shall consider all applications received from 
     States desiring to conduct demonstration projects under this 
     section and shall approve not more than 4 applications which 
     appear likely to contribute significantly to the achievement 
     of the purpose of this section. In selecting States to 
     conduct demonstration projects under this section, the 
     Secretary shall--
       (A) ensure that the applications selected represent a 
     diversity of minimum benefits distributed throughout the 
     range specified in subsection (d)(1)(B)(i);
       (B) consider the geographic dispersion and variation in 
     population of the applicants;
       (C) give priority to States the applications of which 
     demonstrate--
       (i) significant recent improvements in--
       (I) establishing paternity and child support awards,
       (II) enforcement of child support awards, and
       (III) collection of child support payments;
       (ii) a record of effective automation; and
       (iii) that efforts will be made to link child support 
     systems with other service delivery systems;
       (D) ensure that the proposed projects will be of a size 
     sufficient to obtain a meaningful measure of the effects of 
     child support assurance;
       (E) give priority, first, to States intending to operate a 
     child support assurance project on a statewide basis, and, 
     second, to States that are committed to phasing in an 
     expansion of such project to the entire State, if interim 
     evaluations suggest such expansion is warranted; and
       (F) ensure that, if feasible, the States selected use a 
     variety of approaches for child support guidelines.
       (2) Of the States selected to participate in the 
     demonstration projects conducted under this section, the 
     Secretary shall require, if feasible--
       (A) that at least 2 provide intensive integrated social 
     services for low-income participants in the child support 
     assurance project, for the purpose of assisting such 
     participants in improving their employment, housing, health, 
     and educational status; and
       (B) that at least 2 have adopted the Uniform Interstate 
     Family Support Act.
       (f) Duration.--(1) During fiscal year 1995, the Secretary 
     shall develop criteria, select the States to participate in 
     the demonstration, and plan for the evaluation required under 
     subsection (h). The demonstration projects conducted under 
     this section shall commence on October 1, 1995, and shall be 
     conducted for not less than 3 and not more than 5 consecutive 
     fiscal years, except that the Secretary may terminate a 
     project before the end of such period if the Secretary 
     determines that the State conducting the project is not in 
     substantial compliance with the terms of the application 
     approved by the Secretary under this section, and the 
     Secretary may authorize the continuation of a project if the 
     Secretary determines that the project has been successful.
       (g) Cost Savings Recovery.--The Secretary shall develop a 
     methodology to identify any State cost savings realized in 
     connection with the implementation of a child support 
     assurance project conducted under this Act. Any such savings 
     realized as a result of the implementation of a child support 
     assurance project shall be utilized for child support 
     enforcement improvements or expansions and improvements in 
     the Aid to Families With Dependent Children Program conducted 
     under part A of title IV of the Social Security Act within 
     the participating State.
       (h) Evaluation and Report to Congress.--(1) The Secretary 
     shall conduct an evaluation of the effectiveness of the 
     demonstration projects funded under this section. The 
     evaluation shall include an assessment of the effect of an 
     assured benefit on--
       (A) income from nongovernment sources and the number of 
     hours worked;
       (B) the use and amount of government supports;
       (C) the ability to accumulate resources;
       (D) the well-being of the children, including educational 
     attainment and school behavior; and
       (E) the State's rates of establishing paternity and support 
     orders and of collecting support.
       (2) Three and 5 years after commencement of the 
     demonstration projects, the Secretary shall submit an interim 
     and final report based on the evaluation to the Committee on 
     Finance and the Committee on Labor and Human Resources of the 
     Senate, and the Committee on Ways and Means and the Committee 
     on Education and Labor of the House of Representatives 
     concerning the effectiveness of the child support assurance 
     projects funded under this section.
       (i) State Reports.--The Secretary shall require each State 
     that conducts a demonstration project under this section to 
     annually report such information on the project's operation 
     as the Secretary may require, except that all such 
     information shall be reported according to a uniform format 
     prescribed by the Secretary.
       (j) Restrictions on Matching and Use of Funds.--(1) A State 
     conducting a demonstration project under this section shall 
     be required--
       (A) except as provided in paragraph (2), to provide not 
     less than 20 percent of the total amounts expended in each 
     calendar year of the project to pay the costs associated with 
     the project funded under this section;
       (B) to maintain its level of expenditures for child support 
     collection, enforcement, and payment at the same level, or at 
     a higher level, than such expenditures were prior to such 
     State's participation in a demonstration project provided by 
     this section; and
       (C) to maintain the Aid to Families With Dependent Children 
     benefits provided under part A of title IV of the Social 
     Security Act at the same level, or at a higher level, as the 
     level of such benefits on the date of the enactment of this 
     Act.
       (2) A State participating in a demonstration project under 
     this section may provide no less than 10 percent of the total 
     amounts expended to pay the costs associated with the project 
     funded under this section in years after the first year such 
     project is conducted in a State if the State meets the 
     improvements specified in subsection (b)(6)(B).
       (k) Coordination With Certain Means-Tested Programs.--For 
     purposes of--
       (1) the United States Housing Act of 1937;
       (2) title V of the Housing Act of 1949;
       (3) section 101 of the Housing and Urban Development Act of 
     1965;
       (4) sections 221(d)(3), 235, and 236 of the National 
     Housing Act;
       (5) the Food Stamp Act of 1977;
       (6) title XIX of the Social Security Act; and
       (7) child care assistance provided through part A of title 
     IV of the Social Security Act, the Child Care and Development 
     Block Grant, or title XX of the Social Security Act,

     any payment made to an individual within the demonstration 
     project area for child support up to the amount which an 
     assured child support benefit would provide shall not be 
     treated as income and shall not be taken into account in 
     determining resources for the month of its receipt and the 
     following month.
       (l) Treatment of Child Support Benefit.--Any assured child 
     support benefit received by an individual under this Act 
     shall be considered child support for purposes of the 
     Internal Revenue Code of 1986.
       (m) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as may be necessary in each of 
     the fiscal years 1995, 1996, 1997, 1998, 1999, and 2000 to 
     carry out the purposes of this section.

     SEC. 608. CHILDREN'S TRUST FUND.

       (a) Designation of Contributions.--
       (1) In general.--Subchapter A of chapter 61 of the Internal 
     Revenue Code of 1986 (relating to returns and records) is 
     amended by adding at the end thereof the following new part:

           ``PART IX--CONTRIBUTIONS TO CHILDREN'S TRUST FUND

``Sec. 6097. Amounts for Children's Trust Fund.

     ``SEC. 6097. AMOUNTS FOR CHILDREN'S TRUST FUND.

       ``Each taxpayer may include with such taxpayer's return of 
     tax imposed by chapter 1 for any taxable year a contribution 
     by the taxpayer to the Children's Trust Fund.''.
       (2) Clerical amendment.--The table of parts for subchapter 
     A of chapter 61 of the Internal Revenue Code of 1986 is 
     amended by adding at the end thereof the following new item:

``Part IX--Contributions for Children's Trust Fund.''.

       (3) Effective date.--The amendments made by this subsection 
     shall apply to taxable years beginning after December 31, 
     1995.
       (b) Establishment of Children's Trust Fund.--
       (1) In general.--Subchapter A of chapter 98 of the Internal 
     Revenue Code of 1986 (relating to the trust fund code) is 
     amended by adding at the end thereof the following new 
     section:

     ``SEC. 9512. CHILDREN'S TRUST FUND.

       ``(a) Creation of Trust Fund.--There is established in the 
     Treasury of the United States a trust fund to be known as the 
     `Children's Trust Fund', consisting of such amounts as may be 
     appropriated or credited to the Trust Fund as provided in 
     this section or section 9602(b).
       ``(b) Transfer to Children's Trust Fund of Amounts 
     Designated.--There is hereby appropriated to the Children's 
     Trust Fund amounts equivalent to the amounts contributed to 
     such Trust Fund under section 6097.
       ``(c) Expenditures From Trust Fund.--
       ``(1) In general.--Amounts in the Children's Trust Fund 
     shall be available as provided by appropriation Acts for 
     making expenditures for programs regarding child support and 
     the specific mandates described in part D of title IV of the 
     Social Security Act, especially such mandates established by 
     the amendments made by the Child Support Responsibility Act 
     of 1994.
       ``(2) Administrative expenses.--Amounts in the Children's 
     Trust Fund shall be available to pay the administrative 
     expenses of the Department of the Treasury directly allocable 
     to--
       ``(A) modifying the individual income tax return forms to 
     carry out section 6097,
       ``(B) carrying out this chapter with respect to such Trust 
     Fund, and
       ``(C) processing amounts received under section 6097 and 
     transferring such amounts to such Trust Fund.''.
       (2) Clerical amendment.--The table of sections for 
     subchapter A of chapter 98 of the Internal Revenue Code of 
     1986 is amended by adding at the end thereof the following 
     new item:

``Sec. 9512. Children's Trust Fund.''.

     SEC. 609. STUDY OF REASONS FOR NONPAYMENT OF CHILD SUPPORT; 
                   REPORT.

       (a) Study.--The Comptroller General of the United States 
     shall--
       (1) conduct a study of the causes of delinquency in the 
     payment of child support, including the nonpayment of child 
     support by noncustodial parents and failure of custodial 
     parents to cooperate in the collection of child support; and
       (2) if a sufficient number of studies of this matter are 
     available, review the studies.
       (b) Report to the Congress.--Within 1 year after the date 
     of the enactment of this Act, the Comptroller General shall 
     submit to the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate, 
     and to the Office of Child Support Enforcement, a report that 
     contains the results of the study required by subsection (a), 
     and a consolidated summary of the studies described in 
     subsection (a)(2).

     SEC. 610. STUDY OF EFFECTIVENESS OF ADMINISTRATIVE PROCESSES; 
                   REPORT.

       (a) Study.--The Comptroller General of the United States 
     shall conduct a study of the effectiveness of the processing 
     of child support and parentage cases in States that use 
     administrative processes as compared with States that use 
     judicial or quasi-judicial processes.
       (b) Report to the Congress.--Within 1 year after the date 
     of the enactment of this Act, the Comptroller General shall 
     submit to the Committee on Ways and Means of the House of 
     Representatives and the Committee on Finance of the Senate a 
     report that contains the results of the study required by 
     subsection (a).

     SEC. 611. COMPENDIUM OF STATE CHILD SUPPORT STATUTES.

       The Office of Child Support Enforcement shall produce and 
     update the compendium entitled ``A Guide To State Child 
     Support And Paternity Laws'', published by the National 
     Conference of State Legislatures.

     SEC. 612. ESTABLISHMENT OF PERMANENT CHILD SUPPORT ADVISORY 
                   COMMITTEE.

       (a) In General.--The Office of Child Support Enforcement 
     shall establish an advisory committee on child support 
     matters composed of Federal and State legislators, State 
     child support officials, and representatives of custodial and 
     noncustodial parents.
       (b) Functions.--The advisory committee established pursuant 
     to subsection (a) shall--
       (1) provide oversight of the implementation of Federal laws 
     and regulations affecting child support, and the operation of 
     Federal, State, and local child support programs; and
       (2) provide a forum through which child support problems 
     experienced by parents, State agencies, the courts, and the 
     private bar may be identified, and from which recommendations 
     on how to solve such problems may be reported to the 
     Secretary of Health and Human Services and to the Congress.
       (c) Permanency.--Section 14 of the Federal Advisory 
     Committee Act (5 U.S.C. App.) shall not apply to the advisory 
     committee established pursuant to subsection (a) of this 
     section.
                         TITLE VII--STATE ROLE

     SEC. 701. ADVOCATION OF CHILDREN'S ECONOMIC SECURITY.

       Section 454 (42 U.S.C. 654), as amended by sections 211(e), 
     301(a), 425, 504, and 602 of this Act, is amended--
       (1) by striking ``and'' at the end of paragraph (28);
       (2) by striking the period at the end of paragraph (29) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (29) the following:
       ``(30) provide that the agency administering the plan shall 
     advocate to promote the greatest economic security possible 
     for children, consistent with the ability of any individual 
     who owes child support with respect to the child to provide 
     the support.''.

     SEC. 702. DUTIES OF STATE CHILD SUPPORT AGENCIES.

       Section 454 (42 U.S.C. 654), as amended by sections 211(e), 
     301(a), 425, 504, 602, and 701 of this Act, is amended--
       (1) by striking ``and'' at the end of paragraph (29);
       (2) by striking the period at the end of paragraph (30) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (30) the following:
       ``(31) provide that the agency administering the plan shall 
     provide to each custodial parent--
       ``(A) a written description of the services available under 
     the plan, and a statement describing the priorities applied 
     in distributing collected child support and the rules 
     governing confidentiality of information in child support 
     matters;
       ``(B) a statement that at least 30 days before the agency 
     consents to the dismissal of a child support case with 
     prejudice or a reduction of arrearages, the agency must 
     provide notice to the custodial parent at the last known 
     address of the custodial parent;
       ``(C) written quarterly reports on the status of any case 
     involving the custodial parent;
       ``(D) a statement that the State is required to provide 
     services under the plan to any custodial parent who is 
     eligible for aid under the State plan approved under part A; 
     and
       ``(E) a statement that any custodial parent who applies for 
     services under the plan is eligible for such services, and 
     that any application fee for such services is deferred 
     pending determination of the eligibility of the custodial 
     parent for aid under the State plan approved under part A.''.

     SEC. 704. ADMINISTRATIVE PROCESS FOR CHANGE OF PAYEE IN IV-D 
                   CASES.

       Section 466(a) (42 U.S.C. 666(a)), as amended by sections 
     104, 205, 206, 207, 209, 210, 212, 405, 406(a), 407, 408, 
     409, 410, 411, 414, 416, 417, 423, 424, 428, 429, and 502 of 
     this Act, is amended by inserting after paragraph (35) the 
     following:
       ``(36) Procedures under which only administrative 
     procedures are required to change the payee under a child 
     support order in a case under this part, if a statement by an 
     official of the State child support enforcement agency is 
     included in the court or administrative file documenting the 
     change.''.

     SEC. 705. FINANCIAL INCENTIVES.

       (a) Only Child Support Enforcement Funds Subject to 
     Reduction for Substantial Noncompliance.--
       (1) In general.--Subsection (h) of section 403 (42 U.S.C. 
     603(h)) is hereby transferred to section 455 of the Social 
     Security Act, redesignated as subsection (f) of such section 
     455, and amended--
       (A) in paragraph (1)--
       (i) by striking ``Act'' and inserting ``part'';
       (ii) by striking ``part D'' and inserting ``this part''; 
     and
       (iii) by striking ``such part'' and inserting ``this 
     part''; and
       (B) in paragraph (3), by striking ``this part'' and 
     inserting ``part A''.
       (2) Conforming amendments.--
       (A) Section 452(a)(4) (42 U.S.C. 652(a)(4)) is amended by 
     striking ``403(h)'' each place such term appears and 
     inserting ``455(f)''.
       (B) Subsections (d)(3)(A), (g)(1), and (g)(3)(A) of section 
     452 (42 U.S.C. 652) are each amended by striking ``403(h)'' 
     and inserting ``455(f)''.
       (b) Payments to States Increased.--
       (1) In general.--Section 455(a) (42 U.S.C. 655(a)) is 
     amended--
       (A) in paragraph (1)--
       (i) by striking ``(a)(1)'' and inserting ``(a)''; and
       (ii) in subparagraph (A), by striking ``the percent 
     specified in paragraph (2)'' and inserting ``90 percent''; 
     and
       (iii) in each of subparagraphs (B) and (C), by striking 
     ``(rather than the percentage specified in subparagraph 
     (A))'';
       (B) by striking paragraph (2); and
       (C) by redesignating subparagraphs (A), (B), and (C) of 
     paragraph (1) as paragraphs (1), (2), and (3), respectively.
       (2) Conforming amendments.--Paragraphs (1)(B), (2)(A), and 
     (2)(B) of section 452(d) (42 U.S.C. 652(d)) are each amended 
     by striking ``455(a)(1)(B)'' and inserting ``455(a)(2)''.
       (c) Repeal of Incentive Payments to States.--Section 458 
     (42 U.S.C. 658) is hereby repealed.

     SEC. 706. AVOIDANCE OF CONFLICTS OF INTEREST.

       Section 454 (42 U.S.C. 654), as amended by sections 211(e), 
     301(a), 425, 504, 602, 701, and 702 of this Act, is amended--
       (1) by striking ``and'' at the end of paragraph (30);
       (2) by striking the period at the end of paragraph (31) and 
     inserting ``; and''; and
       (3) by inserting after paragraph (31) the following:
       ``(32) provide that the State may not seek to modify a 
     child support order on behalf of a party to the order if the 
     State has provided services under the State plan to another 
     party to the order.''.

  Mr. SASSER. Mr. President, I rise today to talk about an issue that 
is critical for the future of many children in this country; too many 
children are growing up in poverty because noncustodial parents refuse 
to provide financial support for them. As a result, millions are 
growing up in financially unstable families. While we do have a child 
support enforcement program, it is inadequate to meet the needs of many 
of these children. That is why I am joining Senator Feinstein in 
introducing the Child Support Responsibility Act of 1994.


                   SINGLE-PARENT FAMILIES AND POVERTY

  An increasing number of children are growing up in families with just 
one parent--usually the mother--living in the same household. The 
percentage of children in one-parent families has increased from 8 
percent in 1960 to 25 percent in 1990. Contributing to this is the rise 
in out-of-wedlock births; the number of children born to unwed mothers 
increased by 75 percent between 1980 and 1990. Nearly one-third of all 
children born in 1991 were born to unmarried mothers. More than half of 
children receiving benefits under the AFDC program now have parents who 
have never been married. Some researchers estimate that more than half 
of all children born in the last decade will live at some point during 
their childhood with only one parent.
  Now, most single parents do their very best to raise those children 
in loving and supportive homes. Unfortunately, however, there is a high 
correlation between single parent families and poverty. More than half 
of all children in mother-only families live in poverty compared to 
only 11 percent of children in two-parent families. Nearly 75 percent 
of children who spend at least some time in a single-parent family will 
live in poverty at some point during their first 10 years of life and 
are likely to remain poor longer than children in two-parent families. 
Children of unmarried teenage mothers are particularly likely to 
experience poverty.
  Financial instability can put children at a tremendous disadvantage. 
Yet, today 65 percent of absent fathers provide no support at all for 
their children. This is why we must demand that noncustodial parents 
take more responsibility for providing financial support for their 
children. It is true that some fathers are not able to provide 
financial support for their children. But the system needs to reach 
these fathers to encourage them to be a part of their children's lives, 
to provide emotional support, and, when they are able, to contribute 
financially to the child's well-being.


                   INADEQUACIES OF THE CURRENT SYSTEM

  Child support laws, which are part of family law, are generally under 
the purview of the States. Federal legislation was first enacted in 
1950 to respond to the increasing cost of the Aid to Families with 
Dependent Children program. The Child Support Enforcement [CSE] Act was 
enacted in 1975, and has been modified a number of times. The Federal 
Government provides funding and assistance to States to operate child 
support programs to help both AFDC and non-AFDC parents.
  While aspects of the child support system are improving, it is still 
inadequate. Of the 10.8 million single-mother families in this country, 
only 60 percent have child support orders--and there has been no 
improvement in that figure over the past decade. Just over one quarter 
of potentially eligible women have child support awards and received 
the full amount. In addition, the value of child support awards 
declined by 10 percent in real terms between 1978 and 1989. Those with 
child support orders receive, on average, only 60 percent of what is 
owed them per year. The Federal Child Support Enforcement Program, 
which handles only about half of all child support cases, obtained 
collections for less than 20 percent of these families.
  Research by the Urban Institute suggests that if child support orders 
were established in all cases, or brought up to date, and fully 
enforced, $47 billion would be paid in child support every year. 
However, only a total of $20 billion in child support orders have been 
established and, of that, less than $14 billion is currently collected. 
This leaves a gap of nearly $34 billion owed to both non-AFDC and AFDC 
parents.
  There are many reasons for this gap. Some 21 percent, or $7 billion, 
is due to a failure to collect what has been ordered. This can occur 
either because a noncustodial parent cannot pay, or refuses to pay. In 
some cases, the location of the noncustodial parent may not be known.
  Another factor contributing to the gap is that existing child support 
awards are frequently inadequate. Many have not been updated to reflect 
inflation or the ability of the noncustodial parent to pay. If all AFDC 
mothers had child support awards reflective of current award levels and 
received full payment, another $7.2 billion could be collected.

  But fully 57 percent, or $19 billion, of the gap occurs because many 
potentially eligible custodial parents do not have a legal child 
support award or order. About 42 percent of the 10 million single-
mother households do not have child support orders. Half of these 
parents are unable to obtain an award because paternity has not been 
legally established.
  There are many reasons why we should be concerned about the failure 
of noncustodial parents to support their children. We know that 
children tend to fare better if they have the support--emotional and 
financial--of both parents. But taxpayers have a legitimate reason to 
be angry about the refusal of individuals to take responsibility for 
providing financial support for their children; one estimate suggests 
that there could be an 8-percent reduction in the AFDC caseload if just 
the awards that have already been ordered were collected. More people 
could get off of welfare if they have adequate child support orders in 
place.
  This is why I believe that we need to do more to improve child 
support enforcement at the Federal level. The bill we are introducing 
today is the same as legislation introduced by Congresswoman Schroeder 
on behalf of the Congressional Women's Caucus in the House of 
Representatives. That legislation now has 77 cosponsors.


                               highlights

  This bill would improve Federal and State systems to locate absent 
parents through a number of mechanisms. A Federal registry of all child 
support orders would be established. The Federal W-4 form would be 
modified to include information about child support obligations. Access 
to the National Parent Locator Network would be expanded. States would 
be required to maintain child support order registries, using a uniform 
abstract, and transmit copies of those abstracts to the Federal 
registry. Development of interstate on-line access to information on 
child support orders would be encouraged.
  This bill would strengthen programs to establish legal paternity as 
soon as possible after a child is born. This is essential if more 
single mothers are to obtain enforceable child support orders. 
Information would be made available to prospective parents about the 
rights as well as the responsibilities conveyed by legal recognition 
and about the means that are available to establish paternity. Legal 
procedures for establishing paternity would be simplified.
  The bill would also strengthen mechanisms to increase the number of 
families with child support orders, improve the uniformity of those 
orders, and provide for annual updates so that children receive a fair 
amount of support from noncustodial parents.
  The bill would help States increase collection of child support 
payments. Wage withholding requirements would be strengthened to 
improve collections from those who change jobs or move frequently, and 
penalties imposed if employers failed to comply. States would be 
allowed to restrict professional, occupational, and business licenses 
as well as drivers' licenses and auto registration for nonpayment of 
child support. Payments on Lottery winnings, legal settlements, 
payouts, awards, and bequests could be delayed until a determination 
can be made whether the person is in arrears on child support payments. 
Delinquent child support payments would be reported to credit bureaus. 
Passports could be denied or revoked for noncustodial parents who are 
the subject of outstanding State warrants of arrest for nonpayment of 
child support exceeding $10,000. We must get the word out that 
nonpayment of child support is not acceptable.
  Mr. President, I do think it is important to acknowledge that some 
parents may not always be in a position to provide financial support 
for their children, because they have lost their jobs or cannot find 
work. This is one reason why we must continue to work to have a strong, 
vibrant, and job-producng economy that will provide decent wages and 
why we must have strong education and job training systems.
  Our world has changed in many ways over the last 30 years. The change 
in family structure is one such change that has profound implications 
for the future of our Nation's children. We cannot turn back the clock. 
But our Nation's children need financial and emotional security if they 
are to participate fully in this country's future. And the first place 
to turn is to the parents of those children. We can and should adopt 
these measures to make sure that parents take financial responsibility 
for the children they bring into this world. We must get the message 
out that the children come first.
                                 ______

      By Mr. GRAHAM:
  S. 2529. A bill to amend title XI of the Social Security Act with 
respect to certain criminal penalties for acts involving the Medicare 
Program or State health care programs; to the Committee on Finance.


                        HEALTH CARE LEGISLATION

 Mr. GRAHAM. Mr. President, today I am introducing a bill to 
clarify that the intent of the 1977 antikickback statute is not to 
jeopardize every State or Federal health plan which already uses, or 
which seeks to use, Federal funding to pay for private health insurance 
for citizens. Unfortunately, a recent interpretation of that statute by 
the Department of Justice and the Department of Health and Human 
Services have placed at risk innovative Government programs to increase 
health insurance coverage through the purchase of private health 
insurance or the use of managed care in either Medicaid or Medicare. 
That interpretation came as part of Florida's waiver request for a 
Medicaid demonstration project.
  On February 9, 1994, Florida submitted its Florida Health Security 
waiver to the Department of Health and Human Services [HHS] and the 
Health Care Financing Administration [HCFA]. This Medicaid waiver 
request would, if enacted, provide 1.1 million additional Floridians 
with insurance coverage up to 250 percent of the poverty level. FHS 
participants would buy a standard benefit package offered through a 
Community Health Purchasing Alliance and receive, according to their 
income, a premium discount to make the package affordable.
  On September 14, 1994, after 7 long months of negotiations, HHS 
granted a conditional waiver approval to allow Florida to implement the 
State's proposed reforms. By granting this important request, Florida 
would be allowed to use Medicaid funds to provide insurance premium 
discounts to working, uninsured Floridians traditionally ineligible for 
Medicaid.
  There are many positive aspects of Florida Health Security. First and 
foremost, let me reemphasize that this waiver program would allow an 
additional 1.1 million Floridians obtain health insurance coverage--
thereby reducing the State's uninsured rate by over 40 percent. 
Moreover, of the 2.7 million Floridians presently without health 
insurance, 1 million are children. With the plan's requirement that 80 
percent of the enrollment spaces be reserved for lower income, 
uninsured families, children will disproportionately benefit from this 
initiative.
  In addition, this waiver would eliminate the all or none approach of 
Medicaid by creating a sliding scale of contributions for those above 
the Medicaid poverty threshold and up to 250 percent of poverty. At 
present, Medicaid's all or none approach creates the perverse incentive 
of encouraging people to remain unemployed and in poverty in order to 
continue to have health care coverage. Florida's approach would clearly 
help get people off welfare and be a much fairer system than what we 
have now.
  The waiver also allows Florida and the Federal Government better 
control over the costs of the Medicaid Program. Since 1982, Florida has 
had its Medicaid Program increase from $1 billion to $7 billion. In the 
years from 1990 through 1993, Florida saw its Medicaid budget expand by 
30 percent, 26 percent, and 19 percent, respectively. Instead, over the 
5-year period of Florida's waiver program, costs would be controlled 
and managed through the increased use of case management and managed 
care in the private sector. Through these savings, the State and the 
Federal Government will be able to provide coverage to over 1 million 
previously uninsured Floridians without spending additional revenue.
  In short, Florida's Health Security Program would expand access and 
health coverage without raising taxes, control costs and break the 
categorical link between health care and welfare.
  To implement this program, Florida Health Security will utilize the 
already successfully established Community Health Purchasing Alliances, 
which have reduced premiums for participating small businesses by 10 to 
50 percent this year. As a result of this, private health plans will be 
integrally involved in this Florida Health Security Program.
  In fact, under Florida Health Security, accountable health 
partnerships would submit bids on premium rates for the standard 
benefit plan, with a portion of the premium to be paid by Medicaid. 
Insurance agents would be directly involved in the process due to the 
fact that they are an integral part of any system relying in whole or 
in part on private health insurance coverage.
  Unfortunately, HHS and the Department of Justice have expressed 
concern that payments to insurance agents by accountable health plans 
might violate the Social Security antikickback statute. Clearly, the 
1977 antikickback statute was not intended or was even contemplated to 
apply to programs like Florida's demonstration project.
  In fact, there are already numerous and widespread examples where 
Medicare and Medicaid funds are used for the payment, directly or 
indirectly, to insurance agents. These include Medicaid revisions in 
the Family Support Act of 1988, which creates a Medicaid wrap-around 
option allowing States to use Medicaid funds to pay a family's expenses 
for premiums, deductibles, and coinsurance for any health care coverage 
offered by the employer.
  As the State argued while pursuing the waiver, since insurance 
companies use insurance agents, the purchase of insurance and the 
payment of premiums of necessity results in the payment of a commission 
to an insurance agent. This is also true when Medicaid funds health 
maintenance organizations [HMO's], the Medicare Risk Program and 
various State plans relating to areas such as the enrollment of 
Medicaid eligibles in group health plans.
  Through the section 1115 Medicaid demonstration project waiver 
process, Florida is attempting to, for the first time, use Medicaid 
funds to purchase private health insurance on a wide scale. However, by 
mistakenly applying the antikickback statute beyond its intended scope 
to insurance agent commissions, the Departments of Justice and Health 
and Human Service would effectively kill the demonstration. As noted 
before, insurance agents are an integral part of the existing health 
insurance system.
  As a result, this legislation focuses narrowly on clarifying that the 
1977 antikickback statute would not be unnecessarily applied to 
Medicaid demonstration projects and Medicaid managed care programs, 
which were initiatives that were not anticipated in the original 
adoption of the statute. Failure to adopt this language, with Justice's 
and HHS's present interpretation of the statute, would very well 
jeopardize every State or Federal health plan which already uses, or 
which seeks to use, Federal moneys to fund private health insurance 
coverage.
  I urge my colleagues to support this legislation and ask unanimous 
consent that the text of the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2529

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. CRIMINAL PENALTIES FOR ACTS INVOLVING THE MEDICARE 
                   PROGRAM OR STATE HEALTH CARE PROGRAMS.

       Section 1128B(b)(3) of the Social Security Act (42 U.S.C. 
     1320a-7(b)(3)) is amended--
       (1) by striking ``and'' at the end of subparagraph (D);
       (2) by striking the period at the end of subparagraph (E) 
     and inserting ``; and''; and
       (3) by adding at the end the following new subparagraph:
       ``(F)(i) any premium payment made to a health insurer or 
     health maintenance organization by a State agency in 
     connection with a demonstration project operated under the 
     State Mmedicaid program pursuant to section 1115 with respect 
     to individuals participating in such project; or
       ``(ii) any payment made by a health insurer or a health 
     maintenance organization to a sales representative or a 
     licensed insurance agent for the purpose of servicing, 
     marketing, or enrolling individuals participating in such 
     demonstration project in a health plan offered by such an 
     insurer or organization.''.
                                 ______

      By Mr. METZENBAUM:
  S. 2531. A bill to amend the Employee Retirement Income Security Act 
of 1974 to improve the pension and welfare benefits of working men and 
women, and for other purposes; to the Committee on Labor and Human 
Resources.


                 the pension bill of rights act of 1994

 Mr. METZENBAUM. Mr. President, today I am introducing the 
Pension Bill of Rights Act of 1994. I wish that I had introduced this 
bill many years earlier. Unfortunately, we spend so much time fighting 
the most pressing crises of the day, and defending against efforts to 
weaken our laws, we have little time to address the long-term needs of 
our citizens and our country. Even when we try to put forth 
comprehensive proposals to help people, the obstacles are many. We have 
spent decades trying to establish a decent and uniform health care 
system for all of our citizens with little to show for our efforts. 
Access to meaningful health care remains a basic and pressing need; 
Congress must keep trying to pass a comprehensive solution no matter 
how long it takes.
  Increasingly, there is anxiety about the adequacy of our retirement 
system as well. Although Social Security remains a fairly stable 
program to provide a minimum level of income to retired individuals, 
additional funds and reforms are likely to be needed to strengthen this 
floor of retirement protection. In addition, we need to reexamine and 
strengthen our private supplemental pension system. It was 20 years ago 
that the Congress enacted our Federal pension law, known as the 
Employee Retirement Income Security Act or ERISA. While ERISA has led 
to numerous protections and improvements in our supplemental system, it 
also has an increasingly apparent number of flaws. Over the years, the 
Senate Subcommittee on Labor, which I chair, has received thousands of 
letters and held innumerable hearings on the problems which exist in 
our private pension system.
  First, for too many Americans, our private system is failing to 
provide a supplement to Social Security. More than half the work force 
is not covered by a private pension at work. Many full-time workers are 
covered, but more and more employers are hiring part-time, temporary, 
or other contingent employees who are ineligible for pension benefits. 
In fact, today contingent workers account for one-quarter of our work 
force as a whole.
  Second, the funds being set aside for retirement, both by employers 
and employees are increasingly inadequate to meet the needs of 
retirees. Traditionally, employers made initial contributions to 
workers' pensions and then allowed workers to set aside additional 
employee savings. More and more, employers have turned pension plans 
around so that employees must first contribute funds, and only then 
will employers match some or all of the employee's contributions. While 
this change may be an attractive incentive for employees to save more 
than they ordinarily would, it is turning our pension system into one 
that works for those who are already better off financially, and it is 
setting lower paid workers further and further behind. Those without 
discretionary income lose two times; first, because they do not earn 
enough to save their own funds, and second because they therefore 
receive little or nothing from the employer in matching pension 
contributions.
  Third, there is still too much game-playing in our private pension 
system. Too many employers make the rules of the plan so complicated 
and rifled with caveats and loopholes, that the promise of retirement 
benefits proves illusory for many workers. Pension plans should be 
fair. Employers should design and operate their plans fairly. Employees 
should be afforded a fair opportunity to earn pension benefits based on 
their years of service to the company.
  We need a healthy retirement system, both in Social Security and in 
our supplemental private system. The bill I am introducing today seeks 
to improve and simplify our current supplemental system. It does not 
solve every problem that our system faces. But I hope it does clean out 
many of the known cobwebs, and, I believe that it will make our system 
simpler and fairer. I hope it will lay the groundwork for future 
reform. We all have an interest in ensuring a decent and adequate 
retirement system for all of our citizens.
                                 ______

      By Mr. ROTH (for himself, Mr. Boren, Mr. Simon, and Mr. Coats):
  S. 2532. A bill to amend the Internal Revenue Code of 1986 to allow 
for the establishment of medical savings accounts for individuals 
covered by certain high deductible health plans; to the Committee on 
Finance.


             the medical savings account tax incentive act

 Mr. ROTH. Mr. President, I join my friend from Oklahoma to 
introduce this legislation to create a medical savings account option 
for American families--an option that will help our families save money 
on health care expenses--an option that will create incentives to lower 
health care costs--an option that will allow our families to choose 
their own physicians and their own health care plans.
  Let me explain how the medical savings accounts will work.
  Looking at an average family health policy that costs $5,000 a year, 
today that family might have to pay the first $250 of their own health 
costs, and then pay some 20 percent of any health costs after that. 
Under our legislation, that family could instead spend the same $5,000 
to buy a high deductible policy for $2,500 and place $2,500 in their 
medical savings account. As long as that family spends less than $2,500 
for health costs during the year, all of their health expenses will be 
paid with Pretax dollars from their medical savings account provided by 
their employer. If they spend more, then their high deductible health 
insurance policy will begin paying their health costs once they exceed 
$3,000.
  It's that simple!
  After a few years of relatively low health expenses, excess funds in 
that family's medical savings account would be available to pay for 
unexpectedly high health costs, for long-term health insurance, or to 
make health insurance payments to extend coverage in the case of 
unemployment. This last feature offers something that Americans have 
been desiring for years--portability.
  All of this means that many Americans no longer will be forced to 
stay in a job that they do not want, nor do they have to fear losing 
their insurance if they lose their job. They will most likely have the 
comfort of knowing that the money has been provided by their employer, 
free of tax, and is in their account where it can be used to pay for 
their insurance premiums, as well as their routine doctor visits.
  What makes this legislation work is the fact that Americans will know 
that whatever they do not spend on health care expenses, they can keep 
for themselves. This also helps to improve the Nation's poor savings 
rate--the worst in the industrialized world.
  Mr. President, for all these reasons, I encourage my colleagues to 
support Senator Boren and me in this effort. It is good for our 
families. It is good for our health care delivery system. It is good 
for our country.


                         support organizations

  Mr. President, I would like to point out that there is a large 
coalition supporting medical savings accounts. We have had very strong 
support from the small business community and from agriculture 
organizations. I would like to mention a few supporters: the American 
Farm Bureau, the American Soybean Association, the National Association 
of Wheat Growers, the National Federation of Independent Businesses, 
the Small Business Council of America, the American Small Business 
Association, the National American Wholesale Grocers' Association, the 
U.S. Business and Industrial Council, the American Health Care 
Association, the Small Business Survival Committee, the Washington 
Policy Associates, the Independent Bakers Association, the Council for 
Affordable Health Insurance--which includes over 40 insurance 
companies, many doctors and health providers, and the Business 
Coalition for Affordable Health Care--which represents over 900,000 
American business, mostly small ones.
  We feel that this is an impressive list of supporters from diverse 
areas and particularly with the farm and small businesses, this is an 
important alternative that the Congress ought to allow for family's 
health care.


                            physician choice

  Under this legislation, you can go to any doctor, nurse, or other 
health care provider of your choice without worrying about whether or 
not your insurance is going to cover the bill. The reason is simple, 
you will be using the money that your employer has placed into your 
medical savings account before paying taxes, to pay the doctor. If your 
using your own money, then of course you are free to go to whatever 
health provider you want.
  Of course, not only will taxpayers be allowed to go to the doctor of 
their choice, but the hospital, nurse, the midwife, the chiropractor, 
or the optometrist of your choice as well. For working poor Americans, 
I believe medical savings accounts will be especially beneficial. 
That's because they will have the money to pay for health costs in 
their account, and in addition, they will not have to meet a deductible 
or a copayment problem that may prove prohibitively expensive for some 
workers.
  So to summarize, one of the great things about this bill is that no 
Government bureaucrat will get in the way of you and your doctor, or 
you and your hospital, or you and your nurse. There is no health junta 
in my legislation. No one to approve whether you spend the money on a 
second opinion or not, or get that extra test done. There is no 
standard plan that lays out a one-size-fits-all Government system for 
you to leap through. The money is yours, and so you are the one in 
control. But, because the money is yours, and because you will get to 
keep it if you do not waste it, I believe taxpayers will make smarter, 
more informed, and better decisions about when, how, and where to seek 
their health advice.


                   long-term care and cobra payments

  Two of the best provisions of this bill are the ones that add 
flexibility for consumers to purchase insurance in the event they lose 
their job, or if they want to buy long-term insurance. Under this bill, 
taxpayers will be able to use money in their medical savings account to 
make COBRA payments to continue their catastrophic health insurance 
policy in the event that their employer goes out of business, or if 
they are let go. This portability feature is something that is high on 
the list of most Americans in the context of health reform, and this 
bill helps address the problem.
  Second, many Americans know that if they are faced with a serious 
illness for a long period of time, they will need long-term care 
insurance. Those who receive their care from nursing homes understand 
exactly what I am talking about. Often, people's regular insurance does 
not cover this kind of expense, and a long-term care insurance policy 
becomes essential. Government cannot afford to pay the costs of this 
kind of benefit, but it can encourage it through the use of medical 
savings accounts, and the equal tax treatment I am advocating in this 
legislation.


                            cost containment

  Beyond offering patients choice, medical savings accounts will help 
control health care costs. The reason why is simple: it will encourage 
consumers of medical care to shop wisely, reject unnecessary treatment, 
and conserve scarce medical resources because it is the consumer, not 
some third party, such as an insurance company or the Government, who 
will be paying the bills.
  We already know about the success of medical savings accounts because 
they already exist. Many businesses and their employees have learned 
that they can offer these plans today. It is done by offering a high 
deductible health insurance policy to employees, and depositing the 
savings from buying these low cost plans into the employees' bank 
accounts.
  The problem, however, with the current medical savings accounts in 
effect, is that employees are treated worse under the tax laws by 
electing this self-insurance option for their health care coverage. You 
see, at the end of each year, the employee has to include the full 
amount of the money deposited into his or her medical savings account 
in taxable income. That is a grossly unfair result. Since most 
taxpayers cannot deduct their health service costs because they do not 
exceed the 7\1/2\ percent of adjusted gross income test, this often 
results in a tax penalty of between 15 and over 40 percent, after 
taking into account State taxes.

  Still, many, many taxpayers are electing on their own to choose these 
medical saving accounts rather than an ordinary health insurance plan 
from their employers. Why? The answer is simple; they know that they 
have the catastrophic insurance to cover them in the event of an 
emergency, and they have the money provided by their employer to pay 
for routine visits to the doctor for their family. These same taxpayers 
know that if they are good consumers, learn about competition in the 
health care industry, and shop wisely, then they will get to keep the 
savings from being a prudent consumer. Even with the dramatic tax 
penalty now imposed on these health accounts, taxpayers all over the 
country are choosing this method to pay for their health care. I will 
just mention a few employers with programs now in place, and hope the 
Senate will continue to look at their successes: Forbes, the United 
Mine Workers, Dominion Resources, DuPont, Golden Rule Insurance Co., 
Quaker Oats, and the Council for Affordable Health Insurance.


                           state legislation

  Already, seven States have passed legislation enacting tax-favored 
medical savings accounts: Arizona, Colorado, Idaho, Illinois, Michigan, 
Mississippi, and Missouri. Dozens of other States are working to pass 
similar legislation. Jersey City has implemented them as an alternative 
for their city employees, and the State of Ohio is moving to implement 
a test program next year for State employees. Clearly medical savings 
accounts offer Americans a choice about their health care that should 
be fundamental in a country built on free market principles. It is the 
Federal Government that must now move ahead with this new idea.
  I want to point out a few other things about efforts at the local 
levels of government to use medical savings accounts to reform health 
care. I have letters here from three Governors endorsing my proposal 
and pointing out how important it is that we pass their reform at the 
Federal level. Kirk Fordice, from Mississippi writes that he signed 
legislation earlier this year to establish medical savings accounts in 
that State. The State law provides tax exemptions for medical savings 
accounts spent on health care, and he states that a Federal exemption 
would strengthen this incentive, and give employers a viable option for 
providing cost effective health care coverage for their employees. He 
also points out that because medical savings accounts preserve and 
encourage the doctor-patient relationship, they are far more likely to 
produce wise health care choices than an enhanced bureaucracy.
  Another Governor, John Engler from Michigan, writes that he signed 
legislation on July 13, 1994, ``making Michigan the first large 
industrial State to encourage the creation and use of medical savings 
accounts.'' He points out that ``the injection of the consumer in the 
purchase of health care will work to make the individual much more 
sensitive to the true cost of care.''
  Another letter I received from Governor Edgar in Illinois also 
advocates that we adopt medical savings accounts. Governor Edgar points 
out that Illinois will soon have a new law that will allow employees 
and employers to contribute up to $3,000 to a medical savings account, 
from which withdrawals for health costs can be made free of Illinois 
income tax. He says that the Illinois General Assembly agreed 
unanimously to this proposal, and he agrees that the ``accounts just 
make good sense.''
  In addition to the seven States that have actually enacted medical 
savings account legislation, there are seven more that have asked the 
Federal Government to enact medical savings accounts. These resolutions 
at the State level are intended to encourage us to enact just the kind 
of legislation that is in my bill. Those States enacting resolutions 
supporting medical savings accounts, and therefore a bill like mine, 
are: Arizona, Colorado, Montana, South Carolina, Texas, Utah, and 
Virginia.
  I should also mention that there are quite a number of other States 
that have taken steps toward enacting medical savings accounts. In 
Oklahoma, the Oklahoma Family Choice Health Plan was proposed by 
Governor Walters and that plan is under study. That plan, includes a 
form of medical savings accounts, and even forces most individuals by 
1995 to use them to buy insurance and pay doctor's bills. Under a study 
by the respected firm of KPMG Peat Marwick, it was estimated that 
health costs would be reduced by 1 percent in 1997. In 1998 and beyond, 
savings are ``expected to be even greater.''
  In Minnesota, New Jersey, and South Carolina, the Governors have all 
signed legislation to enact in-depth studies of medical savings 
accounts. Mississippi has already concluded their study, and were so 
pleased by the results that they enacted medical savings account 
legislation.
  Other States have pending legislation, some of which have passed 
through some part of the legislative process. These States include: 
California, Kansas, New Mexico, New York, and Pennsylvania. Of these, 
the Kansas and New Mexico legislation has moved the furthest.
  I hope that the encouragement that the States have offered to us here 
in the Senate serve as a strong incentive for Members to support this 
legislation.


                                closing

  Clearly, strong efforts have been made to defeat any medical savings 
account legislation by those who have a vested interest in the current 
system.
  The real winners when my legislation passes will be hundreds of 
thousands of consumers who will have more control over the their own 
life and the health care they need.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2532

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

       (a) Short Title.--This Act may be cited as the ``Medical 
     Savings Account Tax Incentive Act''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.

     SEC. 2. DEDUCTION FOR CONTRIBUTIONS TO MEDICAL SAVINGS 
                   ACCOUNTS.

       (a) In General.--Part VII of subchapter B of chapter 1 
     (relating to additional itemized deductions for individuals) 
     is amended by redesignating section 220 as section 221 and by 
     inserting after section 219 the following new section:

     ``SEC. 220. CONTRIBUTIONS TO MEDICAL SAVINGS ACCOUNTS.

       ``(a) Deduction Allowed.--In the case of an eligible 
     individual, the amounts paid in cash during the taxable year 
     by such individual to a medical savings account for the 
     benefit of such individual or for the benefit of such 
     individual and any spouse or dependent of such individual who 
     is an eligible individual shall be treated for purposes of 
     sections 162(l) and 213 as amounts paid for insurance which 
     constitutes medical care.
       ``(b) Limitations.--
       ``(1) Only 1 account per family.--Except as provided in 
     regulations prescribed by the Secretary, no amount shall be 
     treated as paid for insurance by reason of subsection (a) for 
     amounts paid to any medical savings account if the account 
     beneficiary, or such beneficiary's spouse or dependent, is a 
     beneficiary of any other medical savings account.
       ``(2) Dollar limitation.--
       ``(A) In general.--The aggregate amount which may be 
     treated as paid for insurance under subsection (a) with 
     respect to any account beneficiary shall not exceed the 
     excess (if any) of--
       ``(i) the premium determined under subparagraph (B) for the 
     same class of enrollment as the high deductible health plan 
     described in subsection (c)(1)(A), over
       ``(ii) the cost of such high deductible health plan.
       ``(B) Premium.--Not later than January 1 of each calendar 
     year, the Secretary shall determine and publish the premium 
     (for each class of enrollment) for the preceding calendar 
     year for the health benefits plan offered under chapter 89 of 
     title 5, United States Code, with the highest enrollment 
     (determined on the basis of the annual open enrollment 
     period).
       ``(c) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Eligible individual.--The term `eligible individual' 
     means any individual--
       ``(A) who is covered under a high deductible health plan 
     during any portion of the calendar year with or within which 
     the taxable year begins, and
       ``(B) who is not eligible during such calendar year--
       ``(i) to participate in an employer-subsidized health plan 
     maintained by an employer of the individual, the individual's 
     spouse, or any dependent of either, or
       ``(ii) to receive any employer contribution to a medical 
     savings account.

     For purposes of subparagraph (B), a self-employed individual 
     (within the meaning of section 401(c)) shall not be treated 
     as his own employer.
       ``(2) High deductible health plan.--
       ``(A) In general.--The term `high deductible health plan' 
     means a health plan which--
       ``(i) has an annual deductible limit for each individual 
     covered by the plan which is not less than $1,000 or more 
     then $3,000, and
       ``(ii) has an annual limit on the aggregate amount of 
     deductibles required to be paid with respect to all 
     individuals covered by the plan which is not less than $2,000 
     or more than $5,500.
       ``(B) Cost-of-living adjustment.--In the case of taxable 
     years beginning after December 31, 1996, each dollar amount 
     contained in subparagraph (A) shall be increased by an amount 
     equal to the product of--
       ``(i) such dollar amount, and
       ``(ii) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, except that such section shall be applied by 
     substituting `the medical component of the CPI' for `the CPI' 
     each place it appears and by substituting `1995' for `1992' 
     in subparagraph (B).

     If any amount under this paragraph is not a multiple of $100, 
     such amount shall be rounded to the next lowest multiple of 
     $100.
       ``(3) Medical savings account.--The term `medical savings 
     account' has the meaning given such term by section 7705.
       ``(4) Time when contributions deemed made.--A contribution 
     shall be deemed to be made on the last day of the preceding 
     taxable year if the contribution is made on account of such 
     taxable year and is made not later than the time prescribed 
     by law for filing the return for such taxable year (not 
     including extensions thereof).''
       (b) Clerical Amendment.--The table of sections for part VII 
     of subchapter B of chapter 1 is amended by striking the last 
     item and inserting the following new item:

``Sec. 220. Contributions to medical savings accounts.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 3. EXCLUSION FROM INCOME OF EMPLOYER CONTRIBUTIONS TO 
                   MEDICAL SAVINGS ACCOUNTS.

       (a) In General.--Section 106 (relating to contributions by 
     employers to accident and health plans) is amended by adding 
     at the end the following new subsection:
       ``(b) Contributions to Medical Savings Accounts.--
       ``(1) Treatment of contributions.--
       ``(A) In general.--Gross income of an employee who is 
     covered by a high deductible health plan of an employer shall 
     not include any employer contribution to a medical savings 
     account on behalf of the employee or the employee's spouse or 
     dependents.
       ``(B) No constructive receipt.--No amount shall be included 
     in the gross income of any employee solely because the 
     employee may choose between the contributions described in 
     subparagraph (A) and employer contributions to a health plan 
     of the employer.
       ``(2) Dollar limitation.--The amount which may be excluded 
     under paragraph (1) for any taxable year shall not exceed the 
     high deductible health plan differential.
       ``(3) High deductible health plan differential.--For 
     purposes of paragraph (2)(B), the high deductible health plan 
     differential with respect to any employee is the amount by 
     which the cost of the high deductible health plan in which 
     the employee is enrolled is less than the lesser of--
       ``(A) the cost (for the same class of enrollment) of the 
     health plan which--
       ``(i) the employee is eligible to enroll in through the 
     employer, and
       ``(ii) has the highest cost of all health plans in which 
     the employee may enroll in through the employer, or
       ``(B) the amount determined under section 220(b)(2)(B).
       ``(4) Definitions.--For purposes of this subsection--
       ``(A) High deductible health plan.--The term `high 
     deductible health plan' has the meaning given such term by 
     section 220(c)(2).
       ``(B) Medical savings account.--The term `medical savings 
     account' has the meaning given such term by section 7705.''
       (b) Employer Payments Excluded From Employment Tax Base.--
       (1) Social security taxes.--
       (A) Subsection (a) of section 3121 is amended by striking 
     ``or'' at the end of paragraph (20), by striking the period 
     at the end of paragraph (21) and inserting ``; or'', and by 
     inserting after paragraph (21) the following new paragraph:
       ``(22) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(b).''
       (B) Subsection (a) of section 209 of the Social Security 
     Act is amended by striking ``or'' at the end of paragraph 
     (18), by striking the period at the end of paragraph (19) and 
     inserting ``; or'', and by inserting after paragraph (19) the 
     following new paragraph:
       ``(20) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(b) of the Internal 
     Revenue Code of 1986.''
       (2) Railroad retirement tax.--Subsection (e) of section 
     3231 is amended by adding at the end the following new 
     paragraph:
       ``(10) medical savings account contributions.--The term 
     `compensation' shall not include any payment made to or for 
     the benefit of an employee if at the time of such payment it 
     is reasonable to believe that the employee will be able to 
     exclude such payment from income under section 106(b).''
       (3) Unemployment tax.--Subsection (b) of section 3306 is 
     amended by striking ``or'' at the end of paragraph (15), by 
     striking the period at the end of paragraph (16) and 
     inserting ``; or'', and by inserting after paragraph (16) the 
     following new paragraph:
       ``(17) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(b).''
       (4) Withholding tax.--Subsection (a) of section 3401 is 
     amended by striking ``or'' at the end of paragraph (19), by 
     striking the period at the end of paragraph (20) and 
     inserting ``; or'', and by inserting after paragraph (20) the 
     following new paragraph:
       ``(21) any payment made to or for the benefit of an 
     employee if at the time of such payment it is reasonable to 
     believe that the employee will be able to exclude such 
     payment from income under section 106(b).''
       (c) Conforming Amendment.--Section 106 is amended by 
     striking ``Gross income'' and inserting:
       ``(a) General Rule.--Gross income''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1995.

     SEC. 4. MEDICAL SAVINGS ACCOUNTS.

       (a) In General.--Chapter 79 is amended by adding at the end 
     the following new section:

     ``SEC. 7705. MEDICAL SAVINGS ACCOUNTS.

       ``(a) General Rule.--The term `medical savings account' 
     means a trust created or organized in the United States for 
     the exclusive benefit of the beneficiaries of the trust, but 
     only if the written governing instrument creating the trust 
     meets the following requirements:
       ``(1) Except in the case of a rollover contribution 
     described in subsection (c)(4)--
       ``(A) no contribution will be accepted unless--
       ``(i) it is in cash, and
       ``(ii) it is made for a period during which the individual 
     on whose behalf it is made is covered under a high deductible 
     health plan, and
       ``(B) contributions will not be accepted for any calendar 
     year in excess of the amount determined under section 
     220(b)(2)(B).
       ``(2) The trustee is a bank (as defined in section 408(n)), 
     insurance company (as defined in section 816), or another 
     person who demonstrates to the satisfaction of the Secretary 
     that the manner in which such person will administer the 
     trust will be consistent with the requirements of this 
     section.
       ``(3) The assets of the trust will not be commingled with 
     other property except in a common trust fund or common 
     investment fund.
       ``(4) No part of the trust assets will be invested in life 
     insurance contracts.
       ``(5) The interest of an individual in the balance in the 
     individual's account is nonforfeitable.
       ``(b) Tax Treatment of Accounts.--
       ``(1) Account taxed as grantor trust.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the account beneficiary of a medical savings account shall be 
     treated for purposes of this title as the owner of such 
     account and shall be subject to tax thereon in accordance 
     with subpart E of part I of subchapter J of this chapter 
     (relating to grantors and others treated as substantial 
     owners).
       ``(B) Treatment of capital losses.--With respect to assets 
     held in a medical savings account, any capital loss for a 
     taxable year from the sale or exchange of such an asset shall 
     be allowed only to the extent of capital gains from such 
     assets for such taxable year. Any capital loss which is 
     disallowed under the preceding sentence shall be treated as a 
     capital loss from the sale or exchange of such an asset in 
     the next taxable year.
       ``(2) Account terminations.--
       ``(A) Prohibited transactions; excess withdrawals.--If, 
     during any taxable year of the account beneficiary--
       ``(i) such beneficiary engages in any transaction 
     prohibited by section 4975 with respect to the account, or
       ``(ii) there is a distribution out of the account any 
     portion of which is includible in the income of the account 
     beneficiary under subsection (c)(1)(A), and after such 
     distribution the balance in the account is less than the 
     annual aggregate deductible limit for all individuals covered 
     by the high deductible health plan,

     the account shall cease to be a medical savings account as of 
     the first day of such taxable year.
       ``(B) Failure to remain in health plan.--
       ``(i) In general.--If, at any time during the 2-taxable 
     year period beginning with the taxable year of the account 
     beneficiary in which the medical savings account was 
     established, the account beneficiary becomes a participant in 
     a health plan which has a lower individual (or aggregate) 
     deductible limit than the lowest individual (or aggregate) 
     limit permitted under a high deductible health plan, the 
     account shall cease to be a medical savings account as of the 
     first day of the taxable year in which the individual ceases 
     to be so covered.
       ``(ii) Exception.--This subparagraph shall not apply to any 
     account beneficiary who becomes a participant in a plan 
     described in such subparagraph by reason of separation from 
     employment.
       ``(C) Account treated as distributing all its assets.--In 
     any case in which any account ceases to be a medical savings 
     account by reason of subparagraph (A) or (B) on the first day 
     of any taxable year, subsection (c) shall be applied as if--
       ``(i) there were a distribution on such first day in an 
     amount equal to the fair market value (on such first day) of 
     all assets in the account (on such first day), and
       ``(ii) no portion of such distribution were used to pay 
     qualified medical expenses.
       ``(D) Correction within 60 days.--Subparagraph (A)(ii) 
     shall not apply to any distribution if, within 60 days of the 
     1st date the account beneficiary knew (or exercising 
     reasonable diligence would have known) of a failure to meet 
     the requirements of subparagraph (A)(ii), the account 
     beneficiary repays to the account the amount of the excess 
     distribution. Such repayment shall not be treated as a 
     contribution to the account.
       ``(3) Effect of pledging account as security.--If, during 
     any taxable year, the account beneficiary uses the account or 
     any portion thereof as security for a loan, the portion so 
     used is treated as distributed and not used to pay qualified 
     medical expenses.
       ``(c) Tax Treatment of Distributions.--
       ``(1) Inclusion of amounts not used for qualified medical 
     expenses.--
       ``(A) In general.--Any amount paid or distributed out of a 
     medical savings account which is not used exclusively to pay 
     the qualified medical expenses of the account beneficiary or 
     of the spouse or dependents of such beneficiary shall be 
     included in the gross income of such beneficiary to the 
     extent such amount does not exceed the excess of--
       ``(i) the aggregate contributions to such account which 
     were not includible in gross income by reason of section 
     106(b) or which were deductible under section 220, over
       ``(ii) the aggregate prior payments or distributions from 
     such account which were includible in gross income under this 
     paragraph.
       ``(B) Special rules.--For purposes of subparagraph (A)--
       ``(i) all payments and distributions during any taxable 
     year shall be treated as 1 distribution, and
       ``(ii) any distribution of property shall be taken into 
     account at its fair market value on the date of the 
     distribution.
       ``(2) Excess contributions returned before due date of 
     return.--Paragraph (1) shall not apply to the distribution of 
     any contribution paid during a taxable year to a medical 
     savings account to the extent that such contribution exceeds 
     the amount under subsection (a)(2) if--
       ``(A) such distribution is received by the individual on or 
     before the last day prescribed by law (including extensions 
     of time) for filing such individual's return for such taxable 
     year, and
       ``(B) such distribution is accompanied by the amount of net 
     income attributable to such excess contribution.

     Any net income described in subparagraph (B) shall be 
     included in the gross income of the individual for the 
     taxable year in which it is received.
       ``(3) Penalty for distributions not used for qualified 
     medical expenses.--
       ``(A) In general.--The tax imposed by chapter 1 on the 
     account beneficiary for any taxable year in which there is a 
     payment or distribution from a medical savings account of 
     such beneficiary which is includible in gross income under 
     paragraph (1) shall be increased by 10 percent of the amount 
     which is so includible.
       ``(B) Exception for disability or death.--Subparagraph (A) 
     shall not apply if the payment or distribution is made after 
     the account beneficiary becomes disabled within the meaning 
     of section 72(m)(7) or dies.
       ``(C) Exception for distributions after age 59\1/2\.--
     Subparagraph (A) shall not apply to any payment or 
     distribution after the date on which the account beneficiary 
     attains age 59\1/2\.
       ``(4) Rollover contribution.--An amount is described in 
     this paragraph as a rollover contribution if it meets the 
     requirements of subparagraphs (A) and (B).
       ``(A) In general.--Paragraph (1) shall not apply to any 
     amount paid or distributed from a medical savings account to 
     the account beneficiary to the extent the amount received is 
     paid into a medical savings account for the benefit of such 
     beneficiary not later than the 60th day after the day on 
     which the beneficiary receives the payment or distribution.
       ``(B) Limitation.--This paragraph shall not apply to any 
     amount described in subparagraph (A) received by an 
     individual from a medical savings account if, at any time 
     during the 1-year period ending on the day of such receipt, 
     such individual received any other amount described in 
     subparagraph (A) from a medical savings account which was not 
     includible in the individual's gross income because of the 
     application of this paragraph.
       ``(5) Coordination with medical expense deduction.--For 
     purposes of section 213, any payment or distribution out of a 
     medical savings account for qualified medical expenses shall 
     not be treated as an expense paid for medical care to the 
     extent of the amount of such payment or distribution which is 
     excludable from gross income solely by reason of paragraph 
     (1)(A).
       ``(6)  Transfer of account incident to divorce.--The 
     transfer of an individual's interest in a medical savings 
     account to an individual's spouse or former spouse under a 
     divorce or separation instrument described in subparagraph 
     (A) of section 71(b)(2) shall not be considered a taxable 
     transfer made by such individual notwithstanding any other 
     provision of this subtitle, and such interest at the time of 
     the transfer shall be treated as a medical savings account of 
     such spouse, and not of such individual. Any such account or 
     annuity shall, for purposes of this subtitle, be treated as 
     maintained for the benefit of the spouse to whom the interest 
     was transferred.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Qualified medical expenses.--
       ``(A) In general.--The term `qualified medical expenses' 
     means any expense for--
       ``(i) medical care (as defined in section 213(d)), or
       ``(ii) qualified long-term care services.
       ``(B) Exception for insurance.--
       ``(i) In general.--Such term shall not include any expense 
     for insurance.
       ``(ii) Exceptions.--Clause (i) shall not apply to any 
     expense for--

       ``(I) coverage under a health plan during a period of 
     continuation coverage described in section 4980B(f)(2)(B),
       ``(II) coverage under a medicare supplemental policy (as 
     defined in section 1882(g)(1) of the Social Security Act), or
       ``(III) payment of premiums under part A or B of title 
     XVIII of the Social Security Act, or
       ``(IV) coverage under a policy providing qualified long-
     term care services.

       ``(C) Qualified long-term care services.--For purposes of 
     this paragraph--
       ``(i) In general.--The term `qualified long-term care 
     services' means necessary diagnostic, preventive, 
     therapeutic, rehabilitative, and maintenance (including 
     personal care) services--

       ``(I) which are required by an individual during any period 
     during which such individual is a functionally impaired 
     individual,
       ``(II) which have as their primary purpose the provision of 
     needed assistance with 1 or more activities of daily living 
     which a functionally impaired individual is certified as 
     being unable to perform under clause (ii)(I), and
       ``(III) which are provided pursuant to a continuing plan of 
     care prescribed by a licensed health care practitioner (other 
     than a relative of such individual).

       ``(ii) Functionally impaired individual.--

       ``(I) In general.--The term `functionally impaired 
     individual' means any individual who is certified by a 
     licensed health care practitioner (other than a relative of 
     such individual) as being unable to perform, without 
     substantial assistance from another individual (including 
     assistance involving verbal reminding, physical cueing, or 
     substantial supervision), at least 3 activities of daily 
     living described in clause (iii).
       ``(II) Special rule for home health care services.--In the 
     case of services which are provided during any period during 
     which an individual is residing within the individual's home 
     (whether or not the services are provided within the home), 
     subclause (I) shall be applied by substituting `2' for `3'. 
     For purposes of this subclause, a nursing home or similar 
     facility shall not be treated as a home.

       ``(iii) Activities of daily living.--Each of the following 
     is an activity of daily living:

       ``(I) Eating.
       ``(II) Transferring.
       ``(III) Toileting.
       ``(IV) Dressing.
       ``(V) Bathing.

       ``(D) Licensed health care practitioner.--For purposes of 
     subparagraph (C)--
       ``(i) In general.--The term `licensed health care 
     practitioner' means--

       ``(I) a physician or registered professional nurse,
       ``(II) a qualified community care case manager (as defined 
     in clause (ii)), or
       ``(III) any other individual who meets such requirements as 
     may be prescribed by the Secretary after consultation with 
     the Secretary of Health and Human Services.

       ``(ii) Qualified community care case manager.--The term 
     `qualified community care case manager' means an individual 
     or entity which--

       ``(I) has experience or has been trained in providing case 
     management services and in preparing individual care plans;
       ``(II) has experience in assessing individuals to determine 
     their functional and cognitive impairment;
       ``(III) is not a relative of the individual receiving case 
     management services; and
       ``(IV) meets such requirements as may be prescribed by the 
     Secretary after consultation with the Secretary of Health and 
     Human Services.

       ``(E) Relative.--For purposes of this paragraph, the term 
     `relative' means an individual bearing a relationship to 
     another individual which is described in paragraphs (1) 
     through (8) of section 152(a).
       ``(2) Account beneficiary.--The term `account beneficiary' 
     means the individual for whose benefit the medical savings 
     account is maintained.
       ``(e) Custodial Accounts.--For purposes of this section, a 
     custodial account shall be treated as a trust if--
       ``(1) the assets of such account are held by a bank (as 
     defined in section 408(n)), insurance company (as defined in 
     section 816), or another person who demonstrates to the 
     satisfaction of the Secretary that the manner in which such 
     person will administer the account will be consistent with 
     the requirements of this section, and
       ``(2) the custodial account would, except for the fact that 
     it is not a trust, constitute a medical savings account 
     described in subsection (a).

     For purposes of this title, in the case of a custodial 
     account treated as a trust by reason of the preceding 
     sentence, the custodian of such account shall be treated as 
     the trustee thereof.
       ``(f) Reports.--The trustee of a medical savings account 
     shall make such reports regarding such account to the 
     Secretary and to the individual for whose benefit the account 
     is maintained with respect to contributions, distributions, 
     and such other matters as the Secretary may require under 
     regulations. The reports required by this subsection shall be 
     filed at such time and in such manner and furnished to such 
     individuals at such time and in such manner as may be 
     required by those regulations.''
       (b) Tax on Excess Contributions.--Section 4973 (relating to 
     tax on excess contributions to individual retirement 
     accounts, certain section 403(b) contracts, and certain 
     individual retirement annuities) is amended--
       (1) by inserting ``medical savings accounts,'' after 
     ``accounts,'' in the heading of such section,
       (2) by striking ``or'' at the end of paragraph (1) of 
     subsection (a),
       (3) by redesignating paragraph (2) of subsection (a) as 
     paragraph (3) and by inserting after paragraph (1) the 
     following:
       ``(2) a medical savings account (within the meaning of 
     section 7705(a)), or'', and
       (4) by adding at the end the following new subsection:
       ``(d) Excess Contributions to Medical Savings Accounts.--
     For purposes of this section, in the case of a medical 
     savings account (within the meaning of section 7705(a)), the 
     term `excess contributions' means the amount by which the 
     amount contributed for the taxable year to the account 
     exceeds the amount which may be contributed to the account 
     under section 7705(a)(1)(B) for such taxable year. For 
     purposes of this subsection, any contribution which is 
     distributed out of the medical savings account in a 
     distribution to which section 7705(c)(2) applies shall be 
     treated as an amount not contributed.''
       (c) Tax on Prohibited Transactions.--Section 4975 (relating 
     to prohibited transactions) is amended--
       (1) by adding at the end of subsection (c) the following 
     new paragraph:
       ``(4) Special rule for medical savings accounts.--An 
     individual for whose benefit a medical savings account 
     (within the meaning of section 7705(a)) is established shall 
     be exempt from the tax imposed by this section with respect 
     to any transaction concerning such account (which would 
     otherwise be taxable under this section) if, with respect to 
     such transaction, the account ceases to be a medical savings 
     account by reason of the application of section 
     7705(b)(2)(A)(i) to such account.'', and
       (2) by inserting ``or a medical savings account described 
     in section 7705(a)'' in subsection (e)(1) after ``described 
     in section 408(a)''.
       (d) Failure To Provide Reports on Medical Savings 
     Accounts.--Section 6693 (relating to failure to provide 
     reports on individual retirement accounts or annuities) is 
     amended--
       (1) by inserting ``or on medical savings accounts'' after 
     ``annuities'' in the heading of such section, and
       (2) by adding at the end of subsection (a) the following: 
     ``The person required by section 7705(f) to file a report 
     regarding a medical savings account at the time and in the 
     manner required by such section shall pay a penalty of $50 
     for each failure unless it is shown that such failure is due 
     to reasonable cause.''
       (e) Clerical Amendments.--
       (1) The table of sections for chapter 43 is amended by 
     striking the item relating to section 4973 and inserting the 
     following:

``Sec. 4973. Tax on excess contributions to individual retirement 
              accounts, medical savings accounts, certain 403(b) 
              contracts, and certain individual retirement annuities.''
       (2) The table of sections for subchapter B of chapter 68 is 
     amended by inserting ``or on medical savings accounts'' after 
     ``annuities'' in the item relating to section 6693.
       (f) Effective Date.--The amendments made by this section 
     shall take effect on January 1, 1996.
                                 ______

      By Mr. SMITH (for himself and Mr. Faircloth):
  S. 2533. A bill to amend the Immigration and Nationality Act to 
protect Americans against criminal activity by aliens, to defend 
against acts of international terrorism, and to relieve pressure on 
public services by enhancing border security and diminishing legal 
immigration into the United States; to the Committee on the Judiciary.


                 the immigration control and reform act

  Mr. SMITH. Mr. President, as the recent Haitian and Cuban refugee 
crises dramatically demonstrate, the immigration issue remains one of 
our most urgent national priorities. On behalf of myself and Senator 
Faircloth, today I am introducing a bill that combines the best of the 
approaches that I have studied to controlling illegal immigration and 
reforming legal immigration. My bill is entitled the ``Immigration 
Control and Reform Act of 1994.''
  Nearly 8 years after the passage of the landmark Immigration Reform 
and Control Act of 1986, our Nation still has not secured its borders. 
Illegal immigration remains out of control. The Immigration and 
Naturalization Service apprehends about 1 million illegal aliens every 
year as they seek to enter our country. About three times that many 
illegal aliens evade the INS each year and enter the country. The INS 
estimates that at least 4 million illegal aliens reside permanently in 
the United States and that number grows by at least 300,000 per year.
  The best--and most comprehensive--approach that I have found to 
addressing this continuing crisis is the result of the stellar work of 
the Task Force on Illegal Immigration of the House Republican Research 
Committee. The Immigration Control and Reform Act of 1994 incorporates, 
with some revisions, many of the proposals set forth by the task force. 
In doing so, the bill introduced by myself and Senator Faircloth seeks 
to blunt the effects of two of the most powerful magnets that draw 
illegal aliens into our country--the hope of employment and the allure 
of the welfare state.
  As my colleagues know, the employer sanctions provisions of the 1986 
act are the principal means by which the current immigration laws seek 
to neutralize the employment magnet drawing illegal aliens to the 
United States. The 1986 act requires job applicants to prove that they 
are either U.S. citizens or legal immigrants who are authorized to work 
here. But the proof can come from 29 separate documents--ranging from 
passports to driver's licenses. Numerous studies indicate widespread 
fraud through counterfeiting.
  In keeping with the general approach adopted by the House task force 
and recommended in principle recently by the U.S. Commission on 
Immigration Reform, my bill would establish Social Security numbers as 
the sole means by which employment authorization would be verified. 
Under the new system established by my bill, prospective employers 
would call a national employment verification telephone number to check 
a person's eligibility for employment in much the same manner in which 
retailers now verify credit cards. Such a system, I am convinced, will 
obviate the need for a national identification card, which I think 
would be an infringement on privacy.
  In order to address the welfare magnet aspect of the illegal 
immigration problem, my bill includes strict new prohibitions on 
welfare benefits to illegal aliens. Dr. Don Huddle, of Rice University, 
estimates that the nationwide cost for providing health care alone to 
illegal aliens is $2.5 billion per year. That is just health care. A 
Congressional Research Service study indicates that illegal aliens can 
get on the rolls of more than 100 Federal benefits programs. My bill 
puts a stop to this deplorable state of affairs by explicitly barring 
illegal aliens from receiving any such benefits.
  My bill also addresses the illegal immigration crisis by taking steps 
toward improving significantly our illegal immigration control efforts 
at the Nation's land borders, at her ports of entry, and at overseas 
airports. In addition, my bill takes aim at the increasing problem of 
alien smuggling.

  The Immigration Control and Reform Act of 1994 also remedies a 
significant weakness in the House Republican Immigration Task Force 
approach--the fact that it does not address the current astronomical 
levels of legal immigration. While it is true that ours is proudly a 
nation of immigrants, we simply cannot afford the luxury of legal 
immigration levels of almost 900,000--about three times the historical 
levels--at a time when illegal immigration remains out of control. 
Public opinion polls repeatedly demonstrate that overwhelming 
majorities of the American people want legal immigration levels brought 
down dramatically. A recent ABC News poll, for example, found that 73 
percent of respondents agreed with the statement that ``the U.S. 
Government is allowing too many immigrants to enter this country these 
days.''
  In order to bring legal immigration down to more reasonable levels, 
my bill proposes a reduction of total legal immigration from the 
current annual level of approximately 880,000 to 300,000 persons per 
year. the 300,000 figure represents the approximate historical average 
of annual immigration rates for the period of 1820 through the modern 
liberalization of legal immigration levels in 1965. Although a 
reduction of nearly two-thirds in our annual legal immigration levels 
is a major step, it is hardly a radical one. Indeed, the old U.S. 
Select Commission on Immigration and Refugee Policy, the chairman of 
which was Father Theodore Hesburgh, recommended an annual legal 
immigration cap of 325,000 when it issued its report nearly 15 years 
ago.
  Finally, Mr. President, my Immigration Control and Reform Act 
proposal incorporates the Smith-Simpson amendment to the Senate-passed 
version of the crime bill. As my colleagues will recall, the Smith-
Simpson amendment provided for a new procedure to enable the Justice 
Department to secure the deportation of terrorist aliens through the 
use of classified information. Although the Smith-Simpson amendment 
passed the Senate unanimously and the Clinton administration 
acknowledged that the measure is both necessary and fully 
constitutional, senior liberal members of the House Judiciary Committee 
insisted upon its removal from the conference report on the crime bill. 
I am confident that we can and will get the Smith-Simpson amendment 
enacted into law. I just hope that we can do so before another alien 
terrorist commits another barbaric act like the World Trade Center 
bombing.
  Mr. President, I ask unanimous consent that the full text of my bill, 
as well as a section-by-section analysis, be printed in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. SMITH. Mr. President, I am pleased that the distinguished Senator 
from North Carolina, Senator Faircloth, has joined me as an original 
cosponsor of the Immigration Control and Reform Act of 1994. I invite 
my colleagues to study our proposal and to join us as cosponsors when 
the bill is reintroduced in the 104th Congress next year.

                                S. 2533

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Immigration Control and 
     Reform Act of 1994.''.

     SEC. 2. TABLE OF CONTENTS.

Sec. 1. Short title.
Sec. 2. Table of contents.

                   TITLE I--LEGAL IMMIGRATION REFORM

               Subtitle A--Admission of Legal Immigrants

Sec. 101. Reduction in annual legal immigration ceilings.
Sec. 102. Redefinition of immediate relatives.
Sec. 103. Revision of preference allocations for family-sponsored 
              immigrants.
Sec. 104. Revision of preference allocations for employment-based 
              immigrants.
Sec. 105. Conforming amendments.
Sec. 106. Transition.
Sec. 107. Repeal.

                   Subtitle B--Admission of Refugees

Sec. 111. Number of admissions.

                 TITLE II--ILLEGAL IMMIGRATION CONTROL

                    Subtitle A--Land Borders Control

Sec. 201. Placement of additional physical barriers.
Sec. 202. Establishment of interior repatriation program.

                   Subtitle B--Ports of Entry Control

Sec. 211. Requirement of 24 hours' notice of arrivals by ships.

                 Subtitle C--Overseas Airports Control

Sec. 221. Establishment of additional preinspection stations.
Sec. 222. Training of airline personnel in detection of fraud.

                  Subtitle D--Alien Smuggling Control

Sec. 231. Expansion of alien smuggling asset forfeiture program.
Sec. 232. Inclusion of alien smuggling in RICO Act.
Sec. 233. Enhanced penalties for alien smuggling and employment.
Sec. 234. Provision of wiretap authority for investigations.

               Subtitle E--Employer Sanctions Enforcement

Sec. 241. Improvement of work eligibility verification systems.

     Subtitle F--Prohibition on Welfare Benefits to Illegal Aliens

Sec. 251. Prohibition of welfare benefits to illegal aliens.
Sec. 252. Prohibition of unemployment benefits to illegal aliens.
Sec. 253. Prohibition of housing benefits to illegal aliens.
Sec. 254. Enhancement of legal alien entitlement verification.

   Subtitle G--State and Local Cooperation in Immigration Enforcement

Sec. 261. Prohibition on financial assistance.
Sec. 262. Establishment of program for uniform vital statistics.

              TITLE III--EXCLUSION AND DEPORTATION REFORM

                      Subtitle A--Criminal Aliens

Sec. 301. Registration of aliens on probation and parole.
Sec. 302. Expansion of definition of aggravated felony.
Sec. 303. Authorization of judicial deportation orders.
Sec. 304. Restrictions on defenses to deportation by criminals.
Sec. 305. Establishment of alien prisoner transfer treaty study.

                      Subtitle B--Terrorist Aliens

Sec. 311. Removal of alien terrorists.
Sec. 312. Mandatory exclusion for membership in terror group.

             Subtitle C--Enforcement of Deportation Orders

Sec. 321. Limitations on collateral attacks on underlying deportation 
              orders.

         Subtitle D--Expedited Asylum Review at Ports of Entry

Sec. 331. Establishment of expedited asylum review program.

                       Subtitle E--Asylum Reform

Sec. 341. Asylum.
Sec. 342. Failure to appear for asylum hearing; judicial review.
Sec. 343. Conforming amendments.
Sec. 344. Effective dates.

                  Subtitle F--Miscellaneous Provisions

Sec. 351. Authorization of telephonic deportation hearings.
Sec. 352. Construction of expedited deportation requirements.

                        TITLE IV--EFFECTIVE DATE

Sec. 401. Effective date.
                   TITLE I--LEGAL IMMIGRATION REFORM
               Subtitle A--Admission of Legal Immigrants

     SEC. 101. REDUCTION IN ANNUAL LEGAL IMMIGRATION CEILINGS.

       (a) Family-Sponsored Immigration.--Section 201(c)(1) of the 
     Immigration and Nationality Act (8 U.S.C. 1151) is amended to 
     read as follows:
       ``(c) Worldwide Level of Family-Sponsored Immigrants.--(1) 
     The worldwide level of family-sponsored immigrants under this 
     subsection for a fiscal year is equal to--
       ``(A) 300,000, minus
       ``(B) the number computed under paragraph (2), plus
       ``(C) the number computed under paragraph (3).''.
       (b) Employment-Based Immigration.--Section 201(d)(1)(A) of 
     the Immigration and Nationality Act (8 U.S.C. 1151(d)(1)(A)) 
     is amended by striking ``140,000'' and inserting ``30,000''.
       (c) Diversity Immigration.--Section 201(e) of the 
     Immigration and Nationality Act (8 U.S.C. 1151(e)) is amended 
     by striking ``55,000'' and inserting ``35,000''.

     SEC. 102. REDEFINITION OF IMMEDIATE RELATIVES.

       Section 201(b)(2)(A)(i) of the Immigration and Nationality 
     Act (8 U.S.C. 1151(b)(2)(A)(i)) is amended by striking 
     ``children, spouses, and parents of a citizen of the United 
     States, except that, in the case of parents, such citizens 
     shall be at least 21 years of age'' and inserting ``children 
     and spouses of a citizen of the United States''.

     SEC. 103. REVISION OF PREFERENCE ALLOCATIONS FOR FAMILY-
                   SPONSORED IMMIGRANTS.

       Paragraphs (1) through (4) of section 203(a) of the 
     Immigration and Nationality Act are amended to read as 
     follows:
       ``(1) Spouses and children of permanent resident aliens.--
     Qualified immigrants who are the spouses or children of an 
     alien lawfully admitted for permanent residence shall be 
     allocated visas in a number equal to 40 percent of the 
     difference between such worldwide level and the number of 
     immediate relative visas required, plus any visas not 
     required for the class specified in paragraph (1).
       ``(2) Parents of adult united states citizens.--Qualified 
     immigrants who are the parents of citizens of the United 
     States who are at least 21 years of age shall be allocated 
     visas in a number equal to 60 percent of the difference 
     between such worldwide level and the number of immediate 
     relative visas required, plus any visas not required for the 
     class specified in paragraph (1).
       ``(3) Sons and daughters of united states citizens.--
     Qualified immigrants holding priority dates as of the 
     effective date of this paragraph who are the sons and 
     daughters of citizens of the United States shall be allocated 
     visas in a number equal to 75 percent of the maximum number 
     of visas available but not issued under paragraphs (1) and 
     (2).
       ``(4) Sons and daughters of permanent resident aliens.--
     Qualified immigrants holding priority dates as of the 
     effective date of this paragraph who are the sons and 
     daughters of permanent resident aliens shall be allocated 
     visas in a number equal to 25 percent of the maximum number 
     of visas available but not issued under paragraphs (1) and 
     (2).
       ``(5) Brothers and sisters of citizens.--Qualified 
     immigrants holding priority dates as of the effective date of 
     this paragraph who are the brothers or sisters of citizens of 
     the United States, if such citizens are at least 21 years of 
     age, shall be allocated visas in a number equal to the number 
     of visas not required for the classes specified in paragraphs 
     (3) and (4).''.

     SEC. 104. REVISION OF PREFERENCE ALLOCATIONS FOR EMPLOYMENT-
                   BASED IMMIGRANTS.

       (a) Adjustment in Allocations as Percentage of Worldwide 
     Level.--(1) Section 203(b)(1) of such Act is amended by 
     striking ``28.6 percent'' and inserting ``50 percent''.
       (2) Section 203(b)(2)(A) of such Act is amended by striking 
     ``28.6 percent'' and inserting ``50 percent''.
       (3) Section 203(b)(1) of such Act is amended by striking 
     ``, plus any visas not required for the classes specified in 
     paragraphs (4) and (5),''.
       (b) Allocations for Backlogged Previous Preferences.--(1) 
     Section 203(b)(3)(A) of such Act (8 U.S.C. 1153(b)(3)(A)), in 
     the text above clause (i), is amended to read as follows:
       ``(A) In general.--Visas shall be made available in a 
     number equal to the number of visas not required for the 
     classes specified in paragraphs (1) and (2) to the following 
     classes of aliens not described in paragraph (2) who are 
     qualified immigrants holding priority dates as of the 
     effective date of this paragraph:''.
       (2) Section 203(b)(4) of such Act (8 U.S.C. 1153(b)(4)) is 
     amended by striking ``in a number not to exceed 7.1 percent 
     of such worldwide level, to qualified special immigrants'' 
     and inserting ``in a number equal to the number of visas not 
     required for the classes specified in paragraphs (1) through 
     (3), to qualified special immigrants holding priority dates 
     as of the effective date of this Act who are''.
       (3) Section 203(b)(5)(A) of such Act (8 U.S.C. 
     1153(b)(5)(A)), in the text above clause (i), is amended to 
     read as follows:
       ``(A) In general.--Visas shall be made available in a 
     number equal to the number of visas not required for 
     paragraphs (1) through (4) to qualified immigrants holding 
     priority dates as of the effective date of this paragraph who 
     are seeking to enter the United States for the purpose of 
     engaging in a new commercial enterprise--''.
       (4) Section 203(b)(6) of such Act (8 U.S.C. 1153(b)(6)) is 
     repealed.

     SEC. 105. CONFORMING AMENDMENTS.

       Section 204 of the Immigration and Nationality Act (8 
     U.S.C. 1154) is amended--
       (1) in subsection (a)(1)--
       (A) in subparagraph (A), by striking ``paragraph (1), (3), 
     or (4)'' and inserting ``paragraph (1) or (3)'';
       (B) in subparagraph (D), by striking ``203(b)(2), or 
     203(b)(3)'' and inserting ``or 203(b)(2)'';
       (C) by redesignating subparagraph (E)(ii) as subparagraph 
     (E);
       (D) by striking subparagraph (E)(i);
       (E) by striking subparagraph (F); and
       (F) by redesignating subparagraph (G) as subparagraph (F); 
     and
       (2) in subsection (b), by striking ``or 203(b)(3)''.

     SEC. 106. TRANSITION.

       (a) Parents of Citizens; Unmarried Sons and Daughters of 
     Citizens.--Any petition filed under section 204(a) of the 
     Immigration and Nationality Act before the effective date of 
     this Act for--
       (1) immediate relative status as a parent of a United 
     States citizen who is at least 21 years of age,
       (2) preference status under section 203(a)(1) of such Act 
     (as in effect before such date),
       (3) preference status under section 203(a)(2) by virtue of 
     being the spouse or child of a permanent resident alien, or
       (4) preference status under section 203(a)(2) by virtue of 
     being the son or daughter of a permanent resident alien,

     shall be deemed, as of such date, to be a petition filed 
     under such section for preference status under section 
     203(a)(2), section 203(a)(3), 203(a)(1), or 203(a)(4), 
     respectively, of such Act (as amended by this Act).
       (b) Eliminated Preference Classifications.--Beginning on 
     the effective date of this Act--
       (1) the Attorney General may not accept any petition filed 
     under section 204(a) for classification under section 
     203(a)(4), 203(b)(3), 203(b)(4), or 203(b)(5), as in effect 
     before the effective date of this Act; and
       (2) each priority date established before the effective 
     date of this Act shall be maintained with respect to any 
     petition filed under section 204(a) of the Immigration and 
     Nationality Act before such date for preference status under 
     paragraph (1), (2), (3), or (4) of section 203(a) (as in 
     effect before such date) or paragraph (3), (4), or (5) of 
     section 203(b) of such Act (as in effect before such date).

     SEC. 107. REPEAL.

       Section 301 of the Immigration Act of 1990 (Public Law 101-
     649) (relating to admission of dependents of legalized 
     aliens) is hereby repealed.
                   Subtitle B--Admission of Refugees

     SEC. 111. NUMBER OF ADMISSIONS.

       Section 207 of the Immigration and Nationality Act (8 
     U.S.C. 1157) is amended by striking subsection (a) and 
     inserting the following:
       ``(a) Except as provided in subsection (b), the number of 
     refugees who may be admitted under this section in any fiscal 
     year may not exceed 35,000. Admissions under this subsection 
     shall be allocated by the President among refugees of special 
     humanitarian concern to the United States.''.
                 TITLE II--ILLEGAL IMMIGRATION CONTROL
                    Subtitle A--Land Borders Control

     SEC. 201. PLACEMENT OF ADDITIONAL PHYSICAL BARRIERS.

       After consultation with the Commissioner of Immigration and 
     Naturalization, but not later than 6 months after the date of 
     enactment of this Act, the Attorney General shall submit a 
     report to the chairmen of the Committees on the Judiciary of 
     the House of Representatives and the Senate on the 
     feasibility and cost of the placement of substantial numbers 
     of additional physical barriers at appropriate points on the 
     border between the United States and Mexico to deter and 
     prevent unauthorized crossings into the United States.

     SEC. 202. ESTABLISHMENT OF INTERIOR REPATRIATION PROGRAM.

       Not later than 180 days after the date of enactment of this 
     Act, the Attorney General, in consultation with the 
     Commissioner of Immigration and Naturalization, shall develop 
     and implement a program in which aliens who entered the 
     United States illegally not less than three times before such 
     date and were deported or returned to a country that is 
     contiguous to the United States shall be returned to 
     locations that are not less than five hundred kilometers from 
     that country's border with the United States.
                   Subtitle B--Ports of Entry Control

     SEC. 211. REQUIREMENT OF 24 HOURS' NOTICE OF ARRIVALS BY 
                   SHIPS.

       The Attorney General is authorized to require, by 
     regulation, not less than 24 hours of advance notice to the 
     Immigration and Naturalization Service of the intention of 
     any seagoing vessel to arrive at any port of entry of the 
     United States.
                 Subtitle C--Overseas Airports Control

     SEC. 221. ESTABLISHMENT OF ADDITIONAL PREINSPECTION STATIONS.

       (a) Preinspection Stations.--(1) After consultation with 
     the Secretary of State and the Commissioner of Immigration 
     and Naturalization, but not later than 6 months after the 
     date of enactment of this Act, the Attorney General shall 
     submit a report to the chairmen of the Committees on the 
     Judiciary of the House of Representatives and the Senate on 
     the feasibility and cost of the establishment and maintenance 
     of preinspection stations in at least 10 of the foreign 
     airports that the Attorney General determines to be serving 
     as the last points of departure for the greatest numbers of 
     passengers who arrive from abroad by air at ports of entry 
     within the United States. Such preinspection stations shall 
     be in addition to any preinspection stations that are 
     established before the date of enactment of this section.
       (2) Not later than November 1 of each year, the Attorney 
     General shall compile data identifying--
       (A) the foreign airports that served as the last points of 
     departure for aliens who arrived by air at ports of entry 
     into the United States without valid documentation during the 
     preceding fiscal year,
       (B) the number and nationality of such aliens arriving from 
     each such foreign airport, and
       (C) the primary routes that such aliens followed from their 
     countries of origin to the United States.
       (3) Prior to the establishment of a preinspection station, 
     the Attorney General, in consultation with the Secretary of 
     State, shall ensure that--
       (A) employees of the United States stationed at the 
     preinspection station and their accompanying family members 
     will receive appropriate protection,
       (B) such employees and their families will not be subject 
     to unreasonable risks to their welfare and safety, and
       (C) the country in which the preinspection station is to be 
     established maintains practices and procedures with respect 
     to asylum seekers and refugees in accordance with the 
     Convention Relating to the Status of Refugees (done at Geneva 
     on July 28, 1951) or the Protocol Relating to the Status of 
     Refugees (done at New York on January 31, 1967).
       (b) Establishment of Carrier Consultant Program.--After 
     consultation with the Secretary of State and the Commissioner 
     of Immigration and Naturalization, but not later than 6 
     months after the date of enactment of this Act, the Attorney 
     General shall submit a report to the chairmen of the 
     Committees on the Judiciary of the House of Representatives 
     and the Senate on the feasibility and cost of the assignment 
     of substantial numbers of additional immigration officers to 
     assist air carriers in the detection of fraudulent documents 
     at foreign airports that, based on the records that are 
     maintained in accordance with subsection (a)(2), served as 
     the points of departure for a significant number of the 
     aliens arriving at ports of entry into the United States 
     without valid documentation, but where no preinspection 
     station exists.

     SEC. 222. TRAINING OF AIRLINE PERSONNEL IN DETECTION OF 
                   FRAUD.

       (a) Use of Funds.--Section 286(h)(2)(A) (8 U.S.C. 
     1356(h)(2)(A)) is amended--
       (1) in clause (iv), by inserting ``, including training of, 
     and technical assistance to, commercial airline personnel on 
     such detection'' after ``United States'', and

       (2) by adding at the end the following:
     ``The Attorney General shall provide for expenditures for 
     training and assistance described in clause (iv) in an 
     amount, for any fiscal year, not less than five percent of 
     the total of the expenses incurred that are described in the 
     preceding sentence.''.
       (b) Compliance With Detection Regulations.--Section 212(f) 
     (8 U.S.C. 1182(f)) is amended by adding at the end the 
     following: ``Whenever the Attorney General finds that a 
     commercial airline has failed to comply with regulations of 
     the Attorney General relating to requirements of airlines for 
     the detection of fraudulent documents that are used by 
     passengers traveling to the United States (including the 
     training of personnel in such detection), the Attorney 
     General may suspend the entry of some or all aliens 
     transported to the United States by such airline.''.
       (c) Effective Dates.--
       (1) The amendments made by subsection (a) shall apply to 
     expenses incurred on or after October 1, 1994.
       (2) The Attorney General first shall issue, in proposed 
     form, regulations referred to in the second sentence of 
     section 212(f) of the Immigration and Nationality Act, as 
     added by the amendment made by subsection (b), by not later 
     than 90 days after the date of enactment of this Act.
                  Subtitle D--Alien Smuggling Control

     SEC. 231. EXPANSION OF ALIEN SMUGGLING ASSET FORFEITURE 
                   PROGRAM.

       (a) In General.--Paragraph (1) of section 274(b) of the 
     Immigration and Nationality Act (8 U.S.C. 1324(b)) is amended 
     to read as follows:
       ``(1)(A) Except as provided in subparagraph (B), the 
     following property shall be subject to seizure and 
     forfeiture:
       ``(i) Any conveyance, including any vessel, vehicle, or 
     aircraft, which has been or is being used in the commission 
     of a violation of subsection (a).
       ``(ii) Any property, real or personal, which--
       ``(I) constitutes, or is derived from or traceable to, the 
     proceeds obtained directly or indirectly from the commission 
     of a violation of subsection (a), or
       ``(II) is used to facilitate, or is intended to be so used 
     in the commission of, a violation of subsection (a)(1)(A).
       ``(B)(i) No property used by any person as a common carrier 
     in the transaction of business as a common carrier shall be 
     forfeited under this section, unless the owner or other 
     person with lawful custody of the property was a consenting 
     party to or privy to the violation of subsection (a) or of 
     paragraphs (1) and (2) of subsection (a) of section 274A.
       ``(ii) No property shall be forfeited under the provisions 
     of this section by reason of any act or omission established 
     by the owner to have been committed or omitted by a person 
     other than the owner while the property was unlawfully in the 
     possession of a person other than the owner in violation of 
     the criminal laws of the United States or of any State.
       ``(iii) No property shall be forfeited under the provisions 
     of this section to the extent of an interest of the owner, by 
     reason of any act or omission established by the owner to 
     have been committed or omitted without the knowledge, 
     consent, or willful disregard of the owner, unless the act or 
     omission was committed or omitted by an employee or agent of 
     the owner or other person with lawful custody of the property 
     with the intent of furthering the business interests of, or 
     to confer any other benefit upon, the owner or other person 
     with lawful custody of the property.''.
       (b) Conforming Amendments.--Section 274(b) of such Act (8 
     U.S.C. 1324(b)) is amended--
       (1) in paragraph (2)--
       (A) by striking ``conveyance'' and inserting ``property'' 
     in each place in which it appears, and
       (B) by striking ``is being used in'' and inserting ``is 
     being used in, is facilitating, has facilitated, is 
     facilitating or was intended to facilitate''; and
       (2) in paragraphs (4) and (5), by striking ``a 
     conveyance'', ``any conveyance'', and ``conveyance'' and 
     inserting ``property'' in each place in which it appears.

     SEC. 232. INCLUSION OF ALIEN SMUGGLING IN RICO ACT.

       Section 1961(1) of title 18, United States Code, is 
     amended--
       (1) by striking ``or'' before ``(E) any act'', and
       (2) by inserting before the period at the end the 
     following: ``, or (F) any act that is indictable under 
     section 274(a)(1) of the Immigration and Nationality Act 
     (relating to alien smuggling)''.

     SEC. 233. ENHANCED PENALTIES FOR ALIEN SMUGGLING AND 
                   EMPLOYMENT.

       Section 274(a)(1) of the Immigration and Nationality Act (8 
     U.S.C. 1324(a)(1)) is amended--
       (1) by striking ``or'' at the end of subparagraph (C),
       (2) by striking the comma at the end of subparagraph (D) 
     and inserting ``; or'',
       (3) by inserting after subparagraph (D) the following:
       ``(E) contracts or agrees with another party for that party 
     to provide, for employment by the person or another, an alien 
     who is not authorized to be employed in the United States, 
     knowing that such party intends to cause such alien to be 
     brought into the United States in violation of the laws of 
     the United States,'', and
       (4) by striking ``five years'' and inserting ``ten years''.

     SEC. 234. PROVISION OF WIRETAP AUTHORITY FOR INVESTIGATIONS.

       Section 2516(1) of title 18, United States Code, is 
     amended--
       (1) in subparagraph (c), by inserting after ``weapons),'' 
     the following: ``or a felony violation of section 1028 
     (relating to production of false identification 
     documentation), section 1542 (relating to false statements in 
     passport applications), section 1546 (relating to fraud and 
     misuse of visas, permits, and other documents),'';
       (2) by striking out ``or'' after paragraph (l);
       (3) by redesignating paragraphs (m), (n), and (o) as 
     paragraphs (n), (o), and (p), respectively;
       (4) by inserting after paragraph (l) the following new 
     paragraph:
       ``(m) a violation of section 274 of the Immigration and 
     Nationality Act (8 U.S.C. 1324) (relating to alien 
     smuggling), of section 277 of the Immigration and Nationality 
     Act (8 U.S.C. 1327) (relating to the smuggling of aliens 
     convicted of aggravated felonies or of aliens subject to 
     exclusion on grounds of national security), or of section 278 
     of the Immigration and Nationality Act (8 U.S.C. 1328) 
     (relating to smuggling of aliens for the purpose of 
     prostitution or other immoral purpose);''; and
       (5) by striking ``and'' at the end of paragraph (o) (as 
     redesignated) and inserting ``or''.
               Subtitle E--Employer Sanctions Enforcement

     SEC. 241. IMPROVEMENT OF WORK ELIGIBILITY VERIFICATION 
                   SYSTEMS.

       (a) Work Eligibility Documents and Verification of 
     Eligibility To Work.--Section 274A(b) of the Immigration and 
     Nationality Act is amended--
       (1) by striking paragraph (1) and inserting the following:
       ``(1) Attestation after examination and verification of 
     documentation.--The person or entity must attest, under 
     penalty of perjury and on a form designated or established by 
     the Attorney General by regulation, that it has been 
     confirmed that the individual is not an unauthorized alien by 
     verifying the individual's Social Security account number 
     through the verification system established pursuant to 
     subsection (d)(1).'';
       (2) by redesignating paragraphs (2), (3), (4), and (5) as 
     paragraphs (3), (4), (5), and (6), respectively;
       (3) by inserting after paragraph (1) the following:
       ``(2) Verification of continued work eligibility for aliens 
     with limited work authorization.--In the case of an alien 
     whose work authorization has an expiration date, a person or 
     entity who continues to employ such an alien after the date 
     on which the employment authorization expires must verify, 
     through the verification system established pursuant to 
     subsection (d)(1), that the alien's work authorization has 
     been extended.''; and
       (4) by adding at the end the following new paragraph:
       ``(7) Rule of statutory construction.--Notwithstanding any 
     other provision of law, a person or entity may not be 
     considered to discriminate by requesting the production of 
     the documentation required under this subsection in the 
     hiring, recruiting, or referring of an individual for 
     employment in the United States.''.
       (b) Effective Dates.--(1) The amendment made by subsection 
     (a)(1) shall take effect on July 1, 1995.
       (2) The amendments made by paragraphs (2), (3), and (4) of 
     subsection (a) shall take effect on the date of enactment of 
     this Act.
       (c) Establishment of Employment Verification System.--
     Section 274A(d) of the Immigration and Nationality Act is 
     amended to read as follows:
       ``(d) Employment Verification System.--
       ``(1) Establishment of verification system.--
       ``(A) In general.--The Secretary of Health and Human 
     Services, in consultation with the Attorney General, shall 
     make such modifications and improvements as are necessary to 
     current data bases and systems to develop and implement a 
     verification system that a person or entity can access by 
     telephone or other electronic means. Such system shall permit 
     verification that an individual's Social Security number--
       ``(i) has been issued,
       ``(ii) was issued to an individual authorized to work in 
     the United States, and
       ``(iii) is not a number that was issued to an individual 
     who now is deceased and that has not been reissued to a 
     living individual.

     The system shall also provide any other information that the 
     Attorney General and the Secretary of Health and Human 
     Services determine is needed to verify that the number 
     provided to the employer is the number that was issued 
     properly to that individual, that such individual is 
     authorized to work in the United States, and that the 
     individual providing the Social Security number to the 
     employer is the same person to whom the number is assigned.
       ``(B) Access fee.--A fee, not to exceed $2 plus any line 
     charges payable to a telephone carrier or equivalent entity, 
     shall be charged for each use of the verification system in 
     order to pay for the costs of operating the system.
       ``(C) Effective date.--The verification system required by 
     this paragraph shall be operational not later than July 1, 
     1995.
       ``(2) Privacy protections.--
       ``(A) Any personal information utilized by the system may 
     not be made available to Government agencies, employers, and 
     other persons except to the extent necessary to verify that 
     an individual is not an unauthorized alien.
       ``(B) The system must protect the privacy and security of 
     personal information and identifiers utilized in the system.
       ``(C) A verification that an employee or prospective 
     employee is eligible to be employed in the United States may 
     not be withheld or revoked under the system for any reason 
     other than that the employee or prospective employee is an 
     unauthorized alien.
       ``(D) The system may not be used for law enforcement 
     purposes, other than for the enforcement of this Act or 
     sections 1001, 1028, 1546, and 1621 of title 18, United 
     States Code.
       ``(E) Unauthorized use or disclosure of the information or 
     identifiers contained in the employment verification system 
     shall be punishable by civil and criminal penalties.
       ``(3) Monitoring and improvements in the verification 
     system.--(A) The Attorney General shall provide for the 
     monitoring and evaluation of the degree to which the 
     employment verification system established under this section 
     provides an accurate, efficient, and secure system by which 
     to determine employment eligibility in the United States.
       ``(B) To the extent that the system established under this 
     section is found not to be an accurate, efficient, and secure 
     system by which to determine employment eligibility in the 
     United States, the Attorney General shall recommend such 
     changes or enhancements in the system as may be necessary to 
     achieve such a system.''.
       (d) Conforming Amendments.--(1) Section 274A of the 
     Immigration and Nationality Act (8 U.S.C. 1324a(b)) is 
     amended--
       (A) in subsection (b), by striking ``following three 
     paragraphs'' and inserting ``following four paragraphs'', and
       (B) by striking subsections (i), (j), (k), (l), (m), and 
     (n).
       (2) The amendments made by this subsection shall take 
     effect on July 1, 1995.
     Subtitle F--Prohibition on Welfare Benefits to Illegal Aliens

     SEC. 251. PROHIBITION OF WELFARE BENEFITS TO ILLEGAL ALIENS.

       (a) Direct Federal Financial Benefits.--Subject to 
     subsection (b) and the Immigration and Nationality Act, and 
     notwithstanding any other provision of law, an alien who is 
     not lawfully within the United States as a permanent 
     resident, a refugee, an asylee, or a parolee is not eligible 
     for any direct Federal financial benefit or social insurance 
     benefit (whether through grant, loan, guarantee, or 
     otherwise) as such benefits are identified by the Attorney 
     General in consultation with other appropriate heads of the 
     various departments and agencies of the Federal Government.
       (b) Emergency Medical Care.--Subsection (a) shall not apply 
     with respect to the Federal reimbursement of emergency 
     medical care for aliens, as determined by the Secretary of 
     Health and Human Services by regulation.

     SEC. 252. PROHIBITION OF UNEMPLOYMENT BENEFITS TO ILLEGAL 
                   ALIENS.

       (a) Prohibition.--An alien who has not been granted 
     employment authorization pursuant to the Immigration and 
     Nationality Act or other Federal law shall be ineligible for 
     unemployment compensation under an unemployment compensation 
     law of a State or the United States.
       (b) Amount of Compensation.--An alien who has been granted 
     temporary work authorization shall be eligible only for such 
     unemployment compensation under a law of a State or the 
     United States as accrued during the time in which the alien 
     was authorized to work.
       (c) Definition.--As used in this section, the term 
     ``State'' means any of the several States of the United 
     States, the District of Columbia, Puerto Rico, Guam, and the 
     Virgin Islands.

     SEC. 253. PROHIBITION OF HOUSING BENEFITS TO ILLEGAL ALIENS.

       (a) Limitation.--Notwithstanding section 251 or any other 
     provision of law, no alien who is not a permanent resident, a 
     refugee, an asylee, or a parolee shall be eligible for 
     benefits under the following provisions of law:
       (1) The program of rental assistance on behalf of low-
     income families provided under section 8 of the United States 
     Housing Act of 1937 (42 U.S.C. 1437f).
       (2) The program of assistance to public housing under title 
     I of the United States Housing Act of 1937 (42 U.S.C. 1437 et 
     seq.).
       (3) The loan program under section 502 of the Housing Act 
     of 1949 (42 U.S.C. 1472).
       (4) The program of interest reduction payments pursuant to 
     contracts entered into by the Secretary of Housing and Urban 
     Development under section 236 of the National Housing Act (12 
     U.S.C. 1715z-1).
       (5) The program of loans for rental and cooperative housing 
     under section 515 of the Housing Act of 1949 (42 U.S.C. 
     1485).
       (6) The program of rental assistance payments pursuant to 
     contracts entered into under section 521(a)(2)(A) of the 
     Housing Act of 1949 (42 U.S.C. 1490a(a)(2)(A)).
       (7) The program of assistance payments on behalf of 
     homeowners under section 235 of the National Housing Act (12 
     U.S.C. 1715z).
       (8) The program of rent supplement payments on behalf of 
     qualified tenants pursuant to contracts entered into under 
     section 101 of the Housing and Urban Development Act of 1965 
     (12 U.S.C. 1701s).
       (9) The loan and grant programs under section 504 of the 
     Housing Act of 1949 (42 U.S.C. 1474) for repairs and 
     improvements to rural dwellings.
       (10) The loan and assistance programs under sections 514 
     and 516 of the Housing Act of 1949 (42 U.S.C. 1484, 1486) for 
     housing for farm labor.
       (11) The program of grants for preservation and 
     rehabilitation of housing under section 533 of the Housing 
     Act of 1949 (42 U.S.C. 1490m).
       (12) The program of grants and loans for mutual and self-
     help housing and technical assistance under section 523 of 
     the Housing Act of 1949 (42 U.S.C. 1490c).
       (13) The program of site loans under section 524 of the 
     Housing Act of 1949 (42 U.S.C. 1490d).
       (b) Regulations.--Not later than January 1, 1995, the 
     Secretary of Housing and Urban Development shall issue final 
     regulations to carry out subsection (a).

     SEC. 254. ENHANCEMENT OF LEGAL ALIEN ENTITLEMENT 
                   VERIFICATION.

       There are authorized to be appropriated for each of the 
     fiscal years 1995, 1996, 1997, 1998, and 1999 such sums as 
     may be necessary to carry out the purposes of the automated 
     System for Alien Verification of Eligibility (SAVE) that was 
     established under section 121 of the Immigration Reform and 
     Control Act of 1986 (Public Law 99-603).
   Subtitle G--State and Local Cooperation in Immigration Enforcement

     SEC. 261. PROHIBITION ON FINANCIAL ASSISTANCE.

       (a) In General.--No State or local government or agency 
     that the Attorney General determines has an official policy 
     of refusing to cooperate with officers or employees of the 
     Immigration and Naturalization Service with respect to the 
     identification, location, arrest, prosecution, detention, or 
     deportation of aliens who are not lawfully present within the 
     United States, shall be eligible for any Federal funds from 
     appropriations made to the Department of Justice for as long 
     as the policy of noncooperation remains in effect.
       (b) Reimbursement Prohibited.--No State or local government 
     (or any agency thereof) that is ineligible for assistance 
     under subsection (a) may be reimbursed for such assistance 
     after the termination of such ineligibility.

     SEC. 262. ESTABLISHMENT OF PROGRAM FOR UNIFORM VITAL 
                   STATISTICS.

       (a) Pilot Program.--The Secretary of Health and Human 
     Services shall consult with each State agency that is 
     responsible for the registration and certification of births 
     and deaths and, within 3 years of the date of enactment of 
     this Act, shall establish a pilot program for 3 of the 5 
     States with the largest number of undocumented aliens that 
     creates an electronic network linking the vital statistics 
     records of such States. The network shall provide, where 
     practical, for the matching of deaths with births and shall 
     enable the confirmation of births and deaths of citizens of 
     such States, or of aliens within such States, by any Federal 
     or State agency or official in the performance of official 
     duties. The Secretary and participating State agencies shall 
     institute measures to achieve uniform and accurate reporting 
     of vital statistics into the pilot program network, to 
     protect the integrity of the registration and certification 
     process, and to prevent fraud against the Government and 
     other persons through the use of false birth or death 
     certificates.
       (b) Report.--Not later than 180 days after the 
     establishment of the pilot program under subsection (a), the 
     Secretary shall submit a report to Congress containing 
     recommendations on how the pilot program could be instituted 
     effectively as a national network for the United States.
       (c) Authorization of Appropriations.--There are authorized 
     to be appropriated such sums as may be necessary to carry out 
     this section.
              TITLE III--EXCLUSION AND DEPORTATION REFORM
                      Subtitle A--Criminal Aliens

     SEC. 301. REGISTRATION OF ALIENS ON PROBATION AND PAROLE.

       Section 263(a) of the Immigration and Nationality Act (8 
     U.S.C. 1303(a)) is amended by striking ``and (5)'' and 
     inserting ``(5) aliens who are or have been on criminal 
     probation or parole pursuant to the laws of the United States 
     or of any State, and (6)''.

     SEC. 302. EXPANSION OF DEFINITION OF AGGRAVATED FELONY.

       (a) Expansion in Definition.--Section 101(a)(43) of the 
     Immigration and Nationality Act (8 U.S.C. 1101(a)(43)) is 
     amended to read as follows:
       ``(43) The term `aggravated felony' means--
       ``(A) murder;
       ``(B) any illicit trafficking in any controlled substance 
     (as defined in section 102 of the Controlled Substances Act), 
     including any drug trafficking crime as defined in section 
     924(c) of title 18, United States Code;
       ``(C) any illicit trafficking in any firearms or 
     destructive devices as defined in section 921 of title 18, 
     United States Code, or in explosive materials as defined in 
     section 841(c) of title 18, United States Code;
       ``(D) any offense described in sections 1951 through 1963 
     of title 18, United States Code;
       ``(E) any defense described in--
       ``(i) subsections (h) or (i) of section 842, title 18, 
     United States Code, or subsection (d), (e), (f), (g), (h), or 
     (i) of section 844 of title 18, United States Code (relating 
     to explosive materials offenses),
       ``(ii) paragraph (1), (2), (3), (4), or (5) of section 
     922(g), or section 922(j), section 922(n), section 922(o), 
     section 922(p), section 922(r), section 924(b), or section 
     924(h) of title 18, United States Code (relating to firearms 
     offenses), or
       ``(iii) section 5861 of title 26, United States Code 
     (relating to firearms offenses);
       ``(F) any crime of violence (as defined in section 16 of 
     title 18, United States Code) for which the term of 
     imprisonment imposed (regardless of any suspension of such 
     imprisonment) is at least 5 years;
       ``(G) any theft offense (including receipt of stolen 
     property) or any burglary offense, where a sentence of 5 
     years of imprisonment or more may be imposed;
       ``(H) any offense described in section 875, section 876, 
     section 877, or section 1202 of title 18, United States Code 
     (relating to the demand for or receipt of ransom);
       ``(I) any offense described in section 2251, section 2251A 
     or section 2252 of title 18, United States Code (relating to 
     child pornography);
       ``(J) any offense described in section 1084 of title 18, 
     United States Code, where a sentence of 5 years of 
     imprisonment or more may be imposed;
       ``(K) any offense relating to commercial bribery, 
     counterfeiting, forgery or trafficking in vehicles whose 
     identification numbers have been altered, where a sentence of 
     5 years of imprisonment or more may be imposed;
       ``(L) any offense--
       ``(i) relating to the owning, controlling, managing or 
     supervising of a prostitution business,
       ``(ii) described in section 2421 through 2424 of title 18, 
     United States Code, for commercial advantage, or
       ``(iii) described in sections 1581 through 1585, or section 
     1588, of title 18, United States Code (relating to peonage, 
     slavery, and involuntary servitude);
       ``(M) any offense relating to perjury or subornation of 
     perjury where a sentence of 5 years of imprisonment or more 
     may be imposed;
       ``(N) any offense described in--
       ``(i) section 793 (relating to gathering or transmitting 
     national defense information), section 798 (relating to 
     disclosure of classified information), section 2153 (relating 
     to sabotage) or section 2381 or section 2382 (relating to 
     treason) of title 18, United States Code, or
       ``(ii) section 421 of title 50, United States Code 
     (relating to protecting the identity of undercover 
     intelligence agents);
       ``(O) any offense--
       ``(i) involving fraud or deceit where the loss to the 
     victim or victims exceeded $200,000; or
       ``(ii) described in section 7201 of the Internal Revenue 
     Code of 1986 (relating to tax evasion), where the tax loss to 
     the Government exceeds $200,000;
       ``(P) any offense described in section 274(a)(1) of the 
     Immigration and Nationality Act (relating to alien smuggling) 
     for the purpose of commercial advantage;
       ``(Q) any violation of section 1546(a) of title 18, United 
     States Code (relating to document fraud), for the purpose of 
     commercial advantage; or
       ``(R) any offense relating to failing to appear before a 
     court pursuant to a court order to answer to or dispose of a 
     charge of a felony, where a sentence of 2 years or more may 
     be imposed,

     or any attempt or conspiracy to commit any such act. Such 
     term applies to offenses described in this paragraph whether 
     in violation of Federal or State law and applies to such 
     offenses in violation of the laws of a foreign country for 
     which the term of imprisonment was completed within the 
     previous 15 years.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to all convictions entered before, on, or after 
     the date of enactment of this Act.

     SEC. 303. AUTHORIZATION OF JUDICIAL DEPORTATION ORDERS.

       (a) Judicial Deportation.--Section 242A of the Immigration 
     and Nationality Act (8 U.S.C. 1252a) is further amended by 
     adding at the end the following new subsection:
       ``(d) Judicial Deportation.--
       ``(1) Authority.--Notwithstanding any other provision of 
     this Act, a United States district court shall have 
     jurisdiction to enter a judicial order of deportation at the 
     time of sentencing against an alien whose criminal conviction 
     causes such alien to be deportable under section 
     242(a)(2)(A)(iii) (relating to conviction of an aggravated 
     felony), if such an order has been requested prior to 
     sentencing by the United States Attorney with the concurrence 
     of the Commissioner.
       ``(2) Procedure.--(A) The United States Attorney shall 
     provide notice of intent to request judicial deportation 
     promptly after the entry in the record of an adjudication of 
     guilt or guilty plea. Such notice shall be provided to the 
     court, to the alien, and to the alien's counsel of record.
       ``(B) Notwithstanding section 242B, the United States 
     Attorney, with the concurrence of the Commissioner, shall 
     file at least 20 days prior to the date set for sentencing a 
     charge containing factual allegations regarding the alienage 
     of the defendant and satisfaction by the defendant of the 
     definition of aggravated felony.
       ``(C) If the court determines that the defendant has 
     presented substantial evidence to establish prima facie 
     eligibility for relief from deportation under section 212(c), 
     the Commissioner shall provide the court with a 
     recommendation and report regarding the alien's eligibility 
     for relief under such section. The court shall either grant 
     or deny the relief sought.
       ``(D)(i) The alien shall have a reasonable opportunity to 
     examine the evidence against him or her, to present evidence 
     on his or her behalf, and to cross-examine any witnesses that 
     are presented by the Government.
       ``(ii) The court, for the purposes of determining whether 
     to enter an order described in paragraph (1), shall only 
     consider evidence that would be admissible in proceedings 
     that are conducted pursuant to section 242(b).
       ``(iii) Nothing in this subsection shall limit the 
     information that a court of the United States may receive or 
     consider for the purpose of imposing an appropriate sentence.
       ``(iv) The court may order the alien deported if the 
     Attorney General demonstrates by clear and convincing 
     evidence that the alien is deportable under this Act.
       ``(3) Notice, appeal, and execution of judicial orders of 
     deportation.--(A)(i) A judicial order of deportation, or the 
     denial of such an order, may be appealed by either party to 
     the court of appeals for the circuit in which the district 
     court is located.
       ``(ii) Except as provided in clause (iii), such appeal 
     shall be considered consistent with the requirements that are 
     described in section 106.
       ``(iii) Upon the execution by the defendant of a valid 
     waiver of the right to appeal the conviction on which the 
     order of deportation is based, the expiration of the period 
     that is described in section 106(a)(1), or the final 
     dismissal of an appeal from such a conviction, the order of 
     deportation shall become final and shall be executed at the 
     end of the prison term in accordance with the terms of the 
     order.
       ``(B) As soon as is practicable after the entry of a 
     judicial order of deportation, the Commissioner shall provide 
     the defendant with a written notice of the order of 
     deportation, which shall designate the defendant's country of 
     choice for deportation and any alternate country pursuant to 
     section 243(a).
       ``(4) Denial of judicial order.--The denial of a request 
     for a judicial order of deportation shall not preclude the 
     Attorney General from initiating deportation proceedings 
     pursuant to section 242 upon the same ground of deportability 
     or upon any other ground of deportability that is provided 
     under section 241(a).''.
       (b) Technical and Conforming Changes.--The ninth sentence 
     of section 242(b) of the Immigration and Nationality Act (8 
     U.S.C. 1252(b)) is amended by striking out ``The'' and 
     inserting in lieu thereof, ``Except as provided in section 
     242A(d), the''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to all aliens whose adjudications of guilt or 
     guilty pleas are entered in the record after the date of 
     enactment of this Act.

     SEC. 304. RESTRICTIONS ON DEFENSES TO DEPORTATION BY 
                   CRIMINALS.

       (a) Defenses Based on Seven Years of Permanent Residence.--
     The last sentence of section 212(c) of the Immigration and 
     Nationality Act (8 U.S.C. 1182(c)) is amended by striking out 
     ``has served for such felony or felonies'' and all that 
     follows through the period and inserting in lieu thereof 
     ``has been sentenced for such felony or felonies to a term of 
     imprisonment of at least 5 years, if the time for appealing 
     such a conviction or sentence has expired and the sentence 
     has become final.''.
       (b) Defenses Based on the Withholding of Deportation.--
     Section 243(h)(2) of the Immigration and Nationality Act (9 
     U.S.C. 1253(h)(2)) is amended--
       (1) by striking out the ``or'' at the end of subparagraph 
     (C);
       (2) by striking the period at the end of subparagraph (D) 
     and inserting ``; or'';
       (3) by inserting after subparagraph (D) the following new 
     subparagraph:
       ``(E) the alien has been convicted of an aggravated 
     felony.''; and
       (4) by striking the last sentence.

     SEC. 305. ESTABLISHMENT OF ALIEN PRISONER TRANSFER TREATY 
                   STUDY.

       (a) Report to Congress.--Not later than 180 days after the 
     date of enactment of this Act, the Secretary of State and the 
     Attorney General shall submit to the Congress a report that 
     describes the use and effectiveness of the Prisoner Transfer 
     Treaty with Mexico (in this section referred to as the 
     ``Treaty'') to remove from the United States aliens who have 
     been convicted of crimes in the United States.
       (b) Use of Treaty.--The report under subsection (a) shall 
     include the following information:
       (1) The number of aliens who have been convicted of a 
     criminal offense in the United States since November 30, 
     1977, who have been, or are, eligible for transfer pursuant 
     to the Treaty.
       (2) The number of aliens who are described in paragraph (1) 
     who have been transferred pursuant to the Treaty.
       (3) The number of aliens who are described in paragraph (2) 
     who have been incarcerated in full compliance with the 
     Treaty.
       (4) The number of aliens who are incarcerated in a penal 
     institution in the United States who are eligible for 
     transfer pursuant to the Treaty.
       (5) The number of aliens who are described in paragraph (4) 
     who are incarcerated in State and local penal institutions.
       (c) Effectiveness of Treaty.--The report under subsection 
     (a) shall include the recommendations of the Secretary of 
     State and the Attorney General to increase the effectiveness 
     and use of, and full compliance with, the Treaty. In 
     considering the recommendations under this subsection, the 
     Secretary and the Attorney General shall consult with such 
     State and local officials in areas that are 
     disproportionately harmed by aliens who have been convicted 
     of criminal offenses as the Secretary and the Attorney 
     General consider to be appropriate. Such recommendations 
     shall address the following areas:
       (1) Changes in Federal laws, regulations, and policies 
     affecting the identification, prosecution, and deportation of 
     aliens who have committed criminal offenses in the United 
     States.
       (2) Changes in State and local laws, regulations, and 
     policies affecting the identification, prosecution, and 
     deportation of aliens who have committed criminal offenses in 
     the United States.
       (3) Changes in the Treaty that may be necessary in order to 
     increase the number of aliens who have been convicted of 
     crimes who may be transferred pursuant to the Treaty.
       (4) Methods for preventing the unlawful reentry into the 
     United States of aliens who have been convicted of criminal 
     offenses in the United States and transferred pursuant to the 
     Treaty.
       (5) Any recommendations of appropriate officials of the 
     Mexican Government on programs to achieve the goals of, and 
     ensure full compliance with, the Treaty.
       (6) An assessment of whether the recommendations under this 
     subsection require the renegotiation of the Treaty.
       (7) The additional funds required to implement each 
     recommendation under this subsection.
       (d) Definition.--As used in this section, the term 
     ``Prisoner Transfer Treaty with Mexico'' refers to the Treaty 
     Between the United States of America and the United Mexican 
     States on the Execution of Penal Sentences, done at Mexico 
     City on November 25, 1976 (28 U.S.T. 7399).
                      Subtitle B--Terrorist Aliens

     SEC. 311. REMOVAL OF ALIEN TERRORISTS.

       (a) In General.--The Immigration and Nationality Act (8 
     U.S.C. 1101 et seq.) is amended by inserting after section 
     242B the following new section:


                     ``REMOVAL OF ALIEN TERRORISTS

       ``Sec. 242C. (a) Definitions.--As used in this section--
       ``(1) the term `alien terrorist' means any alien who is 
     described in section 241(a)(4)(B);
       ``(2) the term `classified information' has the same 
     meaning as defined in section 1(a) of the Classified 
     Information Procedures Act (18 U.S.C. App. IV);
       ``(3) the term `national security' has the same meaning as 
     defined in section 1(b) of the Classified Information 
     Procedures Act (18 U.S.C. App. IV);
       ``(4) the term `special court' means the court described in 
     subsection (c) of this section; and
       ``(5) the term `special removal hearing' means the hearing 
     described in subsection (e) of this section.
       ``(b) Application for Use of Procedures.--The provisions of 
     this section shall apply whenever the Attorney General 
     certifies under seal to the special court established under 
     subsection (c) that--
       ``(1) the Attorney General or Deputy Attorney General has 
     approved of the proceeding under this section;
       ``(2) an alien terrorist is physically present in the 
     United States; and
       ``(3) removal of such alien terrorist by deportation 
     proceedings described in section 242, 242A, or 242B would 
     pose a risk to the national security of the United States 
     because such proceedings would disclose classified 
     information.
       ``(c) Special Court.--(1) The Chief Justice of the United 
     States shall publicly designate up to 7 district court judges 
     who shall constitute a special court to hear and decide cases 
     that arise under this section, in a manner consistent with 
     the designation of judges described in section 103(a) of the 
     Foreign Intelligence Surveillance Act (50 U.S.C. 1803(a)).
       ``(2) The Chief Justice may, in the Chief Justice's 
     discretion, designate the same judges under this section as 
     are designated for service on the Foreign Intelligence 
     Surveillance Court pursuant to section 103(a) of that Act (50 
     U.S.C. 1803(a)).
       ``(d) Invocation of Special Court Procedure.--(1) When the 
     Attorney General makes the application described in 
     subsection (b), a single judge of the special court shall 
     consider the application in camera and ex parte.
       ``(2) The judge shall invoke the procedures of subsection 
     (e), if the judge determines that there is probable cause to 
     believe that--
       ``(A) the alien who is the subject of the application has 
     been correctly identified;
       ``(B) a deportation proceeding under section 242, 242A, or 
     242B would pose a risk to the national security of the United 
     States because such proceedings would disclose classified 
     information; and
       ``(C) the threat posed by the alien's physical presence is 
     immediate and involves the risk of death or serious bodily 
     harm.
       ``(e) Special Removal Hearing.--(1) Except as provided in 
     paragraph (4), the special removal hearing authorized by a 
     showing of probable cause described in subsection (d)(2) 
     shall be open to the public.
       ``(2) The alien shall have a right to be present at such 
     hearing and to be represented by counsel. Any alien who is 
     financially unable to obtain counsel shall be entitled to 
     have counsel assigned to represent such alien. Counsel may be 
     appointed as described in section 3006A of title 18, United 
     States Code.
       ``(3) The alien shall have a right to introduce evidence on 
     his own behalf and, except as provided in paragraph (4), 
     shall have a right to cross-examine any witness or request 
     that the judge issue a subpoena for the presence of a named 
     witness.
       ``(4) The judge shall authorize the introduction in camera 
     and ex parte of any item of evidence for which the judge 
     determines that public disclosure would pose a risk to the 
     national security of the United States because it would 
     disclose classified information.
       ``(5) With respect to any evidence described in paragraph 
     (4), the judge shall cause to be delivered to the alien 
     either--
       ``(A) the substitution for such evidence of--
       ``(i) a statement admitting relevant facts that the 
     specific evidence would tend to prove, or
       ``(ii) a summary of the specific evidence; or
       ``(B) if disclosure of even the substituted evidence 
     described in subparagraph (A) would create a substantial risk 
     of death or serious bodily harm to any person, a statement 
     informing the alien that no such summary is possible.
       ``(6) If the judge determines--
       ``(A) that the substituted evidence described in paragraph 
     (4)(B) will provide the alien with substantially the same 
     ability to make his defense as would disclosure of the 
     specific evidence, or
       ``(B) that disclosure of even the substituted evidence 
     described in paragraph (5)(A) would create a substantial risk 
     of death or serious bodily harm to any person,

     then the determination of deportability (described in section 
     (f)) may be made pursuant to this section.
       ``(f) Determination of Deportability.--(1) If the 
     determination in subsection (e)(6)(A) has been made, then the 
     judge shall, considering the evidence on the record as a 
     whole, require that the alien be deported if the Attorney 
     General has proven, by clear and convincing evidence, that 
     the alien is subject to deportation because he is an alien as 
     described in section 241(a)(4)(B).
       ``(2) If the determination in subsection (e)(6)(B) has been 
     made, then the judge shall, considering the evidence received 
     (in camera and otherwise), require that the alien be deported 
     if the Attorney General proves, by clear, convincing, and 
     unequivocal evidence, that the alien is subject to 
     deportation because he is an alien as described in section 
     241(a)(4)(B).
       ``(g) Appeals.--(1) The alien may appeal a determination 
     under subsection (f) to the Court of Appeals for the Federal 
     Circuit, by filing a notice of appeal with such court within 
     20 days of the determination under such subsection.
       ``(2)(A) The Attorney General may appeal a determination 
     under subsection (d), (e), or (f) to the Court of Appeals for 
     the Federal Circuit, by filing a notice of appeal with such 
     court within twenty days of the determination under any one 
     of such subsections.
       ``(B) When requested by the Attorney General, the entire 
     record of the proceeding under this section shall be 
     transmitted to the Court of Appeals under seal. The Court of 
     Appeals shall consider such appeal in camera and ex parte.''.
       (b) Conforming Amendment.--Section 1295(a) of title 28, 
     United States Code, is amended--
       (1) by striking ``and'' at the end of paragraph (13);
       (2) by striking the period at the end of paragraph (14) and 
     inserting ``; and''; and
       (3) by adding at the end the following new paragraph:
       ``(15) of an appeal under section 242C(g) of the 
     Immigration and Nationality Act.''.
       (c) Clerical Amendment.--The table of contents of the 
     Immigration and Nationality Act is amended by inserting after 
     the item relating to section 242B the following new item:

``Sec. 242C. Removal of alien terrorists.''.

     SEC. 312. MANDATORY EXCLUSION FOR MEMBERSHIP IN TERROR GROUP.

       Section 212(a)(3)(B) of the Immigration and Nationality Act 
     (8 U.S.C. 1182(a)(3)(B)) is amended--
       (1) in clause (i)(II), by inserting ``or'' at the end;
       (2) by adding after clause (i)(II) the following:

       ``(III) is a member of an organization that engages in, or 
     has engaged in, terrorist activity or who actively supports 
     or advocates terrorist activity,''; and

       (3) by adding at the end the following new clause:
       ``(iv) Terrorist organization defined.--As used in this 
     subparagraph, the term `terrorist organization' means an 
     organization that engages in terrorist activity as determined 
     by the Attorney General, in consultation with the Secretary 
     of State.''.
             Subtitle C--Enforcement of Deportation Orders

     SEC. 321. LIMITATIONS ON COLLATERAL ATTACKS ON UNDERLYING 
                   DEPORTATION ORDERS.

       Section 276 of the Immigration and Nationality Act (8 
     U.S.C. 1326) is amended by adding at the end the following 
     new subsection:
       ``(c) In any criminal proceeding under this section, no 
     alien may challenge the validity of the deportation order 
     described in subsection (a)(1) or subsection (b) unless the 
     alien demonstrates--
       ``(1) that the alien exhausted the administrative remedies 
     (if any) that may have been available to seek relief against 
     such order,
       ``(2) that the deportation proceedings at which such order 
     was issued improperly deprived the alien of the opportunity 
     for judicial review, and
       ``(3) that the entry of such order was fundamentally 
     unfair.''.
         Subtitle D--Expedited Asylum Review at Ports of Entry

     SEC. 331. ESTABLISHMENT OF EXPEDITED ASYLUM REVIEW PROGRAM.

       (a) In General.--Section 235(b) (8 U.S.C. 1225 (b)) is 
     amended to read as follows:
       ``(b) Inspection and Exclusion by Immigration Officers.--
     (1) An immigration officer shall inspect each alien who is 
     seeking entry to the United States.
       ``(2)(A) If the examining immigration officer determines 
     that an alien seeking entry--
       ``(i) does not present the documentation required (if any) 
     to obtain legal entry to the United States; and
       ``(ii) does not indicate either an intention to apply for 
     provisional asylum (under section 208) or a fear of 
     persecution, the officer shall order the alien excluded from 
     the United States without further hearing or review.
       ``(B) The examining immigration officer shall refer for 
     immediate inspection at the port of entry by an asylum 
     officer under subparagraph (C) any alien who (i) does not 
     present the documentation required (if any) to obtain legal 
     entry to the United States, and (ii) has indicated an 
     intention to apply for provisional asylum or a fear of 
     persecution. Such an alien shall not be considered to have 
     been inspected and admitted for the purposes of this Act.
       ``(C)(i) If an asylum officer determines that an alien has 
     a credible fear of persecution, then the alien shall be 
     entitled to apply for provisional asylum under section 208.
       ``(ii)(I) Subject to subclause (II), if an asylum officer 
     determines that an alien does not have a credible fear of 
     persecution, then the officer shall order the alien excluded 
     from the United States without further hearing or review.
       ``(II) The Attorney General shall promulgate regulations to 
     provide for the immediate review by another asylum officer at 
     the port of entry of a decision under subclause (I).
       ``(iii) For the purposes of this subparagraph, the term 
     `credible fear of persecution' means (I) that it is more 
     probable than not that the statements made by the alien in 
     support of his or her claim are true, and (II) that there is 
     a significant possibility, in light of such statements and of 
     such other facts as are known to the officer, that the alien 
     could establish eligibility for asylum under section 208.
       ``(iv) Notwithstanding any other provision of law, no court 
     shall have jurisdiction to review, except by petition for 
     habeas corpus, any determination made with respect to an 
     alien found excludable pursuant to this paragraph. In any 
     such case, review by habeas corpus shall be limited to 
     examination of whether the petitioner (I) is an alien, and 
     (II) was ordered excluded from the United States pursuant to 
     this paragraph.
       ``(v) Notwithstanding any other provision of law, no court 
     shall have jurisdiction (I) to review the procedures 
     established by the Attorney General for the determination of 
     exclusion pursuant to this paragraph, or (II) to enter 
     declaratory or injunctive relief with respect to the 
     implementation of this paragraph. Regardless of the nature of 
     the suit or claim, no court shall have jurisdiction except by 
     habeas corpus petition as provided in clause (iv) to consider 
     the validity of any adjudication or determination under this 
     paragraph or to provide declaratory or injunctive relief with 
     respect to the exclusion of any alien pursuant to this 
     paragraph.
       ``(vi) In any action brought for the assessment of 
     penalties for improper entry or re-entry of an alien under 
     sections 275 or 276, no court shall have jurisdiction to hear 
     claims collaterally attacking the validity of orders of 
     exclusion or deportation entered under section 235, 236, or 
     242.
       ``(3)(A) Except as provided in subparagraph (B), if the 
     examining immigration officer determines that an alien 
     seeking entry is not clearly and beyond a doubt entitled to 
     enter, the alien shall be detained for a hearing before a 
     special inquiry officer.
       ``(B) The provisions of subparagraph (A) shall not apply--
       ``(i) to an alien crewman,
       ``(ii) to an alien described in paragraph (2)(A) or (2)(B), 
     or
       ``(iii) if the conditions described in section 273(d) 
     exist.
       ``(4) The decision of the examining immigration officer, if 
     favorable to the admission of any alien, shall be subject to 
     challenge by any other immigration officer and such challenge 
     shall operate to take the alien, whose privilege to enter is 
     so challenged, before a special inquiry officer for a hearing 
     on the exclusion of the alien.
       ``(5) An alien has not entered the United States for the 
     purposes of this Act unless and until such alien has been 
     inspected and admitted by an immigration officer pursuant to 
     this subsection.''.
       (b) Conforming Amendments.--Section 237(a) (8 U.S.C. 
     1227(a)) is amended--
       (1) in the second sentence of paragraph (1) by striking 
     ``Deportation'' and inserting ``Subject to section 235(b)(2), 
     deportation''; and
       (2) in the first sentence of paragraph (2) by striking 
     ``If'' and inserting ``Subject to section 235(b)(2), if''.
                       Subtitle E--Asylum Reform

     SEC. 341. ASYLUM.

       (a) In General.--Section 208 (8 U.S.C. 1158) is amended to 
     read as follows:

     ``SEC. 208. ASYLUM.

       ``(a) Provisional Asylum.--
       ``(1) Right to apply.--The Attorney General shall establish 
     a procedure for an alien who is physically present in the 
     United States or at a land border or port of entry, 
     irrespective of such alien's status, to apply for provisional 
     asylum in accordance with this section.
       ``(2) Conditions for granting.--
       ``(A) Mandatory cases.--The Attorney General shall grant 
     provisional asylum to an alien if the alien applies for 
     provisional asylum in accordance with the requirements of 
     this section and establishes that it is more likely than not 
     that in the alien's country of nationality (or, in the case 
     of a person having no nationality, the country in which such 
     alien last habitually resided) such alien's life or freedom 
     would be threatened on account of race, religion, 
     nationality, membership in a particular social group, or 
     political opinion.
       ``(B) Discretionary cases.--The Attorney General may grant 
     provisional asylum to an alien if the alien applies for 
     provisional asylum in accordance with the requirements of 
     this section and establishes that the alien is a refugee 
     within the meaning of section 101(a)(42).
       ``(C) Exceptions.--(i) Subparagraphs (A) and (B) shall not 
     apply to an alien if the Attorney General determines that--
       ``(I) the alien ordered, incited, assisted, or otherwise 
     participated in the persecution of any person on account of 
     race, religion, nationality, membership in a particular 
     social group, or political opinion;
       ``(II) the alien, having been convicted by a final judgment 
     of a particularly serious crime, constitutes a danger to the 
     community of the United States;
       ``(III) there are serious reasons for believing that the 
     alien has committed a serious nonpolitical crime outside the 
     United States prior to the arrival of the alien in the United 
     States;
       ``(IV) there are reasonable grounds for regarding the alien 
     as a danger to the security of the United States; or
       ``(V) a country willing to accept the alien has been 
     identified (other than the country described in subparagraph 
     (A)) to which the alien can be deported or returned and the 
     alien does not establish that it is more likely than not that 
     the alien's life or freedom would be threatened in such 
     country on account of race, religion, nationality, membership 
     in a particular social group, or political opinion.
       ``(ii)(I) For the purposes of clause (i)(II), an alien who 
     has been convicted of an aggravated felony shall be 
     considered to have committed a particularly serious crime.
       ``(II) The Attorney General shall promulgate regulations 
     that specify additional crimes that will be considered to be 
     crimes that are described in clauses (i)(II) or (i)(III).
       ``(III) The Attorney General shall promulgate regulations 
     establishing such additional limitations and conditions as 
     the Attorney General considers to be appropriate under which 
     an alien shall be ineligible for provisional asylum under 
     subparagraph (B).
       ``(3) Provisional asylum status.--In the case of any alien 
     who is granted provisional asylum under paragraph (2)(A), the 
     Attorney General, in accordance with this section--
       ``(A) shall not deport or return the alien to the country 
     described under paragraph (2)(A);
       ``(B) shall authorize the alien to engage in employment in 
     the United States and to provide the alien with an 
     `employment authorized' endorsement or other appropriate work 
     permit; and
       ``(C) may allow the alien to travel abroad with the prior 
     consent of the Attorney General.
       ``(4) Termination.--Provisional asylum granted under 
     paragraph (2) may be terminated if the Attorney General, 
     pursuant to such regulations as the Attorney General may 
     prescribe, determines that--
       ``(A) the alien no longer meets the conditions described in 
     paragraph (2) owing to a change in the circumstances in the 
     alien's country of nationality or, in the case of an alien 
     having no nationality, in the country in which the alien last 
     habitually resided;
       ``(B) the alien meets a condition described in paragraph 
     (2)(C); or
       ``(C) a country willing to accept the alien has been 
     identified (other than the country described in paragraph 
     (2)) to which the alien can be deported or returned and the 
     alien cannot establish that it is more likely than not that 
     the alien's life or freedom would be threatened in such 
     country on account of race, religion, nationality, membership 
     in a particular social group, or political opinion.
       ``(5) Acceptance by another country.--In the case of an 
     alien who is described in paragraph (2)(C)(i)(V) or paragraph 
     (4)(C), the alien's deportation or return shall be directed, 
     at the discretion of the Attorney General, to any country 
     that is willing to accept the alien into its territory (other 
     than the country that is described in paragraph (2)(A)).
       ``(b) Provisional Asylum Applications.--
       ``(1) In general.--
       ``(A) Deadline.--Subject to subparagraph (B), an alien's 
     application for provisional asylum shall not be considered 
     under this section unless--
       ``(i) the alien has filed, not later than 30 days after 
     entering or coming to the United States, notice of intention 
     to file such an application, and
       ``(ii) such application is actually filed not later than 60 
     days after entering or arriving in the United States.
       ``(B) Exception.--An application for provisional asylum may 
     be considered, notwithstanding that the requirements of 
     subparagraph (A) have not been met, only if the alien 
     demonstrates by clear and convincing evidence changed 
     circumstances in the alien's country of nationality (or in 
     the case of an alien with no nationality, in the country 
     where the alien last habitually resided) affecting 
     eligibility for provisional asylum.
       ``(2) Requirements.--An application for provisional asylum 
     shall not be considered unless the alien submits to the 
     taking of fingerprints and a photograph in a manner 
     determined by the Attorney General.
       ``(3) Previous denial of asylum.--An application for 
     provisional asylum shall not be considered if the alien has 
     been denied asylum by a country in which the alien has had 
     access to a full and fair procedure for determining his or 
     her asylum claim in accordance with a bilateral or 
     multilateral agreement between that country and the United 
     States.
       ``(4) Fees.--In the discretion of the Attorney General, the 
     Attorney General may impose reasonable fees for the 
     consideration of an application for provisional asylum, for 
     employment authorization under this section, and for 
     adjustment of status under section 209(b). The Attorney 
     General is authorized to provide for the assessment and 
     payment of any such fee over a period of time or by 
     installments.
       ``(5) Employment.--An applicant for provisional asylum is 
     not entitled to engage in employment in the United States. 
     The Attorney General may authorize an alien who has filed an 
     application for provisional asylum to engage in employment in 
     the United States, in the discretion of the Attorney General.
       ``(6) Notice of consequences of frivolous applications.--At 
     the time of the filing a notice of his or her intention to 
     apply for provisional asylum, the alien shall be advised of 
     the consequences, under subsection (e), of filing a frivolous 
     application for provisional asylum.
       ``(c) Sanctions for Failure To Appear.--
       ``(1) Subject to paragraph (2), the application for 
     provisional asylum of an alien who does not appear for a 
     hearing on such application shall be summarily dismissed 
     unless the alien can show exceptional circumstances (as 
     defined in section 242B(f)(2)) as determined by an asylum 
     officer or an immigration judge.
       ``(2) Paragraph (1) shall not apply if written and oral 
     notice were not provided to the alien of the time and place 
     at which the asylum hearing was to be held, and in the case 
     of any change or postponement in such time or place, written 
     and oral notice were provided to the alien of the new time or 
     place of the hearing.
       ``(d) Asylum.--
       ``(1) Adjustment of status.--Under such regulations as the 
     Attorney General may prescribe, the Attorney General shall 
     adjust to the status of an alien granted asylum the status of 
     any alien granted provisional asylum under subsection 
     (a)(2)(A) or (a)(2)(B) who--
       ``(A) applies for such adjustment;
       ``(B) has been physically present in the United States for 
     at least 1 year after being granted provisional asylum;
       ``(C) continues to be eligible for provisional asylum under 
     this section; and
       ``(D) is admissible under this Act at the time of his or 
     her examination for adjustment of status under this 
     subsection.
       ``(2) Treatment of spouses and children.--A spouse or child 
     (as defined in section 101(b)(1) (A), (B), (C), (D), or (E)) 
     of an alien whose status is adjusted to that of an alien 
     granted asylum under paragraph (a)(2) may be granted the same 
     status as the alien if he or she is accompanying, or 
     following to join, such an alien.
       ``(3) Application fees.--The Attorney General may impose a 
     reasonable fee for the filing of an application for asylum 
     under this subsection.
       ``(e) Denial of Immigration Benefits for Frivolous 
     Applications.--
       ``(1) In general.--If the Attorney General determines that 
     an alien has made a frivolous application for provisional 
     asylum under this section and the alien has received the 
     notice under subsection (b)(5), the alien shall be 
     permanently ineligible for any benefits under this Act, 
     effective as of the date of a final determination on such an 
     application.
       ``(2) Treatment of material misrepresentations.--For the 
     purposes of this subsection, an application considered to be 
     `frivolous' includes, but is not limited to, an application 
     that contains a willful misrepresentation or concealment of a 
     material fact.''.
       (b) Clerical Amendment.--The item in the table of contents 
     relating to section 208 is amended to read as follows:

``Sec. 208. Asylum.''.

     SEC. 342. FAILURE TO APPEAR FOR ASYLUM HEARING; JUDICIAL 
                   REVIEW.

       (a) Failure To Appear for Provisional Asylum Hearing.--
     Section 242B(e)(4) (8 U.S.C. 1252b(e)(4)) is amended--
       (1) in the heading, by striking ``Asylum'' and inserting 
     ``Provisional asylum'';
       (2) by striking ``asylum'' each place it appears and 
     inserting ``provisional asylum''; and
       (3) in subparagraph (A), by striking all after clause (iii) 
     and inserting ``shall not be eligible for any benefits under 
     this Act.''.
       (b) Judicial Review.--Section 106 (8 U.S.C. 1105a) is 
     amended by adding at the end the following subsection:
       ``(d) The procedure prescribed by, and all the provisions 
     of chapter 158 of title 28, United States Code, shall apply 
     to, and shall be the sole and exclusive procedure for, the 
     judicial review of all final orders granting or denying 
     provisional asylum, except that--
       ``(1) a petition for review may be filed not later than 90 
     days after the date of the issuance of the final order 
     granting or denying provisional asylum;
       ``(2) the venue of any petition for review under this 
     subsection shall be in the judicial circuit in which the 
     administrative proceedings were conducted in whole or in 
     part, or in the judicial circuit wherein is the residence, as 
     defined in this Act, of the petitioner, but not in more than 
     one circuit; and
       ``(3) notwithstanding any other provision of law, a 
     determination granting or denying provisional asylum based on 
     changed circumstances pursuant to section 208(b)(1)(A)(ii) 
     shall be in the sole discretion of the officer conducting the 
     administrative proceeding.''.

     SEC. 343. CONFORMING AMENDMENTS.

       (a) Limitation on Deportation.--Section 243 (8 U.S.C. 1253) 
     is amended by striking subsection (h).
       (b) Adjustment of Status.--Section 209(b) (8 U.S.C. 
     1159(b)) is amended--
       (1) in paragraph (2), by striking ``one year'' and 
     inserting ``2 years''; and
       (2) by amending paragraph (3) to read as follows:
       ``(3) continues to be eligible for provisional asylum under 
     section 208,''.
       (c) Aliens Ineligible for Temporary Protected Status.--
     Section 244A(c)(2)(B)(ii) (8 U.S.C. 1254a(c)(2)(B)(ii)) is 
     amended by striking ``section 243(h)(2)'' and inserting 
     ``section 208(a)(2)(C)''.
       (d) Eligibility for Naturalization.--Section 316(f)(1) (8 
     U.S.C. 1427(f)(1)) is amended by striking ``subparagraphs (A) 
     through (D) of paragraph 243(h)(2)'' and inserting ``section 
     208(a)(2)(C).''.
       (e) Family Unity.--Section 301(e) of the Immigration Act of 
     1990 (Public Law 101-649) is amended by striking ``section 
     243(h)(2)'' and inserting ``section 208(a)(2)(C).''.

     SEC. 344. EFFECTIVE DATES.

       (a) In General.--Except as otherwise provided, the 
     amendments made by this title shall take effect on the date 
     of enactment of this Act.
       (b) Exceptions.--(1) The amendments made by this title 
     shall not apply to applications for asylum or the withholding 
     of deportation made before the first day of the first month 
     that begins more than 180 days after the date on which this 
     Act becomes law and no application for provisional asylum 
     under section 208 of the Immigration and Nationality Act (as 
     amended by section 331 of this title) shall be considered 
     before such first day.
       (2) In applying section 208(b)(1)(A) of the Immigration and 
     Nationality Act (as amended by this title) in the case of an 
     alien who has entered or arrived in the United States before 
     the first day described in paragraph (1), notwithstanding the 
     deadlines specified in such section--
       (A) the deadline for the filing of a notice of intention to 
     file an application for provisional asylum is 30 days after 
     such first day, and
       (B) the deadline for the filing of the application for 
     provisional asylum is 30 days after the date of the filing of 
     such a notice.
       (3) The amendment made by section 342(b) (relating to 
     adjustment of status) shall not apply to aliens who are 
     granted asylum under section 208 of the Immigration and 
     Nationality Act, as in effect before the date of enactment of 
     this Act.
                  Subtitle F--Miscellaneous Provisions

     SEC. 351. AUTHORIZATION OF TELEPHONIC DEPORTATION HEARINGS.

       The second sentence of section 242(b) of the Immigration 
     and Nationality Act (8 U.S.C. 1252(b)) is amended by 
     inserting before the period the following: ``; except that 
     nothing in this subsection shall preclude the Attorney 
     General from authorizing proceedings by electronic or 
     telephonic media (with or without the consent of the alien) 
     or, where waived or agreed to by the parties, in the absence 
     of the alien.''.

     SEC. 352. CONSTRUCTION OF EXPEDITED DEPORTATION REQUIREMENTS.

       No amendment made by this Act, and nothing in section 
     242(i) of the Immigration and Nationality Act (8 U.S.C. 
     1252(i)), may be construed to create any right or benefit, 
     substantive or procedural, which is legally enforceable by 
     any party against the United States, its agencies, its 
     officers or any other person.
                        TITLE IV--EFFECTIVE DATE

     SEC. 401. EFFECTIVE DATE.

       Except as otherwise specifically provided in this Act, this 
     Act, and the amendments made by this Act, shall take effect 
     on October 1, 1994.

                               Exhibit 1

                      Section-by-Section Analysis


              title i--legal immigration reform immigrants

                     subtitle a--admission of legal

       Sec. 101. Reduction in Annual Legal Immigration Ceilings.

       This section sets a comprehensive ceiling on legal 
     immigration of 300,000 persons per year. It would represent a 
     substantial reduction from the current level of approximately 
     880,000 persons per year. The 300,000-person annual limit 
     also is consistent with the average yearly immigration figure 
     for the period of 1820 until the modern era of high legal 
     immigration began in 1965.
       Under the new ceiling, this section provides that employers 
     may petition for up to 30,000 priority workers per year. It 
     also sets a limit of 35,000 on ``diversity'' immigrants under 
     an immigration category that was established by the 
     Immigration Act of 1990 to increase the number of immigrants 
     from countries that have been under-represented as sources of 
     immigration in recent decades.

             Sec. 102. Redefinition of Immediate Relatives.

       This section provides that U.S. citizens may petition for 
     immigrant visas on behalf of only their spouses and children. 
     It provides that other relatives may be admitted only if they 
     are on existing waiting lists. By contrast, under current 
     law, U.S. citizens also may file petitions on behalf of their 
     parents and siblings, and aliens may petition for their 
     spouses and children.

   Sec. 103. Revision of Preference Allocations for Family-Sponsored 
                              Immigrants.

       This section conforms applicable parts of the Immigration 
     and Nationality Act (INA) to the changes in law made by 
     Sections 101 and 102.

   Sec. 104. Revision of Preference Allocations for Employment-Based 
                              Immigrants.

       This section conforms applicable parts of the INA to the 
     changes in law made by the previous sections of this 
     Subtitle.

                    Sec. 105. Conforming Amendments.

       This section makes further conforming changes to the INA.

                         Sec. 106. Transition.

       This section provides a short transition period to the new 
     limits.

                           Sec. 107. Repeal.

       This section repeals Section 301 of the Immigration Act of 
     1990, relating to the admission of dependents of legalized 
     aliens.


                   subtitle b--admission of refugees

                    Sec. 111. Number of Admissions.

       Within the overall ceiling set forth in section 101, this 
     section limits the annual number of refugee admissions to 
     35,000. Under current law, there is no limit on the number of 
     refugee admissions. In Fiscal Year 1992, 117,000 refugees 
     were admitted to the U.S.


                 title ii--illegal immigration control

                    subtitle a--land borders control

          Sec. 201. Placement of Additional Physical Barriers.

       This section requires the Attorney General to report to the 
     Chairmen of the Senate and House Judiciary Committees within 
     six months after enactment on the feasibility and cost of the 
     placement of substantial numbers of physical barriers, such 
     as fences and ditches, at appropriate points on the border 
     between the U.S. and Mexico to deter and prevent unauthorized 
     crossings into the U.S.

       Sec. 202. Establishment of Interior Repatriation Program.

       In order to deter the ``revolving door'' effect of 
     reentries by aliens who have been deported from a border 
     area, this section requires that illegal entrants from Canada 
     or Mexico who have entered the U.S. illegally on at least 
     three previous occasions must be repatriated to locations 
     that are not less than five hundred kilometers from that 
     country's border with the United States.


                   subtitle b--ports of entry control

   Sec. 211. Requirement of 24 Hours of Notice of Arrivals by Ships.

       This section would require that 24 hours of advance notice 
     must be given to the INS by ships with respect to their 
     arrivals at ports of entry so that they may be inspected for 
     immigration purposes. Such notice already is given to the 
     U.S. Customs Service.


                 subtitle c--overseas airports control

       Sec. 221. Establishment of Additional Inspection Stations.

       Recognizing that preinspection combats illegal immigration 
     by preventing undocumented aliens from reaching the U.S., 
     this section requires the Attorney General to report to the 
     Chairmen of the Senate and House Judiciary Committees within 
     six months of enactment regarding the feasibility and cost of 
     the establishment of additional preinspection stations in at 
     least 10 of the overseas airports with the heaviest U.S.-
     bound passenger traffic.

     Sec. 222. Training or Airline Personnel in Detection of Fraud.

       This section requires the INS to use at least 5% of the 
     funds in the Inspection Fees Account in order to train 
     airline personnel in the detection of fraudulent documents. 
     If an airline fails to participate in INS training programs 
     with regard to the detection of fraudulent documents, then 
     the section provides that the Attorney General may suspend 
     that airline's landing rights in the U.S.


                  subtitle d--alien smuggling control

    Sec. 231. Expansion of Alien Smuggling Asset Forfeiture Program.

       This section expands the INS's current seizure and 
     forfeiture authority with respect to conveyance used in the 
     smuggling or harboring of illegal aliens to include the 
     seizure and forfeiture of all property in such cases.

          Sec. 232. Inclusion of Alien Smuggling in Rico Act.

       This section adds alien smuggling as a prohibited activity 
     under the Racketeering Influenced Corrupt Organizations 
     (RICO) Act.

    Sec. 233. Enhanced Penalties for Alien Smuggling and Employment.

       This section provides enhanced penalties for any person who 
     knowingly contracts or agrees with another party to provide 
     employment to an illegal alien.

      Sec. 234. Provision of Wiretap Authority for Investigations.

       This section provides authority for the U.S. Department of 
     Justice to use wiretaps to assist in the investigation of 
     alien smuggling and fraud in connection with visas, permits, 
     and other travel documents.


               subtitle e--employer sanctions enforcement

    Sec. 241. Improvement of Work Eligibility Verification Systems.

       In order to eliminate the widespread fraud that is 
     crippling the employer sanctions provisions of the 
     Immigration Reform and Control Act of 1986 (IRCA), this 
     section provides for the use of Social Security numbers as 
     the primary means by which employment eligibility will be 
     verified. The section provides for the establishment of a 
     telephonic verification system for use by employers to 
     determine employment eligibility. The Attorney General is 
     directed to monitor the verification system and to recommend 
     any statutory changes that she deems necessary for the full 
     achievement of the objective of this section.


     subtitle f--prohibition of welfare benefits to illegal aliens

      Sec. 251. Prohibition of Welfare Benefits to Illegal Aliens.

       This section prohibits the payment of Federally-funded 
     welfare benefits to aliens other than those who are lawfully 
     admitted as permanent residents, refugees, asylees or 
     parolees. The section also provides an exception with respect 
     to the Federal reimbursement of emergency medical care for 
     aliens, as determined by the Secretary of Health and Human 
     Services by regulation.

   Sec. 252. Prohibition of Unemployment Benefits to Illegal Aliens.

       This section prohibits the payment of unemployment 
     compensation to aliens who have not been granted employment 
     authorization pursuant to the INA.

      Sec. 253. Prohibition of Housing Benefits to Illegal Aliens.

       This section prohibits the provision of Federally-
     subsidized housing to aliens other than those who are 
     admitted as permanent residents, asylees, refugees, or 
     parolees.

     Sec. 254. Enhancement of Legal Alien Entitlement Verification.

       This section authorizes augmentation of the automated 
     Systematic Alien Verification of Entitlements (SAVE) program, 
     which is used to verify the immigration status of aliens who 
     apply for Federal benefits.


        subtitle g--local cooperation in immigration enforcement

             Sec. 261. Prohibition on Financial Assistance.

       This section requires the suspension of all Justice 
     Department grant assistance to so-called ``sanctuary 
     cities,'' which have an official policy of refusing to 
     cooperate with the INS in the detection, arrest, and 
     detention of illegal aliens. The provision also applies to 
     any States that adopt such policies.

    Sec. 262. Establishment of Program for Uniform Vital Statistics.

       This section establishes a pilot program for the 
     development of a data base on birth and death records to 
     prevent fraud against the government through the use of 
     counterfeit birth or death certificates.


              title iii--exclusion and deportation reform

                      subtitle a--criminal aliens

       Sec. 301. Registration of Aliens on Probation and Parole.

       This section authorizes the registration of aliens on 
     criminal probation or criminal parole with the INS. It is 
     intended to assist the INS in keeping track of criminal 
     aliens.

        Sec. 302. Expansion of Definition of Aggravated Felony.

       This section expands the definition of ``aggravated 
     felony'' for purposes of the INA. The crimes that currently 
     fall within that category are murder, drug trafficking, 
     trafficking in firearms or explosives, money laundering, and 
     violent crimes for which the sentence is over 5 years. This 
     section adds firearms violations, failure to appear before a 
     court to answer a felony charge, demanding or receiving 
     ransom money, unlawful conduct as set forth under the RICO 
     Act, immigration-related offenses including alien smuggling 
     and the sale of fraudulent documents, child pornography, 
     owning or operating a prostitution business, treason, and tax 
     evasion exceeding $200,000.

        Sec. 303. Authorization of Judicial Deportation Orders.

       This section authorizes United States District Judges to 
     issue orders of deportation during the sentencing phases of 
     criminal trials of aliens who are convicted of aggravated 
     felonies. It could apply to all criminal aliens, including 
     those who are permanent residents of the U.S.
       Under this provision, judicial deportation orders must be 
     requested by the U.S. Attorney involved, with the concurrence 
     of the Commissioner of the INS. The U.S. Attorney would be 
     required to provide the alien with a notice of intent to seek 
     such an order following an adjudication of criminal guilt or 
     the entry of a guilty plea. The government would be 
     responsible for demonstrating that the defendant is an alien 
     who is subject to deportation and that the crime of which the 
     alien has been convicted meets the statutory definition of 
     ``aggravated felony.''
       Judicial deportation would replace ordinary administrative 
     deportation procedures in those cases in which it is sought. 
     Aliens who are found to be deportable under this process 
     would continue to have the right to seek judicial review of 
     their deportation orders in the United States Courts of 
     Appeals. In addition, this section would not require the 
     consideration of judicial deportation orders in every trial 
     of an alien who is charged with an aggravated felony. 
     Finally, under this section the Attorney General would retain 
     her right to seek an administrative determination of 
     deportability if the U.S. District Court were to deny a 
     government motion for a judicial deportation order.

    Sec. 304. Restrictions on Defenses to Deportation by Criminals.

       This section would restrict defenses to deportation for 
     aliens who have been convicted of aggravated felonies. As the 
     result of amendments made to the INA by this section, the 
     only such aliens who would qualify for discretionary relief 
     from deportation would be those permanent residents who have 
     lived in the U.S. under that immigration status for at least 
     seven years and have been sentenced to less than five years 
     of imprisonment upon conviction of an aggravated felony.
       Under current law, permanent resident aliens who have lived 
     in the U.S. for seven years are ineligible for relief from 
     deportation if they have served five years or more upon 
     conviction of an aggravated felony. This section would amend 
     the law to make such aliens who have been sentenced to serve 
     five years or more in prison ineligible for such relief.
       The new proposed standard is more relevant to assessing the 
     seriousness of an offense, since dangerous criminals 
     sometimes are released prematurely due to prison overcrowding 
     or for other reasons that are unrelated to the seriousness of 
     the crimes for which they were convicted. Moreover, the 
     current standard presents a serious logistical obstacle to 
     the speedy commencement of deportation proceedings because it 
     may not be known until the alien has served five years in 
     prison whether the alien will be eligible for relief from 
     deportation.

    Sec. 305. Establishment of Alien Prisoner Transfer Treaty Study.

       This section requires the Attorney General, together 
     with the Secretary of State, to report on the use and 
     effectiveness of the Prisoner Transfer Treaty with Mexico. 
     That treaty provides for the removal of aliens who are 
     Mexican nationals from the U.S. when they have been 
     convicted of crimes here.


                      SUBTITLE B--TERRORIST ALIENS

                 Sec. 311. Removal of Alien Terrorists.

       This section incorporates a legislative proposal first made 
     by the Justice Department under the Reagan Administration in 
     1988. It was resubmitted to the Congress by the Bush 
     Administration in 1989. The Senate adopted it unanimously as 
     a part of the crime bill in the fall of 1993. The provision 
     was dropped, however, from the conference report on the bill.
       Under this section, a special Article III court is 
     established in which, under limited circumstances, classified 
     information may be used to establish the deportability of 
     alien terrorists as defined under the Immigration Act of 
     1990. The special Article III court is based on that which 
     was created by the Foreign Intelligence Surveillance Act 
     nearly twenty years ago.
       Under current law [Section 235(c) of the INA], classified 
     information may be used to establish the excludability of 
     aliens. Those cases are heard before INS officials sitting as 
     special adjudicatory officers. In recognition of the fact 
     that aliens are accorded greater constitutional due process 
     protections in deportation proceedings, this section places 
     cases in which the government seeks to use classified 
     information to establish deportability before Article III 
     life-tenured judges. In addition, this section requires that 
     either the Attorney General or the Deputy Attorney General of 
     the United States must personally approve the invocation of 
     this procedure by the Justice Department.
       Under this section, aliens may appeal from adverse 
     decisions by the special Article III court to the United 
     States Court of Appeals for the Federal Circuit. They may 
     seek review of adverse appellate decisions by filing 
     petitions for writs of certiorari to the United States 
     Supreme Court.

     Sec. 312. Mandatory Exclusion for Membership in Terror Group.

       This section provides that membership in a terrorist 
     organization is sufficient cause for the exclusion of aliens 
     who are attempting to enter the United States.


             SUBTITLE C--ENFORCEMENT OF DEPORTATION ORDERS

 Sec. 321. Limitations on Collateral Attacks on Underlying Deportation 
                                Orders.

       In a criminal proceeding against a deported alien who 
     reenters the United States illegally, this section would 
     allow a U.S. District Court to examine the validity of the 
     original deportation order only if the alien demonstrates (1) 
     that he/she exhausted all available administrative remedies, 
     (2) that the deportation proceedings improperly deprived the 
     alien of the opportunity for judicial review, and (3) that 
     the entry of the order of deportation was ``fundamentally 
     unfair. This language, which is taken directly from the U.S. 
     Supreme Court case of United States v. Mendoza-Lopez, 481 U.S 
     828 (1987), is intended to ensure that minimum due process is 
     followed in the original deportation proceeding while 
     preventing wholesale, time-consuming attack on underlying 
     deportation orders.



         SUBTITLE D--EXPEDITED ASYLUM REVIEW AT PORTS OF ENTRY

      Sec. 331. Establishment of Expedited Asylum Review Program.

       Aliens who seek to immigrate to the United States 
     increasingly are using commercial international airline 
     flights in order to circumvent U.S. immigration laws. The 
     number of such aliens who arrive at U.S. airports with 
     fraudulent documents, or without any travel papers at all, 
     has grown markedly in recent years. Severely limited 
     detention space requires the INS to parole most such aliens 
     into the U.S. with instructions to report several months 
     later for a hearing before an immigration judge. Many of 
     those aliens fail to appear for their hearings, however, and 
     take other actions to make INS efforts to locate them quite 
     difficult.
       This section revises Section 235(b) of the INA, which 
     governs the inspection and exclusion of aliens. It provides 
     for an expedited exclusion procedure for aliens who (1) 
     arrive either at points of entry or elsewhere in the U.S., 
     (2) do not have proper documentation, and (3) do not have a 
     credible claim for asylum. Under its terms, if the examining 
     immigration officer determines that an alien seeking entry to 
     the U.S. does not present the requisite documentation to 
     enter the U.S. and doesn't indicate that he/she has a fear of 
     persecution in his/her home country, the officer may exclude 
     the alien without further hearing or review.
       Special protections, however, are provided under this 
     section to aliens who do profess fear of persecution. Such 
     aliens are immediately referred to an INS asylum officer at 
     the port of entry. If the asylum officer determines that the 
     alien has a credible fear of persecution, then the alien is 
     entitled to apply for provisional asylum. On the other hand, 
     if the INS asylum officer finds that the alien does not 
     have a credible fear of persecution, then the officer can 
     order the alien excluded from the United States, subject 
     to immediate supervisory review.
       Under this section, a finding that an alien has a 
     ``credible fear of persecution'' requires a judgment that (1) 
     it is more probable than not that the statements made in 
     support of the claim are true and that (2) there is a 
     significant possibility that the alien could establish 
     eligibility for provisional asylum based upon them.
       This section provides only for quite limited judicial 
     review. An alien who is found to be excludable under the 
     expedited exclusion procedure would be permitted to file a 
     petition for a writ of habeas corpus in a United States 
     District Court. Such review by the Court would be limited to 
     (1) a determination that the petitioner is an alien and (2) a 
     finding of whether the petitioner was ordered excluded under 
     the expedited exclusion procedure.


                       subtitle E--asylum reform

                           Sec. 341. Asylum.

       Under current law, the adjudication of asylum claims 
     through many levels of administrative and judicial review 
     typically is extremely slow. Undeserving applicants have 
     taken advantage of the present massive backlog of 300,000 
     cases, as well as all of their rights to review and appeal, 
     to delay for many years the final resolutions of their cases. 
     In response to that problem, this section rewrites Section 
     208 of the INA, which establishes the asylum process.
       Current law provides that an alien who fears persecution 
     can apply for either asylum under Section 208 or withholding 
     of deportation under Section 243(h), or both. In order to be 
     granted asylum, an alien must prove that he/she has a ``well-
     founded fear of persecution,'' whereas to be granted 
     withholding of deportation an alien must demonstrate that 
     his/her life or freedom ``would be threatened'' if he/she 
     were to return to his/her home country. The courts have 
     interpreted ``would be threatened'' to mean ``more likely 
     than not'' and ``well-founded fear'' to mean ``good reason to 
     fear.'' The judgment of whether to grant asylum to an alien 
     who qualifies is left to the discretion of the Attorney 
     General, while the grant of the withholding of deportation is 
     mandatory for aliens who meet the statutory requirements.
       Under Section 208 as revised by this section, an alien who 
     fears persecution in his/her homeland would be allowed to 
     apply only for provisional asylum. This section would 
     preserve the existing burdens of proof, such that the 
     Attorney General would be required to grant provisional 
     asylum to an alien who establishes that it is ``more likely 
     than not'' that he/she would be persecuted in his/her home 
     country and (2) the Attorney General is given the discretion 
     to grant provisional asylum to an alien who establishes a 
     ``good reason to fear'' persecution. Reflecting current law, 
     the Attorney General would be precluded from granting 
     provisional asylum to aliens who are found to have 
     participated in persecution, who have been convicted of a 
     particularly serious crime, or who are dangerous to the 
     security of the U.S.
       This section also addresses another deficiency in current 
     law with respect to asylum, which is that there are no 
     deadlines by which asylum applications must be filed. An 
     undocumented alien who has been in the U.S. for many years, 
     for example, may claim asylum at any time. This allows such 
     aliens to use asylum as a defense to deportation.
       Accordingly, this section establishes deadlines for 
     provisional asylum applications. Under the new requirements, 
     aliens would be required to file a notice of intent to file a 
     provisional asylum application within 30 days after arriving 
     in the U.S. The application itself then must be filed within 
     60 days. An applicant who misses these deadlines is allowed 
     to apply only if he/she can demonstrate that circumstances 
     changed in his/her home country after the deadlines passed.
       In addition, this section provides that reasonable fees may 
     be charged for asylum applications and that employment 
     authorizations in connection therewith only will be granted 
     at the discretion of the Attorney General. The asylum 
     applications of aliens who do not appear at their hearings 
     will be dismissed, unless the alien involved can demonstrate 
     exceptional circumstances.
       This section also allows aliens who have been granted 
     provisional asylum to receive full asylum status. In order to 
     do so, the alien must be present in the U.S. in provisional 
     asylum status for one year, continue to be eligible for 
     provisional asylum, and admissible for adjustment under the 
     INA.
       Finally, under this section, any alien who has received 
     notice of the consequences of the filing of a frivolous 
     provisional asylum application, and nevertheless files such 
     an application, will not be eligible ever again for any 
     immigration benefits under the INA. An application will be 
     considered frivolous if it includes willful and material 
     misrepresentations of fact.

    Sec. 342. Failure to Appear for Asylum Hearing; Judicial Review.

       Under this section, an alien who has received proper notice 
     and nevertheless fails to appear for a provisional asylum 
     hearing will not be eligible in the future for any 
     immigration benefit under the INA. This section also provides 
     that judicial review of provisional asylum cases will take 
     place in the U.S. Courts of Appeals. Determinations granting 
     or denying provisional asylum on the basis of claims of 
     changed circumstances, however, will rest in the sole 
     discretion of the Attorney General.

                    Sec. 343. Conforming Amendments.

       This section includes conforming amendments to the INA.

                       Sec. 344. Effective Dates.

       This section provides for effective dates. Although most 
     amendments made by the bill will take effect on the date on 
     which the bill becomes law, some effective dates are set 
     afterwards in order to allow the INS more time in which to 
     prepare for the changes made thereby.


                  subtitle e--miscellaneous provisions

      Sec. 351. Authorization of Telephonic Deportation Hearings.

       In response to the 1989 decision of the U.S. Court of 
     Appeals for the Ninth Circuit in Purba v. INS, 884 F. 2d 516 
     (9th Cir. 1989), this section provides authority for 
     deportation proceedings to be heard by immigration judges 
     telephonically and, where waived or agreed to by the parties, 
     in the absence of the alien.

     Sec. 352. Construction of Expedited Deportation Requirements.

       In response to another recent ruling by the Court of 
     Appeals for the Ninth Circuit, this section makes clear that 
     the provision in the INA that requires the Attorney General 
     to begin deportation proceedings as expeditiously as possible 
     cannot be construed to create a legally enforceable right or 
     benefit.
                                 ______

      By Mr. CHAFEE:
  S.J. Res. 231. A joint resolution prohibiting funds for diplomatic 
relations with Vietnam at the ambassadorial level unless a report on 
United States servicemen who remain unaccounted for from the Vietnam 
War is submitted to the Senate; to the Committee on Foreign Relations.


             VIETNAM DIPLOMATIC RELATIONS JOINT RESOLUTION

 Mr. CHAFEE. Mr. President, at the beginning of this session, 
the Senate debated and approved a resolution urging the President to 
lift the trade embargo against Vietnam. It was an emotional and hard-
fought debate. All Senators agreed as to our primary policy objective: 
to obtain continued cooperation from Vietnam in our efforts to account 
for the more than 2,000 servicemen who never returned from the War. The 
question was, how best to meet that objective.
  At the time, many argued very passionately that the cooperation we 
have received from Vietnam on the POW-MIA question has been reluctant 
at best, and that lifting the embargo would remove any incentive that 
the Vietnamese might have to continue to work with us. Others argued 
that if we did not lift the embargo, the Vietnamese would decide that 
continuing to cooperate was pointless and would cease to do so.
  After much consideration, I sided with the proponents of lifting the 
embargo. I felt that we should trust the judgment of our on-the-ground 
investigators, virtually all of whom gave high marks to the Vietnamese 
for their cooperation, and that the best way to maintain that 
cooperation would be to advance our relationship through the lifting of 
the trade embargo.
  Since the Senate approved that resolution on January 27 and the 
President lifted the embargo accordingly on February 3, many in the 
Vietnam veterans community in my state of Rhode Island have expressed 
the understandable concern that, in doing so, we had let the camel's 
nose under the tent. Now that we have taken this important step 
forward, they fear that we will rush headlong toward normalizing our 
relations with Vietnam without any further reflection on the POW-MIA 
question.
  I stated during the debate on the Kerry-McCain amendment that I did 
not advocate establishing normal diplomatic ties with Vietnam. I 
believed then, as I believe now, that any further progress toward 
normalization must continue to be linked to Vietnamese cooperation on 
the POW-MIA issue. The legislation I introduce today--and plan to 
reintroduce when we return next year--is intended to let our Vietnam 
veterans, as well as the comrades and families of those who never 
returned, know that we will not sever that link.
  Quite simply, my joint resolution states that Congress shall 
appropriate no funds to maintain diplomatic relations with Vietnam at 
the ambassadorial level unless, prior to Senate confirmation of any 
U.S. ambassador to Vietnam, the President submits to the Senate a 
comprehensive report assessing the progress to date of U.S.-Vietnamese 
efforts to resolve cases involving U.S. servicemen still unaccounted 
for.

  This legislation would not undermine the President's ability to 
conduct diplomacy. Clearly, we cannot formulate foreign policy with 535 
Secretaries of State. Instead, my legislation focuses on the Senate's 
Constitutional responsibility to confirm ambassadorial appointments and 
the Congress' control over the federal purse strings. It says to the 
President, we will not tie your hands, but before we vote on sending an 
ambassador to Vietnam and before we appropriate any funds to support an 
American embassy in Vietnam, we want, at the very least, a thorough 
update on the accounting of American POW-MIA.
  Mr. President, sadly, we will never recover every American who 
remains unaccounted for from the Vietnam War. The destructive nature of 
war and the particular challenges of recovery work in the jungle make 
resolution of these cases very slow and painstaking, and in some 
instances, impossible. That does not mean, however, that we should 
abandon our efforts to achieve the best accounting we can. The families 
and friends of our missing servicemen have been waiting more than 20 
years for answers about what happened to their loved ones. We must 
continue to do everything possible to provide those answers.
  I want to thank the Rhode Island chapter of the Vietnam Veterans of 
America and in particular Mr. Ernie DiRocco and Mr. Ken Osborne for 
their hard work on this issue and their invaluable assistance in 
crafting this joint resolution.
                                 ______


 By Mr. MURKOWSKI (for himself, Mr. Stevens, Mr. Akaka, Mr. Biden, Mr. 
  Bond, Mr. Boren, Mr. Bryan, Mr. Chafee, Mr. Coats, Mr. Cochran, Mr. 
  Craig, Mr. D'Amato, Mr. DeConcini, Mr. Durenberger, Mr. Glenn, Mr. 
  Grassley, Mr. Heflin, Mr. Helms, Mr. Hollings, Mr. Lautenberg, Mr. 
Mathews, Ms. Mikulski, Mr. Packwood, Mr. Pressler, Mr. Rockefeller, Mr. 
    Roth, Mr. Simon, Mr. Specter, Mr. Thurmond, Mr. Warner and Mr. 
                               Wofford):

  S.J. RES. 232, A joint resolution designating October 23, 1994, 
through October 31, 1994, as ``National Red Ribbon Week for a Drug-Free 
America; to the Committee on the Judiciary.

            NATIONAL RED RIBBON WEEK FOR A DRUG-FREE AMERICA

 Mr. MURKOWSKI. Mr. President, on behalf of myself, Senator 
Stevens, and 29 of our colleagues, I introduce a Senate Resolution 
designating October 23-October 31, 1994, as ``National Red Ribbon Week 
for a Drug-Free America.'' I am proud to be the Senate's original 
sponsor of this seventh annual recognition of this week, and I invite 
my colleagues to support this important resolution.
  Illegal and addictive drugs, Mr. President, are a scourge on our 
society and, if not stemmed, could virtually destroy our American way 
of life. The human misery and violence that surround the drug culture 
are among the most dangerous threats to a free society. I cannot--and 
know we will not--stand by and allow the cancer of drug addiction to 
imperil the future of this country.
  The National Family Partnership is an important organization fighting 
drug abuse in our country. This group of volunteers is dedicated to 
freeing our Nation from dependence on illegal drugs. The Partnership 
orchestrates educational activities throughout American communities 
that are designed to promote broad public awareness on the perils of 
drug addiction. The campaign primarily targets school-age children--
those most vulnerable to the dangers of drugs. Red Ribbon Week is as 
much a celebration of the success and effectiveness of the Family 
Partnership as it is a collective statement about the dangers of drug 
abuse.
  Since its inception in 1988, the National Red Ribbon Celebration has 
made a positive impact on more and more people each year. In 1993, over 
120 million people in the United States participated in Red Ribbon 
activities.
  The National Red Ribbon Celebration originated when Drug Enforcement 
Administration agent Enrique Camarena was murdered by drug traffickers 
in 1985. Angered by the killing and destruction caused by illegal drugs 
in America, the National Family Partnership and affiliated non-profit 
organizations began wearing red ribbons as a symbol of their commitment 
to a healthy, drug-free lifestyle--No use of illegal drugs and no 
illegal use of legal drugs.
  Mr. President, a Senate Joint Resolution on this vital topic lends 
both credence and seriousness to the purposes of Red Ribbon Week, a 
true national grassroots initiative.
  Mr. President, I urge all my colleagues to support this important 
legislation.

                          ____________________