[Congressional Record Volume 150, Number 73 (Friday, May 21, 2004)]
[Senate]
[Pages S6088-S6106]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. LAUTENBERG (for himself, Mr. Kennedy, Mr. Corzine, Ms. 
        Stabenow, Mrs. Clinton, and Mr. Reed):
  S. 2473. A bill to require payment of appropriated funds that are 
illegally disbursed for political purposes by the Centers for Medicare 
and Medicaid Services; to the Committee on Finance.
  Mr. LAUTENBERG. Mr. president, yesterday, the Comptroller General of 
the United States ruled that the Bush administration illegally spent 
taxpayer dollars for political propaganda in violation of two laws.
  To make matters worse, these funds were taken from the Medicare Trust 
Fund.
  In other words, money reserved for our seniors' healthcare was 
illegally used for political activity. It is outrageous.
  The President has raised plenty of money for his campaign. Over 
200 million dollars. Why does he need to use Medicare funds?

  With taxpayer money, the Bush administration produced so-called 
``video news released'' --fake news stories that hailed the new 
Medicare law--and distributed them to TV stations across the country.
  This covert propaganda was never identified as being produced by the 
administration. As a result many news stations ran this story as real 
news and

[[Page S6089]]

viewers had no idea it was produced by the government.
  The phony news stories show scenes of the President receiving a 
standing ovation before signing the bill into law and even end with a 
sign off from a fake reporter.
  The GAO has said that these materials are illegal, but the money is 
already spent and that money will likely never be recovered unless we 
pass this legislation.
  My bill calls on the Bush-Cheney re-election campaign to repay this 
money to the Federal Government. It's the right thing to do.
  I have long said that this administration's so-called ``education'' 
campaign on the new Medicare law is fraught with questionable activity.
  And now we know that they have in fact acted illegally. I think 
somewhere along the way they confused the word ``education'' with 
``election.''
  This is just the most recent incident in a long line of advertising 
by the Bush administration that the non-partisan GAO has called 
misleading and political.
  If the Bush-Cheney campaign wants to spend funds dollars touting the 
new Medicare law, that's their prerogative--but they cannot use 
government agencies and taxpayer funds to do it.
  I am all for educating seniors, but I will always guard against any 
misuse of taxpayer dollars, especially those reserved for Medicare.
  I am here today to tell the President: Don't use the people's money 
to promote your bid for reelection. It's not only unethical, it's 
against the law. Taxpayer money should not be used for political 
purposes.
  I ask unanimous consent that the text of the bill and the GAO report 
be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2473

       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 ``Medicare Trust Fund 
     Reimbursement Act of 2004''.

     SEC. 2. REPAYMENT TO THE MEDICARE TRUST FUNDS OF AMOUNTS 
                   ILLEGALLY DISBURSED FOR POLITICAL PURPOSES.

       (a) In General.--Notwithstanding any other provision of 
     law, if the Comptroller General of the United States 
     determines that the Centers for Medicare & Medicaid Services 
     has violated the restriction on using appropriated funds for 
     publicity or propaganda purposes contained in section 626 of 
     division J of the Consolidated Appropriations Resolution, 
     2003 (Public Law 108-7; 117 Stat. 470) or any other provision 
     of law, the principal campaign committee (as defined in 
     section 301(5) of the Federal Election Campaign Act of 1971 
     (2 U.S.C. 431(5))) of the President of the United States 
     shall reimburse the Federal Government for the amount used in 
     committing such violation.
       (b) Reimbursement of Medicare Trust Funds.--To the extent 
     that the amount described in subsection (a) was initially 
     appropriated to the Federal Hospital Insurance Trust Fund 
     under section 1817 of the Social Security Act or the Federal 
     Supplementary Medical Insurance Trust Fund under section 1841 
     of such Act, the amount reimbursed under such subsection 
     shall be credited to the Trust Fund to which the amount was 
     initially appropriated.
         Comptroller General of the United States, United States 
           General Accounting Office,
                                                   Washington, DC.

                                Decision

     Matter of: Department of Health and Human Services, Centers 
         for Medicare & Medicaid Services--Video News Releases.

     File: B-302710.
     Date: May 19, 2004.


                                 DIGEST

       1. The Centers for Medicare & Medicaid Services's (CMS) use 
     of appropriated funds to pay for the production and 
     distribution of story packages that were not attributed to 
     CMS violated the restriction on using appropriated funds for 
     publicity or propaganda purposes in the Consolidated 
     Appropriations Resolution of 2003, Pub. L. No. 108-7, Div. J, 
     Tit. VI, Sec. 626, 117 Stat. 11, 470 (2003).
       2. CMS, in using appropriations in violation of the 
     publicity or propaganda prohibition, incurred obligations in 
     excess of appropriations available for that purpose. See B-
     300325, Dec. 13, 2002. Accordingly, CMS violated the 
     Antideficiency Act, 31 U.S.C. Sec. 1341, and must report the 
     violation to the Congress and President in accordance with 31 
     U.S.C. Sec. 1351 and Office of Management and Budget Circular 
     No. A-11.


                                DECISION

       In a March 10, 2004, opinion, we concluded that the 
     Department of Health and Human Services's (HHS) use of 
     appropriated funds to produce and distribute a flyer and 
     print and television advertisements, as part of a campaign to 
     inform Medicare beneficiaries about changes to Medicare under 
     the Medicare Prescription Drug, Improvement and Modernization 
     Act of 2003 (MMA), did not violate publicity or propaganda 
     prohibitions in the Consolidated Appropriations Act of 2004, 
     Pub. L. No. 108-199, Div. F, Tit. VI, Sec. 624, 118 Stat. 3, 
     356 (2004), and the Consolidated Appropriations Resolution of 
     2003, Pub. L. No. 108-7, Div. J, Tit. VI, Sec. 626, 117 Stat. 
     11, 470 (2003). B-302504, Mar. 10, 2004. During our 
     development of that opinion, we learned that the Centers for 
     Medicare & Medicaid Services (CMS), an agency in the 
     Department of Health and Human Services, had prepared as part 
     of this campaign video news releases or VNRs, including a 
     news story for television broadcast, to provide information 
     to the television medium. Letter from Dennis G. Smith, 
     Director, Center for Medicaid and State Operations, to Gary 
     L. Kepplinger, Deputy General Counsel, General Accounting 
     Office (GAO), April 2, 2004 (Smith Letter). The VNRs consist 
     of (1) video clips known as B-roll film, (2) introductory and 
     concluding slates with facts about MMA, and (3) prepackaged 
     news reports referred to as story packages with suggested 
     lead-in anchor scripts. Importantly, the prepackaged story 
     packages and anchor scripts did not include statements noting 
     that they had been prepared by CMS.
       Our March 10, 2004, opinion addressed only the flyer and 
     advertisements and did not address CMS's use of appropriated 
     funds to prepare and distribute the VNRs. This decision 
     addresses whether CMS's use of appropriated funds to produce 
     and distribute the VNRs violated the publicity or propaganda 
     prohibitions enacted in the Consolidated Appropriations 
     Resolution of 2003, cited above. CMS told us that it used 
     fiscal year 2003 CMS program management appropriations to 
     produce and distribute the VNRs. Smith Letter, Enclosure 1 at 
     8. As we explain below, we conclude that of the three parts 
     of the VNRs, one part--the story packages with suggested 
     scripts--violates the prohibition. In neither the story 
     packages nor the lead-in anchor scripts did HHS or CMS 
     identify itself to the television viewing audience as the 
     source of the news reports. Further, in each news report, the 
     content was attributed to an individual purporting to be a 
     reporter but actually hired by an HHS subcontractor.
       To perform our analysis, we requested information from CMS 
     regarding the production, filming and distribution of the VNR 
     materials. Letter from Gary L. Kepplinger, Deputy General 
     Counsel, GAO, to Dennis G. Smith, Acting Administrator, CMS, 
     March 17, 2004. CMS responded by letter dated April 2, 2004. 
     Smith Letter. We met with agency officials to clarify their 
     responses and to gain further factual information regarding 
     the production and distribution of the VNRs at issue. In 
     addition to the information CMS provided us, we also examined 
     available information regarding the use of VNRs generally by 
     the broadcast media and their current use as a public 
     relations tool.


                               BACKGROUND

     Use of VNRs
       VNRs have become a popular public relations tool to 
     disseminate desired information from private corporations, 
     nonprofit organizations and government entities, in part 
     because they provide a cheaper alternative to more 
     traditional broadcast advertising.\1\ While the practice is 
     widespread and widely known by those in the media industry, 
     the quality and content of materials considered to constitute 
     a VNR can vary greatly.\2\ Generally, a VNR package may 
     contain a prepackaged news story, referred to as a story 
     package, accompanied by a suggested script, video clips known 
     as B-roll film, and various other promotional materials.\3\ 
     These materials are produced in the same manner in which 
     television news organizations produce materials for their own 
     news segments.\4\ By eliminating the production effort and 
     costs of news organizations, producers of VNRs find news 
     organizations willing to broadcast a favorable news segment 
     on the desired topic.\5\
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     See footnotes at end of article.
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       Since 1990, there has been a notable rise in the 
     distribution of VNR materials.\6\ With growing use of VNRs, 
     journalism scholars began questioning the effect of this 
     third-party material upon the perception that news was 
     derived from a neutral source.\7\ In particular, scholars 
     raised concerns regarding the influence of third-party 
     sources.\8\
       Given these ethical concerns, there have been a number of 
     studies of the use of VNRs by the broadcast industry. Several 
     journalism scholars attribute the rise in the use of VNRs to 
     the economic circumstances of the industry.\9\ In smaller 
     broadcast markets during the early 1990s, news stations 
     suffered significant reductions in staff and budget, and had 
     difficulty obtaining footage of certain public interest 
     events.\10\ Footage from an outside source helped stations 
     fill airtime with programming that would otherwise not be 
     available and helped avoid depletion of already overextended 
     funds.\11\
       Studies also show, however, that most news organizations 
     using VNR materials often use only a portion or edited 
     versions of the materials provided.\12\ Still, parties 
     interested in obtaining the maximum audience for VNR 
     materials argue that, even if the story package or scripted 
     materials are not used in full, the production of a 
     professionally complete news story provides a framework for 
     the message conveyed in the

[[Page S6090]]

     final broadcast.\13\ This allows the story package producer 
     to assert some control over the message conveyed to the 
     target audience.
       Also, the use of VNRs may be attributed to the ease with 
     which the materials may be distributed. While some packages 
     are distributed directly from the source to the television 
     stations, satellite and electronic news services such as 
     provided by CNN Newsource facilitate distribution to a number 
     of news markets in a short period of time.\14\ Broadcast 
     stations subscribe to these services, which provide, in 
     addition to VNR materials, journalist reports and stories, 
     and advertising.\15\ While the news services label VNRs 
     differently than independent journalist news reports, there 
     apparently is no industry standard as to the labeling of 
     VNRs. In fact, when questioned about the use of the VNR 
     materials at issue here, some news organizations indicated 
     that they misread the label or they mistook the story 
     package as an independent journalist news story on CNN 
     Newsource.\16\
       Professional journalism societies have noted in their codes 
     of ethics that journalists should resist influence from 
     outside sources, including advertisers and special interest 
     groups.\17\ Because VNRs consist of information generated by 
     a group with a distinct perspective on an issue, the 
     unfettered use of VNRs may run afoul of these principles.\18\ 
     Moreover, professional organizations warn against using 
     materials that would deceive audiences.\19\ VNRs that 
     disclose the source of information to the target audience 
     alleviate these ethical concerns.
     CMS's Medicare VNRs
       The CMS VNRs consist of three videotapes with corresponding 
     scripts. CMS informed us that these videotapes represent what 
     a news organization would receive when obtaining the VNR 
     materials. Two of the videotapes are in English, and one is 
     in Spanish. The two English videotapes contain three items: 
     (1) video clips, referred to as B-roll, (2) slates 
     containing, among other things, title cards with facts on 
     MMA, and (3) a video segment called a ``story package.'' \20\ 
     The B-roll provides news organizations with footage for use 
     in developing their own news reports. The slate is a visual 
     feed from CMS to recipient news organizations that contains 
     some facts regarding MMA.\21\ The last slate in the VNR 
     materials directs the receiving news station to contact CMS 
     for information on the VNR materials. The story packages are 
     news reports prepared by CMS rather than a news organization.
       The B-roll clips on each videotape are exactly the same and 
     contain footage of President Bush, in the presence of Members 
     of Congress and others, signing MMA into law, and a series of 
     clips of seniors engaged in various leisure and health-
     related activities, including consulting with a pharmacist 
     and being screened for blood pressure. The English videotapes 
     also include clips of Tommy Thompson, the Secretary of the 
     Department of Health and Human Services (HHS), and Leslie 
     Norwalk, Acting Deputy Administrator of CMS, making 
     statements regarding changes to Medicare under MMA. The 
     Spanish videotape includes clips of Dr. Cristina Beato of CMS 
     offering statements about MMA's changes to Medicare, instead 
     of Thompson and Norwalk.
       The two English VNRs contain segments entitled ``story 
     packages'' that consist of self-contained news reports 
     regarding Medicare benefits under MMA. Although the English 
     story packages contain several of the same B-roll video clips 
     and the same narrator, identified as Karen Ryan, the contents 
     of the two story packages vary. With each story package, CMS 
     included a script for a news anchor of the recipient news 
     organization to read as a lead-in to the CMS produced news 
     report. One story package focuses on CMS's advertising 
     campaign regarding MMA (Story Package 1). The suggested 
     anchor lead-in states that ``the Federal Government is 
     launching a new, nationwide campaign to educate 41 million 
     people with Medicare about improvements to Medicare.'' The 
     lead-in ends with ``Karen Ryan explains.'' The video portion 
     of the story package begins with an excerpt of the television 
     advertisement with audio indicating ``it's the same Medicare 
     you've always counted on plus more benefits.'' Karen Ryan 
     explains, ``That's the main message Medicare's advertising 
     campaign drives home about the law.'' As more clips from the 
     advertisement appear, Karen Ryan continues her narration, 
     indicating that the campaign helps beneficiaries answer their 
     questions about the new law, the administration is 
     emphasizing that seniors can keep their Medicare the same, 
     and the campaign is part of a larger effort to educate people 
     with Medicare about the new law. The story package ends with 
     Karen Ryan stating: ``In Washington, I'm Karen Ryan 
     reporting.''
       The second English story package (Story Package 2) focuses 
     on various provisions of the new prescription drug benefit of 
     MMA and does not mention the advertising campaign of CMS. The 
     anchor lead-in states: ``In December, President Bush signed 
     into law the first ever prescription drug benefit for people 
     with Medicare.'' The anchor lead-in then notes, ``[t]here 
     have been a lot of questions about'' MMA and its changes to 
     Medicare and ``Karen Ryan helps sort through the details.'' 
     The video portion of the news report starts with footage of 
     President Bush signing MMA. Karen Ryan's voice narration 
     indicates that when MMA was ``signed into law last month, 
     millions of people who are covered by Medicare began asking 
     how it will help them.'' Next, the segment runs footage of 
     Tommy Thompson, in which he states that ``it will be the same 
     Medicare system but with new benefits. . . .'' Karen Ryan 
     continues her narration, stating ``most of the attention has 
     focused on the new prescription drug benefit . . . all people 
     with Medicare will be able to get coverage that will lower 
     their prescription drug spending . . . Medicare will offer 
     some immediate help through a discount card.'' She also tells 
     viewers that new preventive benefits will be available, low-
     income individuals may qualify for a $600 credit on available 
     drug discount cards, and ``Medicare officials emphasize that 
     no one will be forced to sign up for any of the new 
     benefits.'' Karen Ryan's narration leads into clips of 
     Secretary Thompson and Leslie Norwalk explaining other 
     beneficial provisions of MMA. Similar to Story Package 1, 
     Story Package 2 ends with ``In Washington, I'm Karen Ryan 
     reporting.''
       The Spanish-language materials contain the same three items 
     as the English language VNRs-a B-roll, slates and a story 
     package (Story Package 3). After the B-roll segments, the 
     story package segment appears. This segment is considerably 
     longer than its two English counterparts. Similar to Story 
     Package 2, Story Package 3 focuses on prescription drug 
     benefits available under MMA. It does not mention that CMS is 
     engaging in an advertising campaign. Here, the anchor lead-in 
     is similar to Story Package 2, except the anchor indicates 
     that Alberto Garcia ``helps sort through the details.'' The 
     video segment begins with the footage of President Bush 
     signing MMA into law as Alberto Garcia narrates that after 
     signing the law, millions of people who are covered by 
     Medicare began asking how the new law will help them. The 
     remainder of the story package contains identical footage of 
     Dr. Beato and of seniors engaged in various activities as in 
     the B-roll footage. During the video clips of seniors, 
     Alberto Garcia narrates that the focus of most of the 
     attention to MMA is on the prescription drug benefit 
     available in 2006. He also explains that prescription drug 
     discount cards will be available in June 2004 and that 
     ``[p]eople with Medicare may be able to choose from several 
     different drug discount cards, offering up to 25 percent 
     savings on certain medications.'' \22\ Alberto Garcia 
     concludes his report, stating: ``In Washington, I'm Alberto 
     Garcia reporting.''
       In response to our request for more factual information on 
     CMS's practice of using VNRs, CMS forwarded to us a fourth 
     videotape. This tape contains Story Package 2 and two VNRs, 
     each of which CMS described as a ``produced story segment,'' 
     that HHS produced and distributed in 1999 under then-
     Secretary Donna Shalala of the Clinton Administration. Smith 
     Letter at 2. These two story packages were designed to inform 
     beneficiaries of the Clinton Administration's position on 
     prescription drug benefits and preventive health benefits. 
     CMS pointed out similarities between the story packages in 
     current use and the earlier ones. Much like the story 
     packages at issue here, the earlier story packages contain 
     footage of seniors engaging in various activities, then-HHS 
     Secretary Donna Shalala appearing to answer questions 
     regarding the provisions of proposed legislation for a 
     prescription drug benefits and preventive health benefits, 
     and a report of the Administration's proposal. The earlier 
     story packages end with the phrase, ``Lovell Brigham, 
     reporting.''
     Distribution of Medicare VNRs
       CMS explained to us that HHS hired Ketchum, Inc., to 
     disseminate information regarding the changes to Medicare 
     under MMA. Specifically, HHS contracted with Ketchum to 
     assist HHS and its agencies with a ``full range of social 
     marketing activities to plan, develop, produce, and deliver 
     consumer-based communication programs, strategies, and 
     materials.'' Ketchum Contract at 2. Ketchum hired Home Front 
     Communications (HFC) to create the VNR materials. HFC is a 
     broadcast public relations firm specializing in producing 
     video products. Smith Letter, Enclosure 1 at 6-7. HFC wrote 
     the VNR scripts, which were reviewed, edited, and approved by 
     CMS and HHS. Id. at 7. HFC completed all production work, 
     including filming, audio work and editing. The final VNR 
     packages were reviewed and approved by CMS and HHS. Id.
       The VNR materials were then distributed to television 
     stations via satellite, electronic services provided by CNN 
     Newsource, and/or mail. Id. at 2. CMS and HFC staff members 
     contacted some news directors by telephone to inform the 
     stations that the materials were available. Id. Additionally, 
     CMS e-mailed and faxed news advisories to news stations 
     regarding the VNR availability. Id.; see also Smith Letter, 
     Enclosure 4. The advisory indicated the satellite coordinates 
     to obtain the materials, how to find the materials on CNN 
     Newsource, and bullet-point key facts regarding the new 
     benefits available. Smith Letter, Enclosure 4. The advisory 
     further explains what the visual elements of the VNR 
     consisted of, including interviews, a story package, and B-
     roll. Id. All stations could access satellite distribution. 
     Smith Letter, Enclosure 1 at 6. Computers of the subscribing 
     location stations' newsrooms could access CNN Newsource. Id. 
     The advisory directed news stations to contact Robin Lane, an 
     HFC employee, for more information on retrieving VNR 
     materials. CMS also mailed videotapes of VNR materials to 
     those television stations that requested the material. Smith 
     Letter, Enclosure 4. CMS provided us a list of television

[[Page S6091]]

     stations that aired at least some portion of the VNRs 
     between January 22, 2004, and February 12, 2004. This list 
     contained 40 stations in 33 different markets. Smith 
     Letter, Enclosure 3. CMS did not identify what parts of 
     the VNR each station broadcasted. One of the stations that 
     aired the story package was WBRZ, Baton Rouge, Louisiana. 
     According to transcripts published on the World Wide Web, 
     WBRZ broadcast Story Package 2 and used the suggested 
     anchor lead-in script on January 22, 2004, in its 
     entirety.\23\ At least two other television stations may 
     have aired either Story Package 1 or 2 in their entirety. 
     A review of excerpts of transcripts from Video Monitoring 
     Services of America show that two stations, WMBC-TV in New 
     Jersey (Story Package 1) and WAGA-TV in Atlanta (Story 
     Package 2), aired MMA news stories ending with Karen 
     Ryan's by-line.\24\


                               DISCUSSION

       This is the first occasion that we have had to review the 
     use of appropriated funds by government entities to engage in 
     the production of VNRs. At issue here is whether CMS's use of 
     appropriated funds to produce VNR materials constituted a 
     proper use of those funds. In its written response and during 
     our informal interview, CMS contended that the production of 
     the VNR materials constitutes a ``standard practice in the 
     news sector'' and a ``well-established and well-understood 
     use of a common news and public affairs practice.'' Smith 
     Letter at 2. While we recognize that the use of VNR 
     materials, with already prepared story packages, is a common 
     practice in the public relations industry and utilized not 
     only by government entities but also the private and non-
     profit sector as well, our analysis of the proper use of 
     appropriated funds is not based upon the norms in the public 
     relations and media industry.
       CMS told us that it used fiscal year 2003 CMS program 
     management appropriations to produce and distribute the VNR 
     package. Smith Letter, Enclosure 1 at 8. While CMS may have 
     authority to use appropriated funds to disseminate 
     information regarding the changes to Medicare pursuant to 
     MMA,\25\ this authority is subject to the publicity or 
     propaganda prohibition appearing in the annual appropriation 
     act.\26\ Specifically, this prohibition states: ``No part of 
     any appropriation contained in this or any other Act shall be 
     used for publicity or propaganda purposes within the United 
     States not heretofore authorized by the Congress.'' Pub. L. 
     No. 108-7, Div. J, Tit. VI, Sec. 626, 117 Stat. 11, 470 
     (2003).
       Our March 10, 2004, opinion noted that to date we have 
     applied the publicity or propaganda restriction to prohibit 
     the use of appropriated funds for materials that are self-
     aggrandizing, purely partisan in nature, or covert as to 
     source. See generally B-302504. Of these three types, the VNR 
     materials on MMA raise concerns as to whether they constitute 
     ``covert'' propaganda because they are misleading as to 
     source.\27\
       CMS asserts that, in keeping with the traditional practices 
     in the media industry, CMS or the service it used to 
     distribute the VNR materials clearly labeled the materials as 
     VNRs. See generally Smith Letter. Because they are so labeled 
     and easily identifiable among those in the media, CMS 
     contends that the story packages could not be considered 
     misleading as to source. CMS officials also assert that it 
     was not their intent to distribute the VNR materials to the 
     broadcast stations covertly and that the labeling of the 
     entire VNR package clearly attributes the source of the 
     information to HHS and CMS. Smith Letter, Enclosure 1 at 4.
       The ``critical element of covert propaganda is the 
     concealment of the agency's role in sponsoring the 
     materials.'' B-229257, June 10, 1988. In our case law, 
     findings of propaganda are predicated upon the fact that the 
     target audience could not ascertain the information source. 
     For example, we found government-prepared editorials to be 
     covert propaganda; although the newspapers who would have 
     printed the suggested editorials should have been aware of 
     the source, the reading public would not have been aware of 
     the source. B-223098, Oct. 10, 1986. In that case, we 
     examined materials concerning President Reagan's proposal to 
     transfer the Small Business Administration (SBA) to the 
     Department of Commerce. Id. In support of the 
     Administration's proposal, SBA prepared and distributed a 
     variety of materials, including suggested editorials. SBA 
     prepared these editorials and provided them to newspapers 
     around the country to run as the position of the recipient 
     newspapers without disclosing to the readers of those 
     editorials that SBA was the source of the information. 
     Because the SBA-prepared editorials did not identify SBA as 
     the source, SBA's use of appropriated funds to prepare and 
     distribute the editorials violated the publicity or 
     propaganda prohibition.\28\
       In a 1987 case, the Department of State's Office of Public 
     Diplomacy for Latin America violated the prohibition by 
     paying consultants to write op-ed pieces in support of the 
     Administration's policy on Central America for distribution 
     to newspapers. B-229069, Sept. 30, 1987. The State Department 
     did not advise the newspapers of its involvement in the 
     writing of the op-ed pieces. The newspapers published these 
     articles for distribution to an equally uninformed audience 
     of individual readers. These materials were ``propaganda'' 
     within the ``common understanding'' of the term, and they 
     constituted ``deceptive covert propaganda'' designed to 
     influence the media and public to support the 
     Administration's Latin American policies. Id.
       In defending its VNRs, CMS fails to distinguish among the 
     three separate parts of its VNRs and the intended audience 
     for each part. We do not dispute the fact that CMS labeled 
     the entire package of VNR materials so that the receiving 
     news organizations could identify HHS or CMS as the source of 
     the information, whether they were received directly from CMS 
     through the mail or retrieved by the news organizations from 
     CNN Newsource or other satellite services.\29\ However, in 
     both B-223098 and B-229069, the readers of the printed 
     editorials and op-ed pieces would not have been aware of the 
     government's influence. In analyzing whether the three 
     separate materials that make up the VNR package are covert 
     propaganda, we do not consider the VNR as a whole, because 
     each of the three items that comprise the VNR was prepared 
     for a different purpose and audience.
       In its written response and during our interviews, CMS 
     indicated that the 41 million Medicare beneficiaries, who may 
     comprise the news stations' viewing audience, and not just 
     the television stations themselves, were the intended 
     audience of the VNR materials. Some VNR materials, including 
     the B-roll and the slates, could not reasonably be targeted 
     directly to a television viewing audience. By their very 
     nature, the B-roll and slates were designed to be 
     incorporated in a news story of the receiving stations' own 
     creation. CMS clearly identified itself as the source of 
     these materials to the television stations receiving them. 
     CMS made efforts to notify the news stations of the 
     availability of these materials via e-mail, telephone, and 
     facsimile and the available distribution sources identified 
     the materials as a VNR. Smith Letter at 2, Enclosure 1 at 2. 
     Accordingly, the B-roll and slates do not violate the 
     publicity or propaganda prohibition.
       The story packages and lead-in scripts, however, were 
     clearly designed to be seen and heard directly by the 
     television viewing audience and not solely by the media 
     receiving the package. CMS and HHS officials told us that the 
     story packages were designed so that television stations 
     could include them in their news broadcasts exactly as CMS 
     had produced them, without any production effort by the 
     stations. The suggested anchor lead-in scripts facilitate the 
     unaltered use of the story package, announcing the package as 
     a news story by Karen Ryan or Alberto Garcia. Importantly, 
     CMS included no statement or other reference in either the 
     story package or the anchor lead-in script to ensure that the 
     viewing audience would be aware that CMS is the source of the 
     purported news story.
       The story packages, similar to the SBA editorials and the 
     State Department op-ed pieces, could be reproduced with no 
     alteration thereby allowing the targeted audience to believe 
     that the information came from a nongovernment source or 
     neutral party. The story packages of the VNRs consist of a 
     complete message that could be reproduced directly by the 
     news organizations to be viewed by the audience of the 
     newscasts. As such, the viewing audience does not know, for 
     example, that Karen Ryan and Alberto Garcia were paid with 
     HHS funds for their work.
       The receiving news organization's ability to edit the story 
     packages to produce an independent news story does not negate 
     the fact that CMS designed the segments to broadcast as CMS 
     had produced them. CMS's effort to identify itself to the 
     news organizations that received the VNRs did not alert 
     television viewers that CMS was the source of the story 
     package. CMS has acknowledged that the television viewer was 
     the targeted audience. Because CMS did not identify itself as 
     the source of the news report, the story packages, including 
     the lead-in script, violate the publicity or propaganda 
     prohibition.\30\
       In a modest but meaningful way, the publicity or propaganda 
     restriction helps to mark the boundary between an agency 
     making information available to the public and agencies 
     creating news reports unbeknownst to the receiving audience. 
     It is not the only marker Congress has placed in statute 
     between the government and the American press, however. 
     Consistent with the restrictions on publicity or propaganda 
     ``within the United States,'' \31\ Congress has prohibited 
     the U.S. Information Agency and its succeeding agency, Board 
     of Broadcasting Governors, created by Congress for the 
     purpose of producing pro-U.S. government news reports and 
     print materials for international audiences, 22 U.S.C. 
     Sec. 1461, from broadcasting to domestic audiences, 22 U.S.C. 
     Sec. Sec. 1461(b), 1461-1a.\32\ In limiting domestic 
     dissemination of the U.S. government-produced news reports, 
     Congress was reflecting concern that the availability of 
     government news broadcasts may infringe upon the traditional 
     freedom of the press and attempt to control public opinion. 
     See B-118654-O.M., Feb. 12, 1979. Congress also restricted 
     government-produced programming for domestic audiences in the 
     law creating the Public Broadcasting Corporation. 47 U.S.C. 
     Sec. 396. Although the mission of the Public Broadcasting 
     Corporation includes instructional, educational and cultural 
     purposes, the statute creating the Corporation prohibits the 
     Corporation from directly producing any news programming. 47 
     U.S.C. Sec. 396(g)(3)(A) & (B).\33\ While Congress authorized 
     HHS to conduct a wide-range of informational activities, CMS 
     was given no authority to produce and disseminate 
     unattributed news stories.

[[Page S6092]]

       CMS makes two other arguments in support of its use of 
     appropriated funds to produce and distribute the story 
     packages. Neither argument is persuasive. CMS argues that the 
     VNR materials cannot be covert propaganda because the VNR 
     materials were not produced as a ``purported editorial, 
     advocacy piece or commentary.'' Smith Letter, Enclosure 1 at 
     4. CMS asserts that the narration by Karen Ryan (and 
     presumably Alberto Garcia) does not take a position on the 
     MMA. Id. While we agree that the story packages may not be 
     characterized as editorials, explicit advocacy is not 
     necessary to find a violation of the prohibition.\34\ As with 
     the SBA-suggested editorials, the content of the story 
     packages themselves would not violate the publicity or 
     propaganda prohibition if identifying the source to the 
     target audience were not an issue. See B-302504, Mar. 10, 
     2004.
       Further, CMS refers to our recent opinion in B-301022, Mar. 
     10, 2004, regarding the Office of National Drug Control 
     Policy's (ONDCP) open letter to state-level prosecutors 
     opposing efforts to legalize marijuana and other controlled 
     substances.\35\ Smith Letter, Enclosure 1 at 3. The open 
     letter contained two attachments, one of which did not 
     identify ONDCP as the source of the information. B-301022, 
     Mar. 10, 2004. We found that the unidentified attachment was 
     not a violation of the publicity or propaganda prohibition 
     because the document was part of a package that clearly 
     identified ONDCP as the source and because there was no 
     attempt to portray the contents of the document as the 
     position of an individual outside the agency. Id.
       This reasoning cannot be applied to the story packages at 
     issue here. The target audience of the ONDCP letter and 
     attachments, the state prosecutors, had access to the entire 
     package. The television viewing audiences, however, could not 
     view the entire MMA VNR package. Evidence shows, and CMS 
     acknowledges, that the story package could be broadcast 
     without edit or alteration, and actually was broadcasted 
     unedited in some markets. Television audiences viewing the 
     story packages were not in a position to determine the source 
     from the other materials in the VNR packages. Unlike the 
     ONDCP materials, the content of the message expressed in the 
     story packages was attributed to alleged reporters, Karen 
     Ryan and Alberto Garcia, and not to HHS or CMS. Nothing in 
     the story packages permit the viewer to know that Karen Ryan 
     and Alberto Garcia were paid with federal funds through a 
     contractor to report the message in the story packages. The 
     entire story package was developed with appropriated funds 
     but appears to be an independent news story. The failure to 
     identify HHS or CMS as the source within the story package is 
     not remedied by the fact that the other materials in the VNR 
     package identify HHS and CMS as the source of the materials 
     or that the content of the story package did not attempt to 
     attribute the agency's position to an individual outside the 
     agency.\36\
       HHS's misuse of appropriated funds in violation of the 
     publicity or propaganda prohibition also constitutes a 
     violation of the Antideficiency Act, 31 U.S.C. Sec. 1341(a). 
     The Antideficiency Act prohibits making or authorizing an 
     expenditure or obligation that exceeds available budget 
     authority. See B-300325, Dec. 13, 2002. Because CMS has no 
     appropriation available for the production and distribution 
     of materials that violate the publicity or propaganda 
     prohibition, CMS has violated the Antideficiency Act, 31 
     U.S.C. Sec. 1341(a). See B-300325, Dec. 13, 2002. CMS must 
     report its Antideficiency Act violation to the President and 
     the Congress. 31 U.S.C. Sec. 1351.\37\ Office of Management 
     and Budget Circular No. A-11 provides guidance to executive 
     agencies on information to include in Antideficiency Act 
     reports.


                               CONCLUSION

       Although the VNR materials were labeled so that the 
     television news stations could identify CMS as the source of 
     the materials, part of the VNR materials--the story packages 
     and lead-in anchor scripts--were targeted not only to the 
     television news stations but also to the television viewing 
     audience. Neither the story packages nor scripts identified 
     HHS or CMS as the source to the targeted television audience, 
     and the content of the news reports was attributed to 
     individuals purporting to be reporters, but actually hired by 
     an HHS subcontractor. For these reasons, the use of 
     appropriated funds for production and distribution of the 
     story packages and suggested scripts violated the publicity 
     or propaganda prohibition of the Consolidated Appropriation 
     Resolution of 2003, Pub. L. No. 108-7, Div. J, Tit. VI, 
     Sec. 626, 117 Stat. 11, 470 (2003). Moreover, because CMS had 
     no appropriation available to produce and distribute 
     materials in violation of the publicity or propaganda 
     prohibition, CMS violated the Antideficiency Act, 31 U.S.C. 
     Sec. 1341. CMS must report the Antideficiency Act violation 
     to the Congress and the President. 31 U.S.C. Sec. 1351.
                                                Anthony H. Gamboa,
                                                  General Counsel.


                               footnotes

     \1\ Eugene Marlowe, Sophisticated ``News'' Videos Gain Wide 
     Acceptance, Pub. Rel. J. 17 (Aug./Sept. 1994).
     \2\ In 1991, it was reported that 78 percent of news 
     directors polled used edited VNRs at least once a week in 
     their broadcasts. Bob Sonenclar, The VNR Top Ten: How Much 
     Video PR Gets On the Evening News?, Col. J. Rev. 14 (Mar. 1, 
     1991). In 1992, another source reported that 100 percent of 
     polled stations admitted to using some VNR materials in their 
     newscasts. Anne R. Owen and James A. Karrh, Video News 
     Releases: Effects on Viewer Recall and Attitudes, 22 Pub. 
     Rel. Rev. 369 (Winter 1996). In 2001, it was reported that 
     approximately 800 television stations in the United States 
     use VNRs. Mark D. Harmon and Candace White, How Television 
     News Programs Use Video News Releases, 27 Pub. Rel. Rev. 213 
     (June 22, 2001).
     \3\ Marlowe, supra note 1, at 17.
     \4\ Id.
     \5\ Glen T. Cameron and David Blount, VNRs and Air Checks: A 
     Content Analysis of the Use of Video News Releases in 
     Television Newscasts, 73 Journalism and Mass Comm. Q. 890, 
     891 (Winter 1996) (summarizes the logistic and resource 
     constraints of the media industry attributed to the media's 
     decision to utilize VNR material).
     \6\ Sonenclar, supra note 2, noting the anticipated rise in 
     the use of VNRs. Harmon and White, supra note 2, noting the 
     new importance of using VNRs in the media industry in the 
     late 1980s and into the 1990s.
     \7\ See generally Harmon and White, supra note 2, summarizing 
     the various studies in the 1990s regarding the ethics of 
     using VNRs in the journalism industry.
     \8\ Id.; see also Owen and Karrh, note 2, examining the 
     credibility of news programming using messages derived from 
     VNRs.
     \9\ Marlowe, supra note 1, at 17. See also Cameron and 
     Blount, supra note 5, at 893.
     \10\ Owen and Karrh, supra note 2. Cameron and Blount, supra 
     note 5, at 893.
     \11\ Cameron and Blount, supra note 5, at 893.
     \12\ Id. This study showed that most news stations, 
     regardless of size of the market, did not use the prepackaged 
     news stories on a wide scale basis. The study noted that, 
     while most stations used part of the VNRs, very few stations 
     used the prepackaged story with no alteration.
     \13\ Id. at 901.
     \14\ Harmon and White, supra note 2.
     \15\ Zachary Roth, Fact Check, CNN: Spinning PR into News, 
     CJR Campaign Desk, Mar. 22, 2004, available at http://
www.campaigndesk.org/archives/000318.asp.
     \16\ Id. The article also notes that most news directors that 
     ran the VNRs at issue here expressed displeasure with the 
     Administration, and some thought the distribution of the VNR 
     took ``advantage of the smaller stations' well-known lack of 
     resources.''
     \17\ See Code of Ethics and Professional Conduct Radio--
     Television News Directors Association (RTNDA), available at 
     http://www.rtnda.org/ethics/coe.html; see also Society of 
     Professional Journalists (SPJ) Code of Ethics, available at 
     http://www.spi.org/ethics code-asp.
     \18\ SPJ Code of Ethics states: ``Deny favored treatment to 
     advertisers and special interests and resist their pressure 
     to influence news coverage.'' SPJ Code of Ethics, supra note 
     17. RTNDA Code of Ethics states: ``Gather and report news 
     without fear or favor, and vigorously resist undue influence 
     from any outside forces, including advertisers, sources, 
     story subjects, powerful individuals, and special interest 
     groups.'' Code of Ethics and Professional Conduct RTNDA, 
     supra note 17.
     \19\ RTNDA Code of Ethics states: ``Clearly disclose the 
     origin of information and label all material provided by 
     outsiders.'' (Emphasis added.) SPJ Code of Ethics states: 
     ``Identify sources whenever feasible. The public is entitled 
     to as much information as possible on sources' reliability.''
     \20\ In addition to these materials, one of the English-
     language videos contains footage of an advertisement that 
     appeared on national television. Our legal opinion of March 
     10, 2004, B-302504, reviewed this material, and found that 
     HHS's use of appropriated funds for the advertisement did not 
     violate the publicity or propaganda prohibition.
     \21\ In addition to the title cards, the slates contain the 
     visual feeds of the B-roll and the story packages. Each slate 
     may be separated and edited for individual use by the 
     receiving television station. For example, the receiving 
     station could separate the slate with the B-roll footage of 
     seniors engaged in health-related activities from the other 
     B-roll footage and the story packages. The station could then 
     use this slate separately from the remaining VNR materials.
     \22\ In Story Package 2, Leslie Norwalk, in one of her 
     ``interview'' video clips, not Karen Ryan, the reporter, made 
     this point.
     \23\ The transcript, available http://www.2theadvocate.com/
scripts/012304/noon.htm, was accessed on April 7, 2004.
     \24\ The partial transcripts indicate the time each news item 
     was broadcast, the topic discussed, some information on 
     visual clips, and the reporter on the assignment. For 
     example, the partial transcript for the WAGA-TV transcript 
     indicated that the story ran for 1 minute and 22 seconds, 
     contained video clips from the television campaign 
     advertisements and a pharmacy checkout, an interview with 
     Tommy Thompson, and Karen Ryan reporting from Washington. See 
     Video Monitoring Services of America, Good Day Atlanta, 
     February 4, 2004, available at www.nexis.com.
 \25\ See generally, MMA Sec. 101(a) (adding new sections to 
     the Social Security Act and expanding HHS's authority to 
     engage in information dissemination activities to inform 
     Medicare beneficiaries about their benefits).
     \26\ We need not speculate, and this decision does not 
     address, what type of authorization an agency must have, and 
     how specific that authority would have to be, to prepare and 
     distribute a ``news story'' absent a prohibition on publicity 
     or propaganda.
     \27\ We did not criticize the flyer and advertisements under 
     consideration in our March 10, 2004, opinion as covert 
     propaganda because all of the materials identified HHS or CMS 
     as the source to every audience viewing the material.
     \28\ We compared SBA's editorials to lobbying campaigns, 
     attempting to manipulate the perception that public support 
     for an issue was greater than it actually was. Id.; see also 
     B-129874, Sept. 11, 1978 (criticizing a plan to distribute 
     ``canned editorial materials'').
     \29\ Some news organizations reported that the use of such 
     information was a mistake due to their own misreading of the 
     label on the materials received or some confusion as to the 
     labeling by CNN Newsource. Later reports indicate that CNN 
     Newsource has changed its cataloguing and labeling of VNRs in 
     response to these reports. See Zachary Roth, Fact Check: CNN 
     Cracks Down--on CNN, CJR Campaign Desk, Mar. 31, 2004, 
     available at http://www.campaigndesk.org/archives/000358.asp.
     \30\ As we noted in the background section of this decision, 
     CMS forwarded to us a videotape including what CMS described 
     as two story packages that HHS had produced and distributed 
     during the Clinton Administration in October 1999. These two 
     story packages were not brought to our attention at that 
     time. Had we been aware of the use of story packages in this 
     or other contexts, the principles discussed here would have 
     been applicable. We note, however, that accounts of the 
     government are settled by operation of law three years after 
     the close of the fiscal year. 31 U.S.C. Sec. 3526(c).

[[Page S6093]]

     \31\ The prohibition restricts publicity or propaganda 
     ``within the United States.'' The Consolidated Appropriations 
     Resolution of 2003, Pub. L. No. 108-7, Div. J, Tit. VI, 
     Sec. 626, 117 Stat. 11, 470 (2003).
     \32\ There are some limited exceptions in which Broadcasting 
     Board of Governors and United States Information Agency 
     materials could be viewed by a domestic audience. 22 U.S.C. 
     Sec. 1461(b). None of these exceptions are relevant here.
     \33\ The Administration and Congress have significant control 
     over the Public Broadcasting Corporation (PBC). The President 
     appoints and the Senate confirms the nine members of the 
     Board of Directors. 47 U.S.C. Sec. 396(c)(2). PBC is required 
     to report annually to Congress regarding its operations, 
     activities, financial condition and accomplishments. 47 
     U.S.C. Sec. 396(i).
     \34\ Although the story package content may not contain 
     strong editorial positions on the benefits of MMA, they are 
     not strictly factual news stories as HHS contends. On 
     balance, the contents of the story packages consist of a 
     favorable report on effects on Medicare beneficiaries, 
     containing the same notable omissions and weaknesses as the 
     flyer and advertisements that we reviewed in our March 2004 
     opinion.
     \35\ The National District Attorneys Association sent the 
     open letter and attachments with its own cover letter to the 
     state-level prosecutors.
     \38\ CMS also argues that VNRs are similar to press releases 
     as ``[e]ach is designed to provide information to reporters 
     and is crafted for the use by the media to which it is 
     directed. Each provides quotes, facts and background that a 
     reporter can use to write or produce a story. Each is created 
     to provide context to the issue.'' Smith Letter at 1. There 
     may, indeed, be similarities between these two public 
     relations tools. We are familiar with the practice of 
     preparing press releases to include information useful to 
     reporters who then prepare and produce their own news stories 
     for publication. With the story packages, CMS prepared news 
     stories using alleged reporters rather than simply offering 
     information to reporters who would prepare their own stories.
     \37\ We were unable to identify the amount of HHS's 
     violation. HHS advised that the English language story 
     packages cost $33,250, and that the Spanish language VNR cost 
     $9,500. Smith Letter, Enclosure 1 at 8. Although requested, 
     HHS did not provide further documentation of these costs to 
     us. We did not audit these amounts.
                                 ______
                                 
      By Mr. ALLARD (for himself, Mr. Durbin, and Ms. Landrieu):
  S. 2474. A bill to amend the Internal Revenue Code of 1986 to allow 
penalty-free withdrawals from retirement plans during the period that a 
military reservist or national guardsman is called to active duty for 
an extended period, and for other purposes; to the Committee on 
Finance.
  Mr. ALLARD. Mr. President, I rise to introduce the Guardsmen and 
Reservists Financial Relief Act of 2004. National guardsmen and 
reservists are serving our country with virtue and valor in the war on 
terror. These brave men and women deserve recognition for the many 
sacrifices they make in serving and protecting this great country. 
Their families also deserve protection from potential financial 
hardships experienced at home that may result from the guardsmen or 
reservists being called to service.
  Since September 11, 2004, many men and women have left their jobs in 
the private sector to fill vitally needed positions for our national 
defense. In playing the role of true citizen soldiers, some have taken 
drastic pay cuts from their civilian jobs in order to fulfill their 
duty to their country. This is beginning to create financial strains on 
their families.
  The Department of Defense estimates that 3 percent of its reservists 
have been called up more than once since September 11, 2001. 
Additionally, the GAO reports that nearly 41 percent of reservists are 
impacted by a pay discrepancy between his or her military and civilian 
salary.
  The Guardsmen and Reservists Financial Relief Act of 2004 will see 
that the families and loved ones of Guard members and reservists, who 
are called to service after September 11, 2001, can access retirement 
funds without incurring any penalties.
  This important legislation will allow Guard members and reservists 
who are activated for more than 179 days to make penalty-free early 
withdrawals from their IRA or 401(k) plan.
  This bill retroactively covers members of the Guard and Reserve who 
were called to service beginning on September 11, 2001, and extends 
coverage to those who may continue to be called on to serve on an 
active basis through September 12, 2005.
  Furthermore, this bill will encourage repayment of any withdrawal 
from an IRA or 401(k) fund within 2 years of a guardsman or reservist 
ending their active duty, ensuring retirement, financial security for 
soldiers and their families.
  It also temporarily lifts the contribution cap to equal the amount of 
the withdrawn funds to allow for full repayment.
  National Guard members and military reservists have been imperative 
to the military strength of our Nation over the years. Today, almost 
half of our military strength is from those who serve in the National 
Guard and military Reserve. There are currently 169,000 National Guard 
members and military reservists on active duty helping fight the war on 
terror.
  Since September 11, 2001, 373,707 total National Guard members and 
military reservists have been mobilized. There is no doubt we owe a 
great deal to our men and women in uniform who are so honorably serving 
their country by fighting the war on terror. Helping to ease the 
financial burdens of families of Guard members and reservists is a good 
start.
  I look forward to working with my colleagues in the Senate on the 
Guardsmen and Reservists Financial Relief of 2004 to provide members of 
our National Guard and military Reserve with the financial relief they 
deserve for loyally serving and protecting this country.
  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. 2474

       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 ``Guardsmen and Reservists 
     Financial Relief Act of 2004''.

     SEC. 2. PENALTY-FREE WITHDRAWALS FROM RETIREMENT PLANS FOR 
                   INDIVIDUALS CALLED TO ACTIVE DUTY FOR AT LEAST 
                   179 DAYS.

       (a) In General.--Paragraph (2) of section 72(t) of the 
     Internal Revenue Code of 1986 (relating to 10-percent 
     additional tax on early distributions from qualified 
     retirement plans) is amended by adding at the end the 
     following new subparagraph:
       ``(G) Distributions from retirement plans to individuals 
     called to active duty.--
       ``(i) In general.--Any qualified reservist distribution.
       ``(ii) Amount distributed may be repaid.--Any individual 
     who receives a qualified reservist distribution may, at any 
     time during the 2-year period beginning on the day after the 
     end of the active duty period, make one or more contributions 
     to an individual retirement plan of such individual in an 
     aggregate amount not to exceed the amount of such 
     distribution. The dollar limitations otherwise applicable to 
     contributions to individual retirement plans shall not apply 
     to any contribution made pursuant to the preceding sentence. 
     No deduction shall be allowed for any contribution pursuant 
     to this clause.
       ``(iii) Qualified reservist distribution.--For purposes of 
     this subparagraph, the term `qualified reservist 
     distribution' means any distribution to an individual if--

       ``(I) such distribution is from an individual retirement 
     plan, or from amounts attributable to employer contributions 
     made pursuant to elective deferrals described in subparagraph 
     (A) or (C) of section 402(g)(3) or section 
     501(c)(18)(D)(iii),
       ``(II) such individual was (by reason of being a member of 
     a reserve component (as defined in section 101 of title 37, 
     United States Code)), ordered or called to active duty for a 
     period in excess of 179 days or for an indefinite period, and
       ``(III) such distribution is made during the period 
     beginning on the date of such order or call and ending at the 
     close of the active duty period.

       ``(iv) Application of subparagraph.--This subparagraph 
     applies to individuals ordered or called to active duty after 
     September 11, 2001, and before September 12, 2005. In no 
     event shall the 2-year period referred to in clause (ii) end 
     before the date which is 2 years after the date of the 
     enactment of this subparagraph.''.
       (b) Conforming Amendments.--
       (1) Section 401(k)(2)(B)(i) of such Code is amended by 
     striking ``or'' at the end of subclause (III), by striking 
     ``and'' at the end of subclause (IV) and inserting ``or'', 
     and by inserting after subclause (IV) the following new 
     subclause:

       ``(V) the date on which a period referred to in section 
     72(t)(2)(G)(iii)(III) begins, and''.

       (2) Section 403(b)(11) of such Code is amended by striking 
     ``or'' at the end of subparagraph (A), by striking the period 
     at the end of subparagraph (B) and inserting ``, or'', and by 
     inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) for distributions to which section 72(t)(2)(G) 
     applies.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after September 11, 2001.
                                 ______
                                 
      By Mr. AKAKA (for himself, Mr. Durbin, Mr. Leahy, and Mr. 
        Schumer):
  S. 2475. A bill to require enhanced disclosure to consumers regarding 
the consequences of making only minimum required payments in the 
repayment of credit card debt; to the Committee on Banking, Housing, 
and Urban Affairs.
  Mr. AKAKA. Mr. President, I rise today to introduce the Credit Card 
Minimum Payment Warning Act. I greatly appreciate the significant 
contributions Senator Durbin made to this

[[Page S6094]]

bill, and I thank him very much for that. Also, I thank Senator Leahy 
and Senator Schumer for cosponsoring this legislation.
  Americans are carrying enormous amounts of debt. In 2003, consumer 
debt increased for the first time to more than $2 trillion, according 
to the Federal Reserve. This is a 28-percent increase since the year 
2000. According to the Daily Bankruptcy News, consumer debt is now 
equal to 110 percent of disposable income. Ten years ago, it was 85 
percent; and 20 years ago, it was 65 percent. A key component of 
household debt can be attributed to the use of credit cards. Revolving 
debt, mostly comprised of credit card debt, has more than doubled from 
$313 billion in January 1994 to $753 billion in debt in January 2004. A 
U.S. Public Interest Research Group and Consumer Federation of America 
analysis of Federal Reserve data indicates that the average household 
with debt carries approximately $10,000 to $12,000 in total revolving 
debt and has nine credit cards.
  More and more working families are trying to meet growing financial 
obligations and are having difficulties surviving financially. When 
interest rates do eventually rise, consumers' increasing debt 
obligations will be compounded further.
  As household debt has increased, bankruptcy filings have surged to 
record levels. In the year 2003, more than 1.6 million consumers filed 
for bankruptcy. This staggering amount is an increase of 5.6 percent 
over the previous record set in 2002. Bankruptcies disrupt the lives of 
consumers and limit their ability to access credit in the future. In 
addition, bankruptcies lead to significant financial losses for 
creditors. It is imperative that we make consumers more aware of the 
long-term effects of their financial decisions, particularly in 
managing their credit card debt, so that they can avoid bankruptcy.

  Even as we contemplate the consequences of more and more debt, it has 
become easier to access credit. Pre-approved credit card offers are now 
a routine piece of mail. Students are offered credit cards at earlier 
ages, especially in view of the success that credit card companies are 
having with their aggressive campaigns targeted towards college 
students. Mr. President, 55 percent of college students acquire their 
first credit card during their first year in college, and 83 percent of 
college students have at least one credit card. Forty-five percent of 
college students are in credit card debt, with the average debt being 
over $3,000.
  While it is relatively easy to obtain credit, not enough is done to 
ensure that credit is properly managed. Currently, credit card 
statements fail to include all of the information necessary to allow 
individuals to make fully informed financial decisions. Additional 
disclosure is needed to ensure that individuals completely understand 
the implications of their credit card use.
  Our legislation will provide a wakeup call for consumers. It will 
make it very clear what costs consumers will incur if they make only 
the minimum payments on their credit cards. The personalized 
information they will receive for each of their accounts will help them 
to make informed choices about the payments that they choose to make 
towards their balance.
  This bill requires a minimum payment warning notification on monthly 
statements stating that making the minimum payment will increase the 
amount of interest that will be paid and extend the amount of time it 
will take to repay the outstanding balance. Consumers would have to be 
informed of how many years and months it will take to repay their 
entire balance if they make only the minimum payments. In addition, the 
total costs in interest and principal, if the consumer pays only the 
minimum payment, would have to be disclosed. These provisions will make 
individuals much more aware of the true costs of their credit card 
debts.
  The bill also requires that credit card companies provide useful 
information so that people can develop strategies to free themselves of 
credit card debt. Consumers would have to be provided with the amount 
they need to pay to eliminate their outstanding balance within 36 
months. Finally, the legislation would require that creditors establish 
a toll-free number so that consumers can access trustworthy credit 
counselors. In order to ensure that consumers are referred from the 
toll-free number to only trustworthy organizations, the agencies for 
referral would have to be approved by the Federal Trade Commission and 
the Federal Reserve Board as having met comprehensive quality 
standards. These standards are necessary because certain credit 
counseling agencies have abused their nonprofit, tax-exempt status and 
have taken advantage of people seeking assistance in managing their 
debts. People believe, sometimes mistakenly, that they can place blind 
trust in nonprofit organizations and that their fees will be lower than 
those of other credit counseling organizations.
  Too many individuals may not realize that the credit counseling 
industry does deserve the trust that consumers often place in it.
  The Credit Card Minimum Payment Warning Act has been endorsed by the 
Consumer Federation of America, Consumers Union, and U.S. Public 
Interest Research Group.
  I ask unanimous consent that the letter of support and factsheet from 
these organizations be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
         Consumers Union, Consumer Federation of America, U.S. 
           Public Interest Research Group,
                                                     May 13, 2004:
       Dear Senators Akaka and Durbin The undersigned national 
     consumer organizations write to strongly support the Credit 
     Card Minimum Payment Warning Act. The act would require 
     credit card issuers to disclose more information to consumers 
     about the costs associated with paying their bills at ever-
     declining minimum payment rates. The Act provides a 
     personalized ``price tag'' so consumers can understand what 
     are the real costs of credit card debt and avoid financial 
     problems in the future.
       Undisputed evidence links the rise in bankruptcy in recent 
     years to the increase in consumer credit outstanding. These 
     numbers have moved in lockstep for more than 20 years. 
     Revolving credit, for example (most of which is credit card 
     debt) ballooned from $214 billion in January 1990 to over 
     $750 billion currently. As a family debt increases, debt 
     service payments on items such as interest and late fees take 
     an ever-increasing piece of their budget. For some families, 
     this contributes to the collapse of their budget. Bankruptcy 
     becomes the only way out. (See the attached fact sheet for 
     more information about the scope and impact of credit card 
     debt.)
       Credit card issuers have exacerbated the financial problems 
     that many families have faced by lowering minimum payment 
     amounts, from around 4 percent of the balance owed, to about 
     2 percent currently. This decline in the typical minimum 
     payment is a significant reason for the rise in consumer 
     bankruptcies in recent years. A low minimum payment often 
     barely covers interest obligations. It convinces many 
     borrowers that they are financially sound as long as they can 
     meet all of their minimum payment obligations. However, those 
     that cannot afford to make these payments often carry so much 
     debt that bankruptcy is usually the only viable option.
       This bill will provide consumers several crucial pieces of 
     information on their monthly credit card statement:
       A ``minimum payment warning'' that paying at the minimum 
     rate will increase the amount of interest that is owed and 
     the time it will take to repay the balance.
       The number of years and months that it will take the 
     consumer to pay off the balance at the minimum rate.
       The total costs in interest and principal if the consumer 
     pays at the minimum rate.
       The monthly payment that would be required to pay the 
     balance off in three years.
       The bill also requires that credit card companies provide a 
     toll-free number that consumers can call to receive 
     information about credit counseling and debt management 
     assistance. In order to assure that consumers are referred to 
     honest, legitimate non-profit credit counselors, the bill 
     requires the Federal Reserve to screen these agencies to 
     ensure that they meet rigorous quality standards.
       Our groups command you for offering this very important and 
     long-overdue piece of legislation. It provides the kind of 
     personalized, timely disclosure information that will help 
     debt-choked families make informed decisions and start to 
     work their way back to financial health.
           Sincerely,
     Travis B. Plunkett,
       Legislative Director, Consumer Federation of America.
     Adam Goldberg,
       Policy Analyst, Consumers Union.
     Edmund Mierzwinski,
       Consumer Programs Director, U.S. Public Interest Research 
     Group.

[[Page S6095]]

     
                                  ____
                      FACTS ABOUT CREDIT CARD DEBT

       Revolving debt (most of which is credit card debt) has 
     ballooned from $54 billion in January 1980 to over $750 
     billion currently.

                                                            In billions
January 1980.........................................................54
January 1984.........................................................79
January 1990........................................................214
January 1994........................................................313
January 2004........................................................753

Source: http://www.federalreserve.gov/Releases/G19/his/cc his sa.html.

       About one-twelfth of this debt is paid off before it incurs 
     interest, so Americans pay interest on an annual load of 
     about $690 billion in revolving debt.
       According to the Federal Reserve, the most recent average 
     credit card interest rate is 12.4% APR. At simple interest, 
     with no compounding, then, consumers pay at least $85 billion 
     annually in interest on credit card and other revolving debt.
       Just about 55 percent of consumers carry debt. The rest are 
     convenience users.
       From PIRG/CFA analysis of Federal Reserve data, the average 
     household with debt carriers approximately $10,000-12,000 in 
     total revolving debt and has approximately nine cards.


           FACTS ABOUT THE EFFECT OF MINIMUM MONTHLY PAYMENTS

       A household making the monthly minimum required payments on 
     this debt (usually the greater of 2 percent of the unpaid 
     balance or $20) at the very low average 12.4% APR (many 
     consumers pay much higher penalty rates than this FRB-
     reported average) would pay $1,175 in interest just in the 
     first year, even if these cards are cut up and not used 
     again.
       This household would pay a total of over $9,800 in interest 
     over a period of 25 years and three months. That fact is not 
     disclosed.
       A household or consumer who merely doubled their minimum 
     payment and paid 4% of the amount due would fare better. A 
     household or consumer that paid 10% of the balance each month 
     would fare much better. Here is comparison.
       Minimum Payment Warnings Would Encourage Larger Payments 
     and Save Consumers Thousands of Dollars in High-Priced Credit 
     Card Debt.

------------------------------------------------------------------------
                                           Monthly Payment (% of unpaid
 Credit Card Debt of $10,000 at Modest               balance)
               12.4% APR                --------------------------------
                                             2%         4%        10%
------------------------------------------------------------------------
First Year Interest....................     $1,175     $1,054       $775
Total Interest Owed....................     $9,834     $3,345     $1,129
Months To Pay Owed.....................        303        127         52
Years to Pay...........................       25.3       10.6        4.3
------------------------------------------------------------------------
 Calculations by U.S. PIRG. also see http://www.truthaboutcredit.org/
lowerapr.htm for additional comparisons and amortization tables

       Giving consumers a minimum payment warning on their credit 
     card statements is the most powerful action Congress could 
     take to increase consumer understanding of the cost of credit 
     card debt.


                 FACTS ABOUT WHO OWES CREDIT CARD DEBT

       Credit card debt has risen fastest among lower-income 
     Americans. These families saw the largest increase--a 184 
     percent rise in their debt--but even very high-income 
     families had 28 percent more credit card debt in 2001 than 
     they did in 1989. Source: Demos
       Thirty-nine percent of student loan borrowers now graduate 
     with unmanageable levels of debt, meaning that their monthly 
     payments are more than 8 percent of their monthly incomes. 
     According to PIRG analysis of the 1999-2000 NPSAS data, in 
     2001, 41 percent of the graduating seniors carried a credit 
     card balance, with an average balance of $3,071. Student loan 
     borrowers were even more likely to carry credit card debt, 
     with 48 percent of borrowers carrying an average credit card 
     balance of $3,176. See ``The Burden of Borrowing,'' 2002, 
     Tracey King, the State PIRGs, http://www.pirg.org/highered/
BurdenofBorrowing.pdf
       While less likely to have credit cards than white families, 
     data show that African-American and Hispanic families are 
     more likely to carry debt.

------------------------------------------------------------------------
                                         % With                 Average
                                         credit   Cardholding    credit
                                         cards    % with debt  card debt
                                          2001        2001        2001
------------------------------------------------------------------------
All families.........................         76          55      $4,126
White families.......................         82          51       4,381
Black families.......................         59          84       2,950
Hispanic families....................         53          75       3,691
------------------------------------------------------------------------
 Demos calculation using 2001 Survey of Consumer Finance. See Borrowing
  To Make Ends Meet. Demos, http://www.demos-usa.org/pubs/
borrowing_to_make_ends_meet.pdf.

                         seniors (over age 65)

       Credit card debt among older Americans increased by 89 
     percent from 1992 to 2001. Average balances among indebted 
     adults over 65 increased by 89 percent, to $4,041.
       Seniors between 65 and 69 years old, presumably the newly-
     retired, saw the most staggering rise in credit card debt--
     217 percent--to an average of $5,844.
       Female-headed senior households experienced a 48 percent 
     increase between 1992 and 2001, to an average of $2,319.
       Among seniors with incomes under $50,000 (70 percent of 
     seniors), about one in five families with credit card debt is 
     in debt hardship--spending over 40 percent of their income on 
     debt payments, including mortgage debt.


                       transitioners (ages 55-64)

       Transitioners experienced a 47 percent increase in credit 
     card debt between 1992 and 2001, to an average of $4,088.
       The average credit card-indebted family in this age group 
     now spends 31 percent of their income on debt payments, a 10 
     percent increase over the decade.
       Source: ``Retiring in the Red: The Growth of Debt Among 
     Older Americans''; http://www.demos-usa.org/pub101.cfm.
       Other fact sheet sources include ``Deflate Your Rate,'' 
     MASSPIRG, 2002, see http://www.truthaboutcredit.org and other 
     reports by Demos. See http://www.demos-usa.org/page38.cfm.

  Mr. AKAKA. I also ask unanimous consent that the text of the Credit 
Card Minimum Payment Warning Act be printed in the Record following my 
remarks.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. AKAKA. Mr. President, I urge my colleagues to support this 
legislation that will empower consumers by providing them with detailed 
personalized information to assist them in making informed choices 
about their credit card use and repayment. This bill makes clear the 
adverse consequences of uninformed choices, such as making only minimum 
payments, and provides opportunities to locate assistance to eliminate 
credit card debt.

                                S. 2475

       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 ``Credit Card Minimum Payment 
     Warning Act''.

     SEC. 2. ENHANCED CONSUMER DISCLOSURES REGARDING MINIMUM 
                   PAYMENTS.

       Section 127(b) of the Truth in Lending Act (15 U.S.C. 
     1637(b)) is amended by adding at the end the following:
       ``(11)(A) Information regarding repayment of the 
     outstanding balance of the consumer under the account, 
     appearing in conspicuous type on the front of the first page 
     of each such billing statement, and accompanied by an 
     appropriate explanation, containing--
       ``(i) the words `Minimum Payment Warning: Making only the 
     minimum payment will increase the amount of interest that you 
     pay and the time it will take to repay your outstanding 
     balance.';
       ``(ii) the number of years and months (rounded to the 
     nearest month) that it would take for the consumer to pay the 
     entire amount of that balance, if the consumer pays only the 
     required minimum monthly payments;
       ``(iii) the total cost to the consumer, shown as the sum of 
     all principal and interest payments, and a breakdown of the 
     total costs in interest and principal, of paying that balance 
     in full if the consumer pays only the required minimum 
     monthly payments, and if no further advances are made;
       ``(iv) the monthly payment amount that would be required 
     for the consumer to eliminate the outstanding balance in 36 
     months if no further advances are made; and
       ``(v) a toll-free telephone number at which the consumer 
     may receive information about accessing credit counseling and 
     debt management services.
       ``(B)(i) Subject to clause (ii), in making the disclosures 
     under subparagraph (A) the creditor shall apply the interest 
     rate in effect on the date on which the disclosure is made.
       ``(ii) If the interest rate in effect on the date on which 
     the disclosure is made is a temporary rate that will change 
     under a contractual provision specifying a subsequent 
     interest rate or applying an index or formula for subsequent 
     interest rate adjustment, the creditor shall apply the 
     interest rate in effect on the date on which the disclosure 
     is made for as long as that interest rate will apply under 
     that contractual provision, and then shall apply the adjusted 
     interest rate, as specified in the contract. If the contract 
     applies a formula that uses an index that varies over time, 
     the value of such index on the date on which the disclosure 
     is made shall be used in the application of the formula.''.

     SEC. 3. ACCESS TO CREDIT COUNSELING AND DEBT MANAGEMENT 
                   INFORMATION.

       (a) Guidelines Required.--
       (1) In general.--Not later than 1 year after the date of 
     enactment of this Act, the Board of Governors of the Federal 
     Reserve System and the Federal Trade Commission (in this 
     section referred to as the ``Board'' and the ``Commission'', 
     respectively) shall jointly, by rule, regulation, or order, 
     issue guidelines for the establishment and maintenance by 
     creditors of a toll-free telephone number for purposes of the 
     disclosures required under section 127(b)(11) of the Truth in 
     Lending Act, as added by this Act.
       (2) Approved agencies.--Guidelines issued under this 
     subsection shall ensure that referrals provided by the toll-
     free number include only those agencies approved by the Board 
     and the Commission as meeting the criteria under this 
     section.
       (b) Criteria.--The Board and the Commission shall only 
     approve a nonprofit budget and credit counseling agency for 
     purposes of this section that--
       (1) demonstrates that it will provide qualified counselors, 
     maintain adequate provision

[[Page S6096]]

     for safekeeping and payment of client funds, provide adequate 
     counseling with respect to client credit problems, and deal 
     responsibly and effectively with other matters relating to 
     the quality, effectiveness, and financial security of the 
     services it provides;
       (2) at a minimum--
       (A) is registered as a nonprofit entity under section 
     501(c) of the Internal Revenue Code of 1986;
       (B) has a board of directors, the majority of the members 
     of which--
       (i) are not employed by such agency; and
       (ii) will not directly or indirectly benefit financially 
     from the outcome of the counseling services provided by such 
     agency;
       (C) if a fee is charged for counseling services, charges a 
     reasonable and fair fee, and provides services without regard 
     to ability to pay the fee;
       (D) provides for safekeeping and payment of client funds, 
     including an annual audit of the trust accounts and 
     appropriate employee bonding;
       (E) provides full disclosures to clients, including funding 
     sources, counselor qualifications, possible impact on credit 
     reports, any costs of such program that will be paid by the 
     client, and how such costs will be paid;
       (F) provides adequate counseling with respect to the credit 
     problems of the client, including an analysis of the current 
     financial condition of the client, factors that caused such 
     financial condition, and how such client can develop a plan 
     to respond to the problems without incurring negative 
     amortization of debt;
       (G) provides trained counselors who--
       (i) receive no commissions or bonuses based on the outcome 
     of the counseling services provided;
       (ii) have adequate experience; and
       (iii) have been adequately trained to provide counseling 
     services to individuals in financial difficulty, including 
     the matters described in subparagraph (F);
       (H) demonstrates adequate experience and background in 
     providing credit counseling;
       (I) has adequate financial resources to provide continuing 
     support services for budgeting plans over the life of any 
     repayment plan; and
       (J) is accredited by an independent, nationally recognized 
     accrediting organization.

  Mr. DURBIN. Mr. President, I am delighted to be working with my 
friend the distinguished Senator from Hawaii, Senator Akaka, to 
introduce a measure that provides a simple yet vital commodity to users 
of credit cards. The commodity I speak of: information.
  The modern-day credit-reporting system has benefitted consumers by 
making affordable credit more widely available than ever before, and 
the spread of credit cards is an important part of this ``credit 
revolution.'' Along with this revolution in credit availability, 
however, we need a revolution in consumers' ability to manage their 
credit. Two facts provide a quick and simple snapshot of our progress 
in that regard. In the fourth quarter of 2003, the number of 
delinquencies on regular consumer loans went down. That same quarter, 
the number of past-due credit card accounts hit an all-time high. 
Clearly, an increasing number of credit card holders need to do a 
better job of responsibility managing their credit exposure.
  This bill is designed to help them to do just that by providing that 
vital commodity, information. It would require credit card statements 
to provide information that will help consumers understand the 
relationships among their total balance, the minimum payment due, and 
the accumulation of interest over time. Specifically, this bill would 
require that statements provide the following information: the amount 
of time it would take to pay off the total balance if just minimum 
payments are made each month; the total cost to the consumer that would 
be incurred over that time period, broken into interest and principle; 
the payment amount that would be necessary each month to pay off the 
total balance in three years; and a toll-free telephone number 
consumers could call to get a referral to a legitimate, accredited, 
non-profit credit counseling agency.
  We would like to think that the credit card companies would be glad 
to provide whatever information their consumers needed to responsibly 
manage their credit. The fact of the matter is, though, that they do 
not provide the information I just described, and chances are they will 
not begin doing so on their own initiative. These numbers are not all 
that hard to calculate. A few lines of computer code is all it would 
take. And yet provision of these three simple numbers would provide a 
huge payback by helping credit card users quickly and easily get a 
clearer understanding of the size of their balance and what the 
consequences will be for them--in terms of time and financial cost--of 
carrying that balance.
  Let me be extra clear about one thing: This bill will help markets 
for credit work better. As Adam Smith told us, the free flow of 
information is an absolute prerequisite of an efficient market. For 
markets to work, buyers must know and understand what they are buying. 
When our bill becomes law, credit card holders--who are simply buyers 
of credit in the marketplace--will have a better understanding of what 
exactly they are buying into, for the long term. The result can only be 
that the credit markets will better serve us, and that our households 
and our Nation will be on stronger financial footing.
  I thank my friend Senator Akaka for working with me on this important 
measure. I am also delighted that my friends Senator Schumer and 
Senator Leahy have joined us as original cosponsors. I urge the rest of 
my colleagues to join us by cosponsoring this bill.
                                 ______
                                 
      By Mr. KYL (for himself, Mr. Miller, Mr. Cornyn, Mr. Sessions, 
        Mr. Chambliss, Mr. Graham of South Carolina, Mr. Nickles, Mr. 
        McConnell, Mr. Inhofe, and Mr. Roberts):
  S. 2476. A bill to amend the USA PATRIOT Act to repeal the sunsets; 
to the Committee on the Judiciary.
  Mr. KYL. Mr. President, I rise today to introduce a bill that would 
repeal 
Sec. 224 of the USA Patriot Act. Section 224 provides that 16 different 
parts of the Patriot Act ``shall cease to have effect on December 31, 
2005.'' The authorities subject to this sunset include some of the most 
important provisions of the Act. They are sections 201, wiretapping in 
terrorism cases; 202, wiretapping in computer fraud and abuse felony 
case; 203(b) sharing wiretap information; 203(d), sharing foreign 
intelligence information; 204, Foreign Intelligence Surveillance Act 
(FISA) pen register/trap and trace exceptions; 206, roving FISA 
wiretaps; 207, duration of FISA surveillance of non-United States 
persons who are agents of a foreign power; 209, seizure of voice-mail 
messages pursuant to warrants; 212, emergency disclosure of electronic 
surveillance; 214, FISA pen register/ trap and trace authority; 215, 
FISA access to tangible items; 217, interception of computer trespasser 
communications; 218, purpose for FISA orders; 220, nationwide service 
of search warrants for electronic evidence; 223, civil liability and 
discipline for privacy violations; and 225, provider immunity for FISA 
wiretap assistance.
  Rather than praise the Patriot Act myself, I would like to quote 
others who have done so. First, I would note that the President has 
called on Congress to renew all parts of the Patriot Act that are 
scheduled to expire next year. As he has emphasized, ``to abandon the 
Patriot Act would deprive law enforcement and intelligence officers of 
needed tools in the war on terror, and demonstrate willful blindness to 
a continuing threat.''
  FBI Director Robert Mueller, in a hearing before the Judiciary 
Committee yesterday, also voiced strong support for renewing the 
Patriot Act. As he noted, ``for over two and a half years, the PATRIOT 
Act has proved extraordinarily beneficial in the war on terrorism and 
has changed the way the FBI does business. Many of our counterterrorism 
successes, in fact, are the direct results of provisions included in 
the Act, a number of which are scheduled to `sunset' at the end of next 
year. I strongly believe it is vital to our national security to keep 
each of these provisions intact.''
  Similarly, in an April 14 field hearing before the Judiciary 
Committee, Deputy Attorney General James Comey stated that the Patriot 
Act ``has made us immeasurably safer.'' He also responded to the 
allegation, occasionally made by some critics, that the Patriot Act was 
passed too quickly. He replied that ``the USA Patriot Act was not 
rushed, it actually came 10 years too late.''
  The importance of the Patriot Act to American security also has drawn 
the attention of the 9/11 Commission. Former New Jersey Governor Thomas 
Kean has noted that the Commission has had ``witness after witness tell 
us that the Patriot Act has been very, very helpful, and if the Patriot 
Act, or portions of it, had been in place before 9/11, that would have 
been very helpful.''

[[Page S6097]]

  This praise has not been limited to the Republicans who have 
participated in the Commission's proceedings. Former Attorney General 
Janet Reno, for example, testified before the Commission that 
``everything that's been done in the Patriot Act has been helpful.''
  Nor is President Bush alone among the major candidates for President 
this year in hailing the importance of the Patriot Act. Indeed, his 
principal rival for the office, Senator Kerry, recently claimed that he 
would go even further than the President. According to an April 25 
story in the Los Angeles Times, Senator Kerry's spokesman insists that 
``it is the challenger, not the president, who brings the most muscular 
view of the Patriot Act into the race.'' Senator Kerry's presidential 
campaign website even includes a ``Plan to Restore American Security,'' 
which lists as its number-one priority to ``improve intelligence 
capabilities.'' Senator Kerry states that he ``understands that 
intelligence information is the key to disrupting and dismantling 
terrorist organizations and that we need to improve our intelligence 
capabilities, both domestically and internationally, in order to win 
the war on global terrorism.''
  One reform implemented by the Patriot Act that Attorney General Reno 
and others have particularly emphasized is its authorization for 
information sharing. Because this part of the Patriot Act is often 
praised but infrequently described in detail, I would like to quote the 
following accounts of pre-Patriot barriers to information sharing, and 
of the investigative successes that the removal of those barriers has 
made possible.
  The FISA Court of Review decision upholding the Patriot Act's 
authorization for information sharing, In re: Sealed Case, 310 F.3d 
717,


    F.I.S. Ct. Rev. 2002 , describes the origins of the pre-Patriot 
                               barriers:

       Apparently to avoid running afoul of the primary purpose 
     test used by some courts, the 1995 [Attorney General] 
     Procedures [(``Procedures for Contacts Between the FBI and 
     the Criminal Division Concerning Foreign Intelligence and 
     Foreign Counterintelligence Investigations'')] limited 
     contacts between the FBI and the Criminal Division in cases 
     where FISA surveillance or searches were being conducted by 
     the FBI for foreign intelligence (FI) or foreign 
     counterintelligence (FCI) purposes. The procedures state that 
     ``the FBI and Criminal Division should ensure that advice 
     intended to preserve the option of a criminal prosecution 
     does not inadvertently result in either the fact or the 
     appearance of the Criminal Division's directing or 
     controlling the FI or FCI investigation toward law 
     enforcement objectives.'' Although these procedures provided 
     for significant information sharing and coordination between 
     criminal and FI or FCI investigations, based at least in part 
     on the ``directing or controlling'' language, they eventually 
     came to be narrowly interpreted within the Department of 
     Justice, and most particularly by OIPR, as requiring OIPR to 
     act as a ``wall'' to prevent the FBI intelligence officials 
     from communicating with the Criminal Division regarding 
     ongoing FI or FCI investigations. Thus, the focus became the 
     nature of the underlying investigation, rather than the 
     general purpose of the surveillance. Once prosecution of the 
     target was being considered, the procedures, as interpreted 
     by OIPR in light of the case law, prevented the Criminal 
     Division from providing any meaningful advice to the FBI.''

In re: Sealed Case, 310 F.3d at 727-28 citations omitted.
  FBI Director Mueller, in his testimony yesterday, provided a concrete 
account of the impact that these information-sharing barriers had on 
intelligence investigations:

       Prior to September 11, an [FBI] Agent investigating the 
     intelligence side of a terrorism case was barred from 
     discussing the case with an Agent across the hall who was 
     working the criminal side of that same investigation. For 
     instance, if a court-ordered criminal wiretap turned up 
     intelligence information, the criminal investigator could not 
     share that information with the intelligence investigator--he 
     could not even suggest that the intelligence investigator 
     should seek a wiretap to collect the information for himself. 
     If the criminal investigator served a grand jury subpoena to 
     a suspect's bank, he could not divulge any information found 
     in those bank records to the intelligence investigator. 
     Instead, the intelligence investigator would have to issue a 
     National Security Letter in order to procure that same 
     information.

  Chicago U.S. Attorney Patrick Fitzgerald, in an October 21, 2003 
hearing before the Senate Judiciary Committee, described how these pre-
Patriot information-sharing limits undercut one potentially vital 
terror investigation. Mr. Fitzgerald discussed the grand-jury testimony 
of Wadih el Hage, a key member of the Al Qaeda cell in Nairobi who, in 
September 1997, was apprehended while changing flights in New York 
City. Federal prosecutors subpoenaed el Hage from the airport to 
testify before a Federal grand jury in Manhattan. Mr. Fitzgerald 
described how el Hage:

       [P]rovided some information of potential use to the 
     intelligence community--including potential leads as to the 
     location of his confederate Harun and the location of Harun's 
     files in Kenya. Unfortunately, as el Hage left the grand-jury 
     room, we knew that * * * [because of pre-Patriot 
     restrictions] we would not be permitted to share the grand-
     jury information with the intelligence community. * * * 
     Fortunately, we found a way to address the problem that in 
     most other cases would not work. Upon request, el Hage 
     voluntarily agreed to be debriefed by an FBI agent outside 
     the grand-jury room * * *. El Hage then repeated the essence 
     of what he told the grand jury to the FBI agent, including 
     his purported leads to on the location of Harun and his 
     files. The FBI then lawfully shared the information with the 
     intelligence community. In essence, we solved the problem by 
     obtaining the consent of a since-convicted terrorist. We do 
     not want to have to rely on the consent of al Qaeda 
     terrorists to address the gaps in our national security.

  Mr. Fitzgerald went on to describe how, in August 1998, the American 
Embassy in Nairobi was bombed by al Qaeda. Investigators quickly 
learned that el Hage's associate Harun was responsible. In this 
particular case, investigators had been able to work around 
information-sharing limits because of an al Qaeda terrorist's 
willingness to be interviewed by the FBI, and even with this 
information U.S. agents were not able to stop a terrorist attack. The 
pre-Patriot limits were not a decisive factor in blocking U.S. 
intelligence agents from preventing the Kenya bombing. But they could 
have been. As U.S. Attorney Fitzgerald concluded, ``we should not have 
to wait for people to die with no explanation [other] than that 
interpretations of the law blocked the sharing of specific information 
that probably [c]ould have saved [American lives].''
  As Attorney General Reno noted in her testimony before the 9/11 
Commission, ``these restrictions [on information sharing] have now been 
eliminated as part of the Patriot Act.'' Director Mueller, in his 
Judiciary Committee testimony yesterday, described the impact of this 
change:

       The removal of the ``wall'' has allowed government 
     investigators to share information freely. Now, criminal 
     investigative information that contains foreign intelligence 
     or counterintelligence, including grand jury and wiretap 
     information, can be shared with intelligence officials. This 
     increased ability to share information has disrupted 
     terrorist operations in their early stages--such as the 
     successful dismantling of the ``Portland Seven'' terror 
     cell--and has led to numerous arrests, prosecutions, and 
     convictions in terrorism cases.
       In essence, prior to September 11th, criminal and 
     intelligence investigators were attempting to put together a 
     complex jigsaw puzzle at separate tables. The Patriot Act has 
     fundamentally changed the way we do business. Today, those 
     investigators sit at the same table and work together on one 
     team. They share leads. They fuse information. Instead of 
     conducting parallel investigations, they are fully integrated 
     into one joint investigation.

  These Patriot Act changes can directly be credited with some 
important recent successes in the war on terror. For example, in 
February 2003, Federal prosecutors arrested and indicted Sami Al-Arian 
and seven other suspected terrorists. The 50-count indictment indicated 
that Al-Arian was the financial director and the North American leader 
of Palestinian Islamic Jihad, a terrorist group that has killed more 
than 100 people in and around Israel, including two Americans. Al-Arian 
wired money to groups in Israel that paid money to the families of 
terrorists who carried out suicide bombings. He also founded three 
organizations in Florida which, among other things, drafted final wills 
and testaments for suicide bombers.
  Incredibly, through much of the 1990s, Al-Arian was secretly watched 
by two different sets of U.S. investigators. The FBI had been 
conducting a criminal probe of Al-Arian since 1995. Meanwhile, 
intelligence agents had monitored Al-Arian since the late 1980s. 
Because of pre-Patriot restrictions, the two sets of investigators were 
not able to share information and were not aware of the full extent of 
each other's investigations. It was only after the FISA Court of Review 
upheld Patriot

[[Page S6098]]

Act Sec. 203's information-sharing provisions in November 2002 that 
intelligence officials were able to show their files to prosecutors. 
Several months after this Patriot provision was upheld and made 
effective, prosecutors arrested and indicted Al-Arian and put an end to 
his activities.
  Of course, the provisions of the Patriot Act subject to the Sec. 224 
sunset include much more than just the three provisions that facilitate 
information sharing. Although I will not discuss all of those 
provisions in detail today--some of which have never been 
controversial--I would like to discuss one provision that has been a 
particular focus of attacks on the Patriot Act.
  Section 215 of the Patriot Act allows the FBI to seek an order for 
``the production of tangible things (including books, records, papers, 
documents, and other items) for an investigation to obtain foreign 
intelligence information.'' FISA defines ``foreign intelligence'' as 
information relating to foreign espionage, foreign sabotage, or 
international terrorism, or information respecting a foreign power that 
relates to U.S. national security or foreign policy. Thus Sec. 215 
cannot be used to investigate ordinary crimes or even domestic 
terrorism. And in every case, a Sec. 215 order must be approved by a 
judge.
  Alhough Sec. 215 is basically a form of subpoena authority, like that 
allowed for numerous other types of investigation indeed, it is more 
tightly restricted than other types of subpoenas because it must be 
pre-approved by a judge Sec. 215 has been heavily targeted by Patriot 
Act critics. Chief among their complaints is that Sec. 215 could be 
used to obtain records from bookstores or libraries. Some of these 
critics have even alleged that Sec. 215 would allow the FBI to 
investigate someone simply because of the books that he borrows from a 
library.
  Section 215 could in fact be used to obtain library records, though 
neither Sec. 215 nor any other provision of the Patriot Act 
specifically mentions libraries or is directed at libraries. 
Nevertheless, Sec. 215 does authorize court orders to produce tangible 
records--which could include library records.
  Where the critics are wrong is in suggesting that a Sec. 215 order 
could be obtained because of the books that someone reads or the 
websites that he visits. Sec. 215 allows no such thing. Instead, 
Sec. 215 allows an order to obtain ``tangible things'' as part of an 
investigation to ``obtain foreign intelligence information''--
information relating to foreign espionage or terrorism or relating to a 
foreign government or group and national security. By requiring a judge 
to approve such an order, Sec. 215 ensures that these orders will not 
be used for an improper purpose. And as an added protection against 
abuse, the Patriot Act also requires that the FBI ``fully inform'' the 
House and Senate Intelligence Committees on all use of Sec. 215 every 
six months. These checks and safeguards leave FBI agents little room 
for the types of witch hunts that Patriot Act critics conjure up.
  Further, it bears mention that federal investigators already use an 
authority very similar to Sec. 215 the grand jury subpoena--to obtain 
bookstore records. As Deputy AG Comey recently emphasized in a letter 
that he submitted to the editor of the New York Times, ``orders for 
records under [Sec. 215] are more closely scrutinized and more 
difficult to obtain than ordinary grand jury supoenas, which can 
require production of the very same records, but without judicial 
approval.'' Similarly, in a September 11, 2003 editorial, ``Patriot 
(Act) Games,'' the Washington Post noted that investigative authority 
to review library records ``existed prior to the Patriot Act; the law 
extends it to national security investigations, which isn't 
unreasonable.''
  Finally, I would emphasize that an intelligence or criminal 
investigation may have good and legitimate reasons for extending to 
library or bookstore records. For example, in a recent domestic 
terrorism case, Federal investigators sought to prove that a suspected 
bomber had built a particularly unusual detonator that had been used in 
several bombings. The investigators used a grand-jury subpoena to show 
that the suspect had purchased a book giving instructions on how to 
build such a detonator.
  Moreover, we should not forget that terrorists and spies historically 
have used libraries to plan and carry out activities that threaten U.S. 
national security. We know, for example, that some terrorists have used 
computers at public libraries to use the internet and communicate by 
email. It would be unwise to place libraries and bookstores beyond the 
scope of anti-terror investigations.
  Andrew McCarthy, a former federal prosecutor who led the 1995 
terrorism case against Sheik Omar Abdel Rahman, recently elaborated on 
this point in a November 13, 2003 article in National Review Online, 
``Patriot Act Under Siege'':

       [H]ard experience--won in the course of a string of 
     terrorism trials since 1993--instructs us that it would be 
     folly to preclude the government a priori from access to any 
     broad categories of business record. Reading material, we now 
     know, can be highly relevant in terrorism cases. People who 
     build bombs tend to have books and pamphlets on bomb making. 
     Terrorist leaders often possess literature announcing the 
     animating principles of their organizations in a tone 
     tailored to potential recruits. This type of evidence is a 
     staple of virtually every terrorism investigation--both for 
     what it suggests on its face and for the forensic 
     significance of whose fingerprints may be on it. No one is 
     convicted for having it--jurors are Americans too, and they'd 
     not long stand for the odious notion that one should be 
     imprisoned for the mere act of thinking.
       When a defendant pleads ``not guilty,'' however, he is 
     saying: ``I put the government to its proof on every element 
     of the crime, including that I acted with criminal purport.'' 
     Prosecutors must establish beyond a reasonable doubt not only 
     that the terrorist engaged in acts but did so intending 
     execrable consequences. If an accused says the precursor 
     components he covertly amassed were for innocent use, is it 
     not relevant that he has just borrowed a book that covers 
     explosives manufacture? If he claims unfamiliarity with the 
     tenets of violent jihad, should a jury be barred from 
     learning that his paws have yellowed numerous publications on 
     the subject? Such evidence was standard fare throughout Janet 
     Reno's tenure as attorney general--and rightly so.

  In his testimony yesterday, FBI Director Mueller also described the 
importance to antiterror investigations of some of the other Patriot 
Act authorities subject to expire under Sec. 224. For example, Director 
Mueller noted that:

       The PATRIOT Act gave federal judges the authority to issue 
     search warrants that are valid outside the issuing judge's 
     district in terrorism investigations. In the past, a court 
     could only issue a search warrant for premises within the 
     same judicial district--yet our investigations of terrorist 
     networks often span multiple districts. The PATRIOT Act 
     streamlined this process, making it possible for judges in 
     districts where activities related to terrorism may have 
     occurred to issue search warrants applicable outside their 
     immediate districts.
       In addition, the PATRIOT Act permits similar search 
     warrants for electronic evidence such as email. In the past, 
     for example, if an Agent in one district needed to obtain a 
     search warrant for a subject's email account, but the 
     Internet service provider (ISP) was located in another 
     district, he or she would have to contact an AUSA and Agent 
     in the second district, brief them on the details of the 
     investigation, and ask them to appear before a judge to 
     obtain a search warrant--simply because the ISP was 
     physically based in another district. Thanks to the PATRIOT 
     Act, this frustrating and time-consuming process can be 
     averted without reducing judicial oversight. Today, a judge 
     anywhere in the U.S. can issue a search warrant for a 
     subject's email, no matter where the ISP is based.
       [Further], the PATRIOT Act updated the law to match current 
     technology, so that we no longer have to fight a 21st-century 
     battle with antiquated weapons. Terrorists exploit modern 
     technology such as the Internet and cell phones to conduct 
     and conceal their activities. The PATRIOT Act leveled the 
     playing field, allowing investigators to adapt to modern 
     techniques. For example, the PATRIOT Act clarified our 
     ability to use court-ordered pen registers and trap-and-trace 
     devices to track Internet communications. The Act also 
     enabled us to seek court-approved roving wiretaps, which 
     allow investigators to conduct electronic surveillance on a 
     particular suspect, not a particular telephone this allows 
     them to continuously monitor subjects without having to 
     return to the court.

  All of the authorities described by Director Mueller obviously are 
critical to antiterrorism investigations--and all will expire next year 
unless Congress acts to repeal Sec. 224.
  In responding to some of the accusations of Patriot Act critics, I do 
not mean to dismiss the importance of either civil liberties or of 
independent oversight of the federal government. I would simply 
emphasize that the Patriot Act is carefully crafted legislation that 
both guarantees protection for civil liberties and is subject to ample 
oversight. I would note, in this vein, that in a report filed in 
January

[[Page S6099]]

2004, Department of Justice Inspector General Glenn A. Fine--an 
appointee of President Clinton described the results of his 
investigation of all recent civil-rights and civil-liberties complaints 
received by the Justice Department. The Inspector General found no 
incidents in which the Patriot Act was used to abuse civil rights or 
civil liberties.
  The Patriot Act's provisions for independent oversight of the new 
authorities created by the Act were described in detail by Deputy AG 
Comey in his April 14, 2004 testimony before the Judiciary Committee. 
Mr. Comey noted:

       First, the USA PATRIOT Act preserves the historic role of 
     courts by ensuring that the vital role of judicial oversight 
     is not diminished. For example, the provision for delayed 
     notice for search warrants requires judicial approval. In 
     addition, under the Act, investigators cannot obtain a FISA 
     pen register unless they apply for and receive permission 
     from federal court. The USA PATRIOT Act actually goes farther 
     to protect privacy than that Constitution requires, as the 
     Supreme Court has long held that law enforcement authorities 
     are not constitutionally required to obtain court approval 
     before installing a pen register. Furthermore, a court order 
     is required to compel production of business records, in 
     national security investigations.
       Second, the USA PATRIOT Act respects important 
     congressional oversight by placing new reporting requirements 
     on the Department. Every six months, the Attorney General is 
     required to report to Congress the number of times section 
     215 has been utilized, as well as to inform Congress 
     concerning all electronic surveillance under the Foreign 
     Intelligence Surveillance Act. Under section 1001 of the USA 
     PATRIOT Act, Congress receives a semiannual report from the 
     Department's Inspector General detailing any abuses of civil 
     rights and civil liberties by employees or officials of the 
     Department of Justice. It is important to point out that in 
     the Inspector General's most recent report to Congress, he 
     reported that his office has received no complaints alleging 
     misconduct by Department employees related to the use of a 
     substantive provision of the USA PATRIOT Act.
       Finally, the USA PATRIOT Act fosters public oversight of 
     the Department. In addition to the role of the Inspector 
     General to review complaints alleging abuses of civil 
     liberties and civil rights, the Act provides a cause of 
     action for individuals aggrieved by any willful violation of 
     Title III or certain sections of FISA. To date, no civil 
     actions have been filed under this provision.

  The United States has had some important successes in the war on 
terror so far. Worldwide, more than half of al Qaeda's senior 
leadership has been captured or killed. More than 3,000 al Qaeda 
operatives have been incapacitated. Within the United States, 4 
different terrorist cells have been broken up--cells located in 
Buffalo, Detroit, Seattle, and Portland. 284 individuals have been 
criminally charged to date, and 149 individuals have been convicted or 
pleaded guilty, including: shoe bomber Richard Reid, six members of the 
Buffalo terrorist cell, two members of the Detroit cell, Ohio truck 
driver Iyman Faris, and U.S.-born Taliban John Walker Lindh.
  Patriot-aided criminal prosecutions also have contributed to U.S. 
intelligence efforts to learn more about terrorist organizations. 
Facing long prison terms, some apprehended terrorist have chosen to 
cooperate with the U.S. government. So far, the Justice Department has 
obtained plea agreements from 15 individuals who are now cooperating 
with terror investigations. One individual has given the U.S. 
information about weapons stored by terrorists in the United States. 
Another cooperating terrorist has given U.S. investigators information 
about locations in the U.S. that are being scouted or cased for 
potential attacks by al Qaeda.
  The Patriot Act has played a major role in what U.S. antiterror 
investigations have accomplished so far. And it is clear that we will 
continue to need the authorities created by the Patriot Act into the 
foreseeable future. For these reasons, I am pleased to introduce today 
with my colleagues a bill to repeal Sec. 224 and make the Patriot Act 
permanent.
  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. 2476

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

     SECTION 1. REPEAL OF USA PATRIOT ACT SUNSETS.

       Section 224 of the USA PATRIOT Act (18 U.S.C. 2510 note) is 
     repealed.
                                 ______
                                 
      By Mr. REED (for himself, Ms. Collins, Mr. Kennedy, and Mrs. 
        Murray):
  S. 2477. A bill to amend the Higher Education Act of 1965 to expand 
college access and increase college persistence, to simplify the 
process of applying for student assistance, and for other purposes; to 
the Committee on Health, Education, Labor, and Pensions.
  Mr. REED. Mr. President, I rise today to introduce bipartisan 
legislation to expand access to college. I am pleased to be joined in 
this effort by Senators Collins, Kennedy, and Murray.
  In a year in which we are slated to reauthorize the Higher Education 
Act, we have had only a few hearings on the reauthorization in the HELP 
Committee. In these hearings and the discussions ongoing in the other 
body, there has been scant mention of our insufficient investment in 
need-based financial aid. Instead, the discussions have been dominated 
by proposals that will hurt, rather than help, the neediest students.
  This is troubling, particularly as more and more students are being 
priced out of college, which shortchanges their future and that of our 
nation. Economic security is a necessity not just for the wealthy, but 
for every American. And the key to economic security is education.
  An individual's climb up the economic ladder is directly related to 
the amount of education he or she receives. Given the strong 
correlation among educational attainment, employment, and wages, the 
cost of not going to college is just too high.
  Almost a third of the growth in employment over the next decade is 
expected to occur in occupations that require at least a bachelor's 
degree. College graduates, on average, earn 60 percent more than high 
school graduates, while an individual with a professional degree earns 
almost four times what a high school graduate earns.
  And yet, too many college students are under-prepared, underfinanced, 
and overworked. Those who make it through are saddled by nearly 
insurmountable loan debt. But many more cannot afford the cost of 
college at all.
  Even though there have been gains due to the Higher Education Act, 
the current approach to student aid isn't alleviating the gaps between 
our lowest and highest income students nor is it addressing the gaps 
between the aid low-income students receive and the actual cost of 
attendance.
  7 times as many students from high-income families 48 percent 
graduate from college by age 24 as students from low-income families 7 
percent. Low-income, college-qualified high school graduates have an 
annual ``unmet need'' of nearly $4,000 in college expenses. Without 
drastic increases in need-based aid, over the next decade, according to 
a report by the Advisory Committee on Student Financial Assistance, 4.4 
million low- and moderate-income college qualified high school 
graduates will not be able to pursue a four year degree full time and 2 
million will not go to college at all.
  A combination of factors has arisen to create this unfortunate 
situation, chief among them a decline in the purchasing power of the 
Pell Grant and sharp increases in the cost of college.
  My predecessor, Senator Claiborne Pell, established what is now known 
as the Pell Grant in order to ensure higher education wasn't an 
``unachievable dream.'' Almost one quarter of undergraduate students 
from colleges and universities nationwide receive a Pell Grant. It is 
the single largest source of grant aid for higher education funded by 
the Federal government.
  Unfortunately, the Pell Grant's purchasing power has plummeted due to 
the slow growth in funding and the rapid rise of college prices. In the 
late 70s, the maximum grant covered 77 percent of costs at a public 
four-year institution. Today, the maximum Pell Grant of $4,050 covers 
only 41 percent.
  On top of that, an estimated 60 percent of student aid is now in the 
form of loans and 40 percent in grants, a reversal of the distribution 
20 years ago. Indeed, the average graduate has a student loan debt of 
$17,000. Pell Grant recipients, who represent the lowest income sectors 
of students, graduate with an average of $20,000 in student loan debt.

[[Page S6100]]

  Over the last ten years, public and private 4-year college costs, 
tuition and fees, rose 47 percent and 42 percent, respectively, after 
adjusting for inflation, which is a more rapid growth rate than 
consumer prices. Over the last three years, since President Bush 
entered office, tuition has increased by 28 percent on average, even 
after inflation. Students have felt the bite as states have drastically 
cut funding for public colleges.
  There is a further convergence of economic and demographic factors. 
In 2008, the largest number of students in our history will graduate 
from high school. A high percentage of these students will be from low-
income, minority families, who will need student aid. At the same time, 
our Nation will need replacement workers as aging, college-educated 
baby boomers begin to retire in increasing numbers.
  This crisis calls out for action. It should be a national imperative 
to ensure an educated citizenry and a world class workforce. Our Nation 
cannot afford to lose out on the countless returns from a robust 
education investment.
  The legislation we introduce today, the ACCESS, Accessing College 
through Comprehensive Early outreach, State partnerships, and 
Simplification, Act, seeks to set our Nation back on the course that 
Senator Pell sought when he authored the grants later named after him 
in 1972.
  The ACCESS Act revitalizes the Leveraging Educational Assistance 
Partnership (LEAP) program, which was established over thirty years ago 
to encourage States to play a role in helping low-income students go to 
college. Without this important, although extremely modest, Federal 
incentive, many States would never have established need-based grant 
programs and many States would not continue to maintain such programs.
  Recognizing that LEAP can do even more to address the barriers to 
college access and persistence, the ACCESS Act forges a new Federal 
incentive for states--via higher levels of Federal match--to spur 
greater investments by states, colleges, businesses, and philanthropies 
in need-based grants for low-income students. At a time when public 
higher education is bearing the brunt of the fiscal crises confronting 
our States, we need to do more to encourage States to help low-income 
students attend college.
  We want States to focus their energies on enhancing coordination and 
cohesion among Federal, State, and local programs and efforts of 
colleges, philanthropies, and businesses, with the goal of generating 
new investments in need-based aid sufficient to provide low-income 
students with an access and persistence grant to fill the gap in aid 
they face. All too often successful middle school students give up the 
dream of college because they think there is no way they can ever 
afford college. The ACCESS Act also requires States to notify low-
income students beginning in middle school of their potential 
eligibility for student financial aid and encourages increased 
participation in early intervention, mentoring, and outreach programs.
  The legislation is modeled after initiatives like the Rhode Island 
Children's Crusade in my home state and Indiana's 21st Century Scholars 
Program. A Lumina Foundation evaluation found that 21st Century 
Scholars--low-income students who receive an early notification of 
assistance, early intervention and support, and scholarships equivalent 
to the cost of in-state college tuition--were nearly 5 times more 
likely than non-participants to enroll in college. Indeed, successful 
college access programs are those that offer early intervention and 
mentoring services coupled with early information about estimated 
financial aid awards and adequate grant funding to make the dream of 
higher education a reality. Students participating in such programs are 
more financially and academically prepared, and thus more likely to 
enroll in college and persist to degree completion.
  Our legislation also simplifies the financial aid process for low-
income students. It allows more students to qualify for an Automatic-
Zero Expected Family Contribution, aligning its eligibility with the 
standards for other Federal means-tested programs, like free school 
lunch, SSI, and Food Stamps. Students and families should not have to 
prove over and over again that they are low-income, and asking students 
to fill out lengthy forms when they already meet the eligibility level 
for Pell Grants is a burden we should ease.
  In a similar vein, the legislation establishes a short, paper FAFSA-
EZ application form for students qualifying for the auto-zero along 
with a tailored web-based system and a free telefile system for 
students without Internet access.
  The ACCESS Act also expands college access for low-income students, 
in part by prohibiting a qualified education benefit, like education 
savings plans, from being considered as a student asset and by reducing 
the work penalty. The current income protection allowance levels are 
unrealistically low, creating a disincentive for students who work in 
order to pay college costs. I look forward to receiving further 
information on this and other problems addressed in the legislation 
when the Advisory Committee on Student Financial Assistance completes 
work on the congressionally mandated financial aid simplification study 
later this year.
  We must act on this legislation and others to make sure that every 
student who works hard and plays by the rules gets the opportunity to 
live the American Dream.
  I was pleased to work with the Advisory Committee on Student 
Financial Assistance, and a host of other higher education 
organizations and charitable foundations, including Scholarship 
America, on this legislation. I am also pleased that this legislation 
has the support of a range of higher education and student groups, 
including the American Association of Community Colleges, the American 
Association of State Colleges and Universities, the American Council on 
Education, the Association of American Universities, the Association of 
Jesuit Colleges and Universities, the Center for Law and Social Policy, 
the Council for Opportunity in Education, National Association for 
College Admission Counseling, the National Association of Independent 
Colleges and Universities, National Association of State Student Grant 
and Aid Programs, the National Association of State Universities and 
Land-Grant Colleges, the National Association of Student Financial Aid 
Administrators, the United Negro College Fund, and the United States 
Student Association.
  I urge my colleagues to cosponsor this important legislation and work 
for its inclusion in the upcoming reauthorization of the Higher 
Education Act.
  I ask unanimous consent that the text of this legislation be printed 
in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2477

       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 ``Accessing College through 
     Comprehensive Early Outreach, State Partnerships, and 
     Simplification Act''.

     SEC. 2. GRANTS FOR ACCESS AND PERSISTENCE.

       (a) Authorization of Appropriations.--Section 415A(b) of 
     the Higher Education Act of 1965 (20 U.S.C. 1070c(b)) is 
     amended by striking paragraphs (1) and (2) and inserting the 
     following:
       ``(1) In general.--There are authorized to be appropriated 
     to carry out this subpart $500,000,000 for fiscal year 2005, 
     and such sums as may be necessary for each of the 5 
     succeeding fiscal years.
       ``(2) Reservation.--For any fiscal year for which the 
     amount appropriated under paragraph (1) exceeds $30,000,000, 
     the excess amount shall be available to carry out section 
     415E.''.
       (b) Applications for Leveraging Educational Assistance 
     Partnership Programs.--Section 415C(b) of the Higher 
     Education Act of 1965 (20 U.S.C. 1070c-2(b)) is amended--
       (1) in paragraph (2), by striking ``$5,000'' and inserting 
     ``$12,500'';
       (2) in paragraph (9), by striking ``and'' after the 
     semicolon;
       (3) in paragraph (10), by striking the period at the end 
     and inserting ``; and''; and
       (4) by adding at the end the following:
       ``(11) provides notification to eligible students that such 
     grants are--
       ``(A) Leveraging Educational Assistance Partnership Grants; 
     and
       ``(B) funded by the Federal Government and the State.''.
       (c) Grants for Access and Persistence.--Section 415E of the 
     Higher Education Act of 1965 (20 U.S.C. 1070c-3a) is amended 
     to read as follows:

[[Page S6101]]

     ``SEC. 415E. GRANTS FOR ACCESS AND PERSISTENCE.

       ``(a) Purpose.--It is the purpose of this section to expand 
     college access and increase college persistence by making 
     allotments to States to enable the States to--
       ``(1) expand and enhance partnerships with institutions of 
     higher education, early information and intervention, 
     mentoring, or outreach programs, private corporations, 
     philanthropic organizations, and other interested parties to 
     carry out activities under this section and to provide 
     coordination and cohesion among Federal, State, and local 
     governmental and private efforts that provide financial 
     assistance to help low-income students attend college;
       ``(2) provide need-based access and persistence grants to 
     eligible low-income students;
       ``(3) provide early notification to low-income students of 
     their eligibility for financial aid; and
       ``(4) encourage increased participation in early 
     information and intervention, mentoring, or outreach 
     programs.
       ``(b) Allotments to States.--
       ``(1) In general.--
       ``(A) Authorization.--From sums reserved under section 
     415A(b)(2) for each fiscal year, the Secretary shall make an 
     allotment to each State that submits an application for an 
     allotment in accordance with subsection (c) to enable the 
     State to pay the Federal share of the cost of carrying out 
     the activities under subsection (d).
       ``(B) Determination of allotment.--In making allotments 
     under subparagraph (A), the Secretary shall consider the 
     following:
       ``(i) Continuation of award.--If a State continues to meet 
     the specifications established in its application under 
     subsection (c), the Secretary shall make an allotment to such 
     State that is not less than the allotment made to such State 
     for the previous fiscal year.
       ``(ii) Priority.--The Secretary shall give priority in 
     making allotments to States that meet the requirements under 
     paragraph (2)(B)(iii).
       ``(2) Federal share.--
       ``(A) In general.--The Federal share of the cost of 
     carrying out the activities under subsection (d) for any 
     fiscal year may not exceed 66.66 percent.
       ``(B) Different percentages.--The Federal share under this 
     section shall be determined in accordance with the following:
       ``(i) If a State applies for an allotment under this 
     section in partnership with any number of degree granting 
     institutions of higher education in the State whose combined 
     full-time enrollment represents less than a majority of all 
     students attending institutions of higher education in the 
     State, then the Federal share of the cost of carrying out the 
     activities under subsection (d) shall be equal to 50 percent.
       ``(ii) If a State applies for an allotment under this 
     section in partnership with any number of degree granting 
     institutions of higher education in the State whose combined 
     full-time enrollment represents less than a majority of all 
     students attending institutions of higher education in the 
     State, and philanthropic organizations that are located in, 
     or who provide funding in, the State or private corporations 
     that are located in, or who do business in, the State, then 
     the Federal share of the cost of carrying out the activities 
     under subsection (d) shall be equal to 57 percent.
       ``(iii) If a State applies for an allotment under this 
     section in partnership with any number of degree granting 
     institutions of higher education in the State whose combined 
     full-time enrollment represents a majority of all students 
     attending institutions of higher education in the State, 
     philanthropic organizations that are located in, or who 
     provide funding in, the State, and private corporations that 
     are located in, or who do business in, the State, then the 
     Federal share of the cost of carrying out the activities 
     under subsection (d) shall be equal to 66.66 percent.
       ``(c) Application for Allotment.--
       ``(1) In general.--
       ``(A) Submission.--A State that desires to receive an 
     allotment under this section shall submit an application to 
     the Secretary at such time, in such manner, and containing 
     such information as the Secretary may require.
       ``(B) Content.--An application submitted under subparagraph 
     (A) shall include the following:
       ``(i) A description of the State's plan for using the 
     allotted funds.
       ``(ii) Assurances that the State will provide matching 
     funds, from State, institutional, philanthropic, or private 
     funds, of not less than 33.33 percent of the cost of carrying 
     out the activities under subsection (d). The State shall 
     specify the methods by which matching funds will be paid and 
     include provisions designed to ensure that funds provided 
     under this section will be used to supplement, and not 
     supplant, Federal and non-Federal funds available for 
     carrying out the activities under this title. A State that 
     uses non-Federal funds to create or expand existing 
     partnerships with nonprofit organizations or community-based 
     organizations in which such organizations match State funds 
     for student scholarships, may apply such matching funds from 
     such organizations toward fulfilling the State's matching 
     obligation under this clause.
       ``(iii) Assurances that early information and intervention, 
     mentoring, or outreach programs exist within the State or 
     that there is a plan to make such programs widely available.
       ``(iv) A description of the organizational structure that 
     the State has in place to administer the activities under 
     subsection (d), including a description of the system the 
     State will use to track the participation of students who 
     receive grants under this section to degree completion.
       ``(v) Assurances that the State has a method in place, such 
     as acceptance of the automatic zero expected family 
     contribution determination described in section 479, to 
     identify eligible low-income students and award State grant 
     aid to such students.
       ``(vi) Assurances that the State will provide notification 
     to eligible low-income students that grants under this 
     section are--

       ``(I) Leveraging Educational Assistance Partnership Grants; 
     and
       ``(II) funded by the Federal Government and the State.

       ``(2) State agency.--The State agency that submits an 
     application for a State under section 415C(a) shall be the 
     same State agency that submits an application under paragraph 
     (1) for such State.
       ``(3) Partnership.--
       ``(A) Mandatory partners.--In applying for an allotment 
     under this section, the State agency shall apply for the 
     allotment in partnership with--
       ``(i) not less than 1 public and 1 private degree granting 
     institution of higher education that are located in the 
     State; and
       ``(ii) new or existing early information and intervention, 
     mentoring, or outreach programs located in the State.
       ``(B) Permissive partners.--In addition to applying for an 
     allotment under this section in partnership with degree 
     granting institutions of higher education and early 
     information and intervention, mentoring, or outreach 
     programs, a State agency may also apply in partnership with 
     philanthropic organizations that are located in, or who 
     provide funding in, the State and private corporations that 
     are located in, or who do business in, the State.
       ``(C) Roles of partners.--
       ``(i) State agency.--A State agency that is in a 
     partnership receiving an allotment under this section--

       ``(I) shall--

       ``(aa) serve as the primary administrative unit for the 
     partnership;
       ``(bb) provide or coordinate matching funds, and coordinate 
     activities among partners;
       ``(cc) encourage each institution of higher education in 
     the State to participate in the partnership;
       ``(dd) make determinations and early notifications of 
     assistance as described under subsection (d)(2); and
       ``(ee) annually report to the Secretary on the 
     partnership's progress in meeting the purpose of this 
     section; and

       ``(II) may provide early information and intervention, 
     mentoring, or outreach programs.

       ``(ii) Degree granting institutions of higher education.--A 
     degree granting institution of higher education that is in a 
     partnership receiving an allotment under this section--

       ``(I) shall--

       ``(aa) recruit and admit participating qualified students 
     and provide such additional institutional grant aid to 
     participating students as agreed to with the State agency;
       ``(bb) provide support services to students who receive an 
     access and persistence grant under this section and are 
     enrolled at such institution; and
       ``(cc) assist the State in the identification of eligible 
     students and the dissemination of early notifications of 
     assistance as agreed to with the State agency; and

       ``(II) may provide funding for early information and 
     intervention, mentoring, or outreach programs or provide such 
     services directly.

       ``(iii) Programs.--An early information and intervention, 
     mentoring, or outreach program that is in a partnership 
     receiving an allotment under this section shall provide 
     direct services, support, and information to participating 
     students.
       ``(iv) Permissive partners.--A philanthropic organization 
     or private corporation that is in a partnership receiving an 
     allotment under this section shall provide funds for access 
     and persistence grants for participating students, or provide 
     funds or support for early information and intervention, 
     mentoring, or outreach programs.
       ``(d) Authorized Activities.--
       ``(1) In general.--
       ``(A) Establishment of partnership.--Each State receiving 
     an allotment under this section shall use the funds to 
     establish a partnership to award access and persistence 
     grants to eligible low-income students in order to increase 
     the amount of financial assistance such students receive 
     under this subpart for undergraduate education expenses.
       ``(B) Amount.--
       ``(i) Partnerships with institutions serving less than a 
     majority of students in the state.--

       ``(I) In general.--In the case where a State receiving an 
     allotment under this section is in a partnership described in 
     clause (i) or (ii) of subsection (b)(2)(B), the amount of an 
     access and persistence grant awarded by such State shall be 
     not less than the amount that is equal to the average 
     undergraduate tuition and mandatory fees at 4-year public 
     institutions of higher education in the State where the 
     student resides (less any other

[[Page S6102]]

     Federal or State sponsored grant amount, college work study 
     amount, and scholarship amount received by the student) and 
     such amount shall be used toward the cost of attendance at an 
     institution of higher education, located in the State, that 
     is a partner in the partnership.
       ``(II) Cost of attendance.--A State that has a program, 
     apart from the partnership under this section, of providing 
     eligible low-income students with grants that are equal to 
     the average undergraduate tuition and mandatory fees at 4-
     year public institutions of higher education in the State, 
     may increase the amount of access and persistence grants 
     awarded by such State up to an amount that is equal to the 
     average cost of attendance at 4-year public institutions of 
     higher education in the State (less any other Federal or 
     State sponsored grant amount, college work study amount, and 
     scholarship amount received by the student).

       ``(ii) Partnership with institutions serving the majority 
     of students in the state.--In the case where a State 
     receiving an allotment under this section is in a partnership 
     described in subsection (b)(2)(B)(iii), the amount of an 
     access and persistence grant awarded by such State shall be 
     up to an amount that is equal to the average cost of 
     attendance at 4-year public institutions of higher education 
     in the State where the student resides (less any other 
     Federal or State sponsored grant amount, college work study 
     amount, and scholarship amount received by the student) and 
     such amount shall be used by the student to attend an 
     institution of higher education, located in the State, that 
     is a partner in the partnership.
       ``(2) Early notification.--
       ``(A) In general.--Each State receiving an allotment under 
     this section shall annually notify low-income students, such 
     as students who are eligible to receive a free lunch under 
     the school lunch program established under the Richard B. 
     Russell National School Lunch Act, in grade 7 through grade 
     12 in the State of their potential eligibility for student 
     financial assistance, including an access and persistence 
     grant, to attend an institution of higher education.
       ``(B) Content of notice.--The notification under 
     subparagraph (A)--
       ``(i) shall include--

       ``(I) information about early information and intervention, 
     mentoring, or outreach programs available to the student;
       ``(II) information that a student's candidacy for an access 
     and persistence grant is enhanced through participation in an 
     early information and intervention, mentoring, or outreach 
     program;
       ``(III) an explanation that student and family eligibility 
     and participation in other Federal means-tested programs may 
     indicate eligibility for an access and persistence grant and 
     other student aid programs;
       ``(IV) a nonbinding estimation of the total amount of 
     financial aid a low-income student with a similar income 
     level may expect to receive, including an estimation of the 
     amount of an access and persistence grant and an estimation 
     of the amount of grants, loans, and all other available types 
     of aid from the major Federal and State financial aid 
     programs;
       ``(V) an explanation that in order to be eligible for an 
     access and persistence grant, at a minimum, a student shall 
     meet the requirement under paragraph (3), graduate from 
     secondary school, and enroll at an institution of higher 
     education that is a partner in the partnership;
       ``(VI) information on any additional requirements (such as 
     a student pledge detailing student responsibilities) that the 
     State may impose for receipt of an access and persistence 
     grant under this section; and
       ``(VII) instructions on how to apply for an access and 
     persistence grant; and

       ``(ii) may include a disclaimer that access and persistence 
     grant awards are contingent upon--

       ``(I) a determination of the student's financial 
     eligibility at the time of the student's enrollment at an 
     institution of higher education that is a partner in the 
     partnership;
       ``(II) annual Federal and State appropriations; and
       ``(III) other aid received by the student at the time of 
     the student's enrollment at an institution of higher 
     education that is a partner in the partnership.

       ``(3) Eligibility.--In determining which students are 
     eligible to receive access and persistence grants, the State 
     shall ensure that each such student meets not less than 2 of 
     the following criteria and give priority to students meeting 
     all of the following criteria:
       ``(A) Has an expected family contribution equal to zero (as 
     described in section 479) or a comparable alternative based 
     upon the State's approved criteria in section 415C(b)(4).
       ``(B) Is participating in, or has participated in, a 
     Federal, State, institutional, or community early information 
     and intervention, mentoring, or outreach program, as 
     recognized by the State agency administering activities under 
     this section.
       ``(C) Has qualified for a free lunch, or at the State's 
     discretion a reduced price lunch, under the school lunch 
     program established under the Richard B. Russell National 
     School Lunch Act.
       ``(D) Qualifies for the State's maximum undergraduate 
     award, as authorized under section 415C(b).
       ``(E) Receives, or has received, an access and persistence 
     grant under this section.
       ``(4) Grant award.--Once a student, including those who 
     have received early notification under paragraph (2) from the 
     State, applies for admission to an institution that is a 
     partner in the partnership, files a Free Application for 
     Federal Student Aid and any related existing State form, and 
     is determined eligible by the State under paragraph (3), the 
     State shall--
       ``(A) issue the student a preliminary access and 
     persistence grant award certificate with tentative award 
     amounts; and
       ``(B) inform the student that payment of the access and 
     persistence grant award amounts is subject to certification 
     of enrollment and award eligibility by the institution of 
     higher education.
       ``(5) Duration of award.--An eligible student that receives 
     an access and persistence grant under this section shall 
     receive such grant award for each year of such student's 
     undergraduate education in which the student remains eligible 
     for assistance under this title, including pursuant to 
     section 484(c), and remains financially eligible as 
     determined by the State, except that the State may impose 
     reasonable time limits to baccalaureate degree completion.
       ``(e) Administrative Cost Allowance.--A State that receives 
     an allotment under this section may reserve not more than 3.5 
     percent of the funds made available annually through the 
     allotment for State administrative functions required to 
     carry out this section.
       ``(f) Statutory and Regulatory Relief for Institutions of 
     Higher Education.--The Secretary may grant, upon the request 
     of an institution of higher education that is in a 
     partnership described in subsection (b)(2)(B)(iii) and that 
     receives an allotment under this section, a waiver for such 
     institution from statutory or regulatory requirements that 
     inhibit the ability of the institution to successfully and 
     efficiently participate in the activities of the partnership.
       ``(g) Applicability Rule.--The provisions of this subpart 
     which are not inconsistent with this section shall apply to 
     the program authorized by this section.
       ``(h) Maintenance of Effort Requirement.--Each State 
     receiving an allotment under this section for a fiscal year 
     shall provide the Secretary an assurance that the aggregate 
     amount expended per student or the aggregate expenditures by 
     the State, from funds derived from non-Federal sources, for 
     the authorized activities described in subsection (d) for the 
     preceding fiscal year were not less than the amount expended 
     per student or the aggregate expenditure by the State for the 
     activities for the second preceding fiscal year.
       ``(i) Reports.--Not later than 3 years after the date of 
     enactment of the Accessing College through Comprehensive 
     Early Outreach, State Partnerships, and Simplification Act, 
     and annually thereafter, the Secretary shall submit a report 
     describing the activities and the impact of the partnerships 
     under this section to the Committee on Health, Education, 
     Labor, and Pensions of the Senate and the Committee on 
     Education and the Workforce of the House of 
     Representatives.''.
       (d) Continuation and Transition.--During the 2-year period 
     commencing on the date of enactment of this Act, the 
     Secretary shall continue to award grants under section 415E 
     of the Higher Education Act of 1965 (20 U.S.C. 1070c-3a), as 
     such section existed on the day before the date of enactment 
     of this Act, to States that choose to apply for grants under 
     such predecessor section.
       (e) Implementation and Evaluation.--Section 491(j) of the 
     Higher Education Act of 1965 (20 U.S.C. 1098(j)) is amended--
       (1) in paragraph (4), by striking ``and'' after the 
     semicolon; and
       (2) by striking paragraph (5) and inserting the following:
       ``(5) not later than 6 months after the date of enactment 
     of the Accessing College through Comprehensive Early 
     Outreach, State Partnerships, and Simplification Act, advise 
     the Secretary on means to implement the activities under 
     section 415E, and the Advisory Committee shall continue to 
     monitor, evaluate, and make recommendations on the progress 
     of partnerships that receive allotments under such section; 
     and''.

     SEC. 3. SIMPLIFIED NEEDS TEST AND AUTOMATIC ZERO 
                   IMPROVEMENTS.

       (a) Simplified Needs Test.--Section 479 of the Higher 
     Education Act of 1965 (20 U.S.C. 1087ss) is amended--
       (1) in subsection (b)--
       (A) in paragraph (1)--
       (i) by striking subparagraph (A)(i) and inserting the 
     following:
       ``(i) the student's parents--

       ``(I) file, or are eligible to file, a form described in 
     paragraph (3);
       ``(II) certify that they are not required to file an income 
     tax return;
       ``(III) 1 of whom is a dislocated worker; or
       ``(IV) or the student received benefits at some time during 
     the previous 24-month period under a means-tested Federal 
     benefit program as defined under subsection (d); and''; and

       (ii) by striking subparagraph (B)(i) and inserting the 
     following:
       ``(i) the student (and the student's spouse, if any)--

       ``(I) files, or is eligible to file, a form described in 
     paragraph (3);
       ``(II) certifies that the student (and the student's 
     spouse, if any) is not required to file an income tax return;
       ``(III) is a dislocated worker; or
       ``(IV) received benefits at some time during the previous 
     24-month period under a

[[Page S6103]]

     means-tested Federal benefit program as defined under 
     subsection (d); and''; and

       (B) in paragraph (3), by striking ``A student or family 
     files a form described in this subsection, or subsection (c), 
     as the case may be, if the student or family, respectively, 
     files'' and inserting ``In the case of an independent 
     student, the student, or in the case of a dependent student, 
     the family, files a form described in this subsection, or 
     subsection (c), as the case may be, if the student or family, 
     as appropriate, files'';
       (2) in subsection (c)--
       (A) in paragraph (1)--
       (i) by striking subparagraph (A) and inserting the 
     following:
       ``(A) the student's parents--
       ``(i) file, or are eligible to file, a form described in 
     subsection (b)(3);
       ``(ii) certify that they are not required to file an income 
     tax return;
       ``(iii) 1 of whom is a dislocated worker; or
       ``(iv) or the student received benefits at some time during 
     the previous 24-month period under a means-tested Federal 
     benefit program as defined under subsection (d); and''; and
       (ii) by striking subparagraph (B) and inserting the 
     following:
       ``(B) the sum of the adjusted gross income of the parents 
     is less than or equal to $25,000; or'';
       (B) in paragraph (2)--
       (i) by striking subparagraph (A) and inserting the 
     following:
       ``(A) the student (and the student's spouse, if any)--
       ``(i) files, or is eligible to file, a form described in 
     subsection (b)(3);
       ``(ii) certifies that the student (and the student's 
     spouse, if any) is not required to file an income tax return;
       ``(iii) is a dislocated worker; or
       ``(iv) received benefits at some time during the previous 
     24-month period under a means-tested Federal benefit program 
     as defined under subsection (d); and''; and
       (ii) by striking subparagraph (B) and inserting the 
     following:
       ``(B) the sum of the adjusted gross income of the student 
     and spouse (if appropriate) is less than or equal to 
     $25,000.''; and
       (C) by striking the flush matter at the end and inserting 
     the following:

     ``The Secretary shall annually adjust the income level 
     necessary to qualify an applicant for the zero expected 
     family contribution. The income level shall be adjusted 
     according to increases in the Consumer Price Index, as 
     defined in section 478(f).''; and
       (3) by adding at the end the following:
       ``(d) Definitions.--In this section:
       ``(1) Dislocated worker.--The term `dislocated worker' has 
     the same meaning given the term in section 101 of the 
     Workforce Investment Act of 1998 (29 U.S.C. 2801).
       ``(2) Means-Tested Federal Benefit Program.--The term 
     `means-tested Federal benefit program' means a mandatory 
     spending program of the Federal Government in which 
     eligibility for the program's benefits, or the amount of such 
     benefits, or both, are determined on the basis of income or 
     resources of the individual or family seeking the benefit, 
     and includes the supplemental security income program under 
     title XVI of the Social Security Act, the food stamp program 
     under the Food Stamp Act of 1977, and the free and reduced 
     price school lunch program established under the Richard B. 
     Russell National School Lunch Act.''.
       (b) Discretion of Student Financial Aid Administrators.--
     Section 479A(a) of the Higher Education Act of 1965 (20 
     U.S.C. 1087tt(a)) is amended in the third sentence by 
     inserting ``a family member who is a dislocated worker (as 
     defined in section 101 of the Workforce Investment Act of 
     1998 (29 U.S.C. 2801)),'' after ``recent unemployment of a 
     family member,''.

     SEC. 4. IMPROVING PAPER AND ELECTRONIC FORMS.

       (a) Simplified Needs Test.--Section 479(a) of the Higher 
     Education Act of 1965 (20 U.S.C. 1087ss(a)) is amended by 
     adding at the end the following:
       ``(3) Simplified forms.--The Secretary shall make special 
     efforts to notify families meeting the requirements of 
     subsection (c) that such families may use the FAFSA-EZ or the 
     simplified electronic application form established under 
     section 483(a).''.
       (b) Common Financial Aid Form Development and Processing.--
     Section 483 of the Higher Education Act of 1965 (20 U.S.C. 
     1090) is amended--
       (1) in subsection (a)--
       (A) by striking paragraphs (1), (2), and (5);
       (B) by redesignating paragraphs (3), (4), (6), and (7), as 
     paragraphs (7), (8), (9), and (10), respectively;
       (C) by inserting before paragraph (7), as redesignated by 
     subparagraph (B), the following:
       ``(1) In general.--The Secretary, in cooperation with 
     representatives of agencies and organizations involved in 
     student financial assistance, shall produce, distribute, and 
     process free of charge common financial reporting forms as 
     described in this subsection to be used for application and 
     reapplication to determine the need and eligibility of a 
     student for financial assistance under parts A through E 
     (other than subpart 4 of part A). These forms shall be made 
     available to applicants in both paper and electronic formats 
     and shall be referred to as the `Free Application for Federal 
     Student Aid'.
       ``(2) Paper format.--
       ``(A) In general.--The Secretary shall produce, distribute, 
     and process common forms in paper format to meet the 
     requirements of paragraph (1). The Secretary shall develop a 
     common paper form for applicants who do not meet the 
     requirements of subparagraph (B).
       ``(B) FAFSA-EZ.--
       ``(i) In general.--The Secretary shall develop and use a 
     simplified paper application form, to be known as the `FAFSA-
     EZ', to be used for applicants meeting the requirements of 
     section 479(c).
       ``(ii) Reduced data requirements.--The FAFSA-EZ shall 
     permit an applicant to submit for financial assistance 
     purposes, only the data elements required to make a 
     determination of whether the applicant meets the requirements 
     under section 479(c).
       ``(iii) State data.--The Secretary shall include on the 
     FAFSA-EZ space for information that needs to be submitted 
     from the applicant to be eligible for State financial 
     assistance, as provided under paragraph (5), except the 
     Secretary shall not include a State's data if that State does 
     not permit its applicants for State assistance to use the 
     FAFSA-EZ.
       ``(iv) Free availability and processing.--The provisions of 
     paragraph (6) shall apply to the FAFSA-EZ, and the data 
     collected by means of the FAFSA-EZ shall be available to 
     institutions of higher education, guaranty agencies, and 
     States in accordance with paragraph (7).
       ``(v) Testing.--The Secretary shall conduct appropriate 
     field testing on the FAFSA-EZ.
       ``(C) Phasing out the paper form for students who do not 
     meet the requirements of the automatic zero expected family 
     contribution.--
       ``(i) In general.--The Secretary shall make all efforts to 
     encourage all applicants to utilize the electronic forms 
     described in paragraph (3).
       ``(ii) Phaseout of full fafsa.--Not later than award year 
     2009-2010, the Secretary shall phaseout the long paper form 
     for applicants who do not qualify for the FAFSA-EZ.
       ``(iii) Use of savings to address the digital divide.--The 
     Secretary shall utilize savings accrued by moving more 
     applicants to the electronic forms to improve access to the 
     electronic forms for applicants meeting the requirements of 
     section 479(c).
       ``(3) Electronic format.--
       ``(A) In general.--The Secretary shall produce, distribute, 
     and process common forms in electronic format to meet the 
     requirements of paragraph (1). The Secretary shall develop a 
     common electronic form for applicants who do not meet the 
     requirements of subparagraph (B).
       ``(B) Simplified application: fafsa on the web.--
       ``(i) In general.--The Secretary shall develop and use a 
     simplified electronic application form to be used by 
     applicants meeting the requirements under subsection (b) or 
     (c) of section 479.
       ``(ii) Reduced data requirements.--The simplified 
     electronic application form shall permit an applicant to 
     submit for financial assistance purposes, only the data 
     elements required to make a determination of whether the 
     applicant meets the requirements under subsection (b) or (c) 
     of section 479.
       ``(iii) State data.--The Secretary shall include on the 
     simplified electronic application form space for information 
     that needs to be submitted from the applicant to be eligible 
     for State financial assistance, as provided under paragraph 
     (5), except the Secretary shall not include a State's data if 
     that State does not permit its applicants for State 
     assistance to use the simplified electronic application form.
       ``(iv) Free availability and processing.--The provisions of 
     paragraph (6) shall apply to the simplified electronic 
     application form, and the data collected by means of the 
     simplified electronic application form shall be available to 
     institutions of higher education, guaranty agencies, and 
     States in accordance with paragraph (7).
       ``(v) Testing.--The Secretary shall conduct appropriate 
     field testing on the form developed under this subparagraph.
       ``(C) Rule of construction.--Nothing in this subsection 
     shall be construed to prohibit the use of the form developed 
     by the Secretary pursuant to this paragraph by an eligible 
     institution, eligible lender, guaranty agency, State grant 
     agency, private computer software providers, a consortium 
     thereof, or such other entities as the Secretary may 
     designate.
       ``(D) Privacy.--The Secretary shall ensure that data 
     collection under this paragraph complies with section 552a of 
     title 5, United States Code, and that any entity using the 
     electronic version of the forms developed by the Secretary 
     pursuant to this paragraph shall maintain reasonable and 
     appropriate administrative, technical, and physical 
     safeguards to ensure the integrity and confidentiality of the 
     information, and to protect against security threats, or 
     unauthorized uses or disclosures of the information provided 
     on the electronic version of the form. Data collected by such 
     electronic version of the form shall be used only for the 
     application, award, and administration of aid awarded under 
     this title, State aid, or aid awarded by eligible 
     institutions or such entities as the Secretary may designate. 
     No data collected by such electronic version of the form 
     shall be used for making final aid awards under this title 
     until such data have been processed by the Secretary or a 
     contractor or designee of the Secretary, except as may be 
     permitted under this title.

[[Page S6104]]

       ``(E) Signature.--Notwithstanding any other provision of 
     this Act, the Secretary may permit an electronic form to be 
     submitted without a signature, if a signature is subsequently 
     submitted by the applicant.
       ``(F) Personal identification numbers authorized.--The 
     Secretary is authorized to assign to applicants personal 
     identification numbers--
       ``(i) to enable the applicants to use such numbers in lieu 
     of a signature for purposes of completing a form under this 
     paragraph; and
       ``(ii) for any purpose determined by the Secretary to 
     enable the Secretary to carry out this title.
       ``(4) Reapplication.--
       ``(A) In general.--The Secretary shall develop streamlined 
     reapplication forms and processes, including both paper and 
     electronic reapplication processes, consistent with the 
     requirements of this subsection, for an applicant who applies 
     for financial assistance under this title in the next 
     succeeding academic year subsequent to the year in which such 
     applicant first applied for financial assistance under this 
     title.
       ``(B) Updated.--The Secretary shall determine, in 
     cooperation with States, institutions of higher education, 
     agencies and organizations involved in student financial 
     assistance, the data elements that can be updated from the 
     previous academic year's application.
       ``(C) Rule of construction.--Nothing in this title shall be 
     construed as limiting the authority of the Secretary to 
     reduce the number of data elements required of reapplicants.
       ``(D) Zero family contribution.--Applicants determined to 
     have a zero family contribution pursuant to section 479(c) 
     shall not be required to provide any financial data in a 
     reapplication form, except that which is necessary to 
     determine eligibility under such section.
       ``(5) State requirements.--
       ``(A) In general.--The Secretary shall include on the forms 
     developed under this subsection, such State-specific 
     nonfinancial data items as the Secretary determines are 
     necessary to meet State requirements for need-based State 
     aid. Such items shall be selected in consultation with States 
     to assist in the awarding of State financial assistance in 
     accordance with the terms of this subsection. The number of 
     such data items shall not be less than the number included on 
     the form on October 7, 1998, unless States notify the 
     Secretary that they no longer require those data items for 
     the distribution of State need-based aid.
       ``(B) Annual review.--The Secretary shall conduct an annual 
     review process to determine which nonfinancial data items the 
     States require to award need-based State aid and other 
     application requirements that the States may impose.
       ``(C) Federal register notice.--The Secretary shall publish 
     on an annual basis a notice in the Federal Register requiring 
     State agencies to inform the Secretary--
       ``(i) if they are unable to permit applicants to utilize 
     the FAFSA-EZ or the simplified electronic application form; 
     and
       ``(ii) of the State-specific nonfinancial data that the 
     State agency requires for delivery of State need-based 
     financial aid.
       ``(D) State notification to the secretary.--
       ``(i) In general.--Each State shall notify the Secretary 
     whether it permits an applicant to file a form described in 
     paragraph (2)(B) or (3)(B) for purposes of determining 
     eligibility for State need-based grant aid.
       ``(ii) No permission.--In the event that a State does not 
     permit an applicant to file a form described in paragraph 
     (2)(B) or (3)(B) for purposes of determining eligibility for 
     State need-based grant aid--

       ``(I) the State shall notify the Secretary if it is not 
     permitted to do so because of either State law or because of 
     agency policy; and
       ``(II) the notification under subclause (I) shall include 
     an estimate of the program cost to permit applicants to 
     complete FAFSA-EZs and simplified electronic application 
     forms.

       ``(iii) Lack of notification by the state.--If a State does 
     not notify the Secretary pursuant to clause (i), the 
     Secretary shall--

       ``(I) permit residents of that State to complete a FAFSA-EZ 
     or a simplified electronic application form; and
       ``(II) not require any resident of that State to complete 
     any nonfinancial data previously required by that State.

       ``(E) Restriction.--The Secretary shall not require 
     applicants to complete any nonfinancial data or financial 
     data that are not required by the applicant's State agency, 
     except as may be required for applicants who use the common 
     paper form.
       ``(6) Charges to students and parents for use of forms 
     prohibited.--The common financial reporting forms prescribed 
     by the Secretary under this subsection shall be produced, 
     distributed, and processed by the Secretary and no parent or 
     student shall be charged a fee by the Secretary, a 
     contractor, a third party servicer or private software 
     provider, or any other public or private entity for the 
     collection, processing, or delivery of financial aid through 
     the use of such forms. The need and eligibility of a student 
     for financial assistance under parts A through E (other than 
     under subpart 4 of part A) may only be determined by using a 
     form developed by the Secretary pursuant to this subsection. 
     No student may receive assistance under parts A through E 
     (other than under subpart 4 of part A), except by use of a 
     form developed by the Secretary pursuant to this subsection. 
     No data collected on a paper or electronic form, worksheet, 
     or other document for which a fee is charged shall be used to 
     complete the form prescribed under this subsection. No 
     person, commercial entity, or other entity shall request, 
     obtain, or utilize an applicant's Personal Identification 
     Number for purposes of submitting an application on an 
     applicant's behalf except State agencies that have entered 
     into an agreement with the Secretary to streamline 
     applications, eligible institutions, or programs under this 
     title as permitted by the Secretary.'';
       (2) by striking subsection (b) and inserting the following:
       ``(b) Early Notification of Aid Eligibility.--
       ``(1) In general.--The Secretary shall make every effort to 
     provide students with early information about potential 
     financial aid eligibility.
       ``(2) Availability of means to determine eligibility.--
       ``(A) In general.--The Secretary shall provide, in 
     cooperation with States, institutions of higher education, 
     agencies, and organizations involved in student financial 
     assistance, both through a widely disseminated printed form 
     and the Internet or other electronic means, a system for 
     individuals to determine easily, by entering relevant data, 
     approximately the amount of grant, work-study, and loan 
     assistance for which an individual would be eligible under 
     this title upon completion and verification of form under 
     subsection (a).
       ``(B) Determination of whether to use simplified 
     application.--The system established under this paragraph 
     shall also permit users to determine whether or not they may 
     apply for aid using a FAFSA-EZ or a simplified electronic 
     application form under subsection (a).
       ``(3) Availability of means to communicate eligibility.--
       ``(A) Lower-income students.--The Secretary shall--
       ``(i) make special efforts to notify students who qualify 
     for a free or reduced price lunch under the school lunch 
     program established under the Richard B. Russell National 
     School Lunch Act, benefits under the food stamp program under 
     the Food Stamp Act of 1977, or benefits under such programs 
     as the Secretary shall determine, of such students' potential 
     eligibility for a maximum Federal Pell Grant under subpart 1 
     of part A; and
       ``(ii) disseminate informational materials regarding the 
     linkage between eligibility for means-tested Federal benefit 
     programs and eligibility for a Federal Pell Grant, as 
     determined necessary by the Secretary.
       ``(B) Middle school students.--The Secretary shall, in 
     cooperation with States, middle schools, programs under this 
     title that serve middle school students, and other 
     cooperating independent outreach programs, make special 
     efforts to notify middle school students of the availability 
     of financial assistance under this title and of the 
     approximate amounts of grant, work-study, and loan assistance 
     an individual would be eligible for under this title.
       ``(C) Secondary school students.--The Secretary shall, in 
     cooperation with States, secondary schools, programs under 
     this title that serve secondary school students, and 
     cooperating independent outreach programs, make special 
     efforts to notify students in their junior year of secondary 
     school the approximate amounts of grant, work-study, and loan 
     assistance an individual would be eligible for under this 
     title upon completion and verification of an application form 
     under subsection (a).'';
       (3) in subsection (c), by striking ``Labor and Human 
     Resources'' and inserting ``Health, Education, Labor, and 
     Pensions'';
       (4) by striking subsection (d); and
       (5) by redesignating subsection (e) as subsection (d).
       (c) Toll-Free Application and Information.--Section 479 of 
     the Higher Education Act of 1965 (20 U.S.C. 1087ss), as 
     amended by section 3, is further amended by adding at the end 
     the following:
       ``(e) Toll-Free Application and Information.--The Secretary 
     shall contract for, or establish, and publicize a toll-free 
     telephone service to provide an application mechanism and 
     timely and accurate information to the general public. The 
     information provided shall include specific instructions on 
     completing the application form for assistance under this 
     title. Such service shall also include a service accessible 
     by telecommunications devices for the deaf (TDD's) and shall, 
     in addition to the services provided for in the previous 
     sentence, refer such students to the national clearinghouse 
     on postsecondary education that is authorized under section 
     685(d)(2)(C) of the Individuals with Disabilities Education 
     Act. Not later than 2 years after the date of enactment of 
     the Accessing College through Comprehensive Early Outreach, 
     State Partnerships, and Simplification Act, the Secretary 
     shall test and implement a toll-free telephone-based 
     application system to permit applicants to utilize the FAFSA-
     EZ or simplified electronic application form under section 
     483(a) over such system.''.
       (d) Master Calendar.--Section 482(a)(1)(B) of the Higher 
     Education Act of 1965 (20 U.S.C. 1089) is amended to read as 
     follows:
       ``(B) by March 1: proposed modifications and updates 
     pursuant to sections 478 and 483(a)(5) published in the 
     Federal Register;''.

[[Page S6105]]

     SEC. 5. ALLOWANCE FOR STATE AND OTHER TAXES.

       Section 478(g) of the Higher Education Act of 1965 (20 
     U.S.C. 1087rr(g)) is amended to read as follows:
       ``(g) State and Other Tax Allowance.--For each award year 
     after award year 2004-2005, the Secretary shall publish in 
     the Federal Register a revised table of State and other tax 
     allowances for the purpose of sections 475(c)(2), 475(g)(3), 
     476(b)(2), and 477(b)(2). The Secretary shall develop such 
     revised table after review of the Department of the 
     Treasury's Statistics of Income file and determination of the 
     percentage of income that each State's taxes represent. 
     Updates shall be phased in proportionately over a period of 
     time equal to the number of years since the last update.''.

     SEC. 6. SUPPORT FOR WORKING STUDENTS.

       (a) Dependent Students.--Section 475(g)(2)(D) of the Higher 
     Education Act of 1965 (20 U.S.C. 1087oo(g)(2)(D)) is amended 
     to read as follows:
       ``(D) $9,000;''.
       (b) Independent Students Without Dependents Other Than a 
     Spouse.--Section 476(b)(1)(A)(iv) of the Higher Education Act 
     of 1965 (20 U.S.C. 1087pp(b)(1)(A)(iv)) is amended to read as 
     follows:
       ``(iv) an income protection allowance of the following 
     amount (or a successor amount prescribed by the Secretary 
     under section 478)--

       ``(I) $10,000 for single students;
       ``(II) $10,000 for married students where both are enrolled 
     pursuant to subsection (a)(2); and
       ``(III) $13,000 for married students where 1 is enrolled 
     pursuant to subsection (a)(2);''.

       (c) Independent Students With Dependents Other Than a 
     Spouse.--Section 477(b)(4) of the Higher Education Act of 
     1965 (20 U.S.C. 1087qq(b)(4)) is amended to read as follows:
       ``(4) Income protection allowance.--The income protection 
     allowance is determined by the following table (or a 
     successor table prescribed by the Secretary under section 
     478):

       

                                          ``Income Protection Allowance
----------------------------------------------------------------------------------------------------------------
                                                                        Number in College
                                    Family Size ----------------------------------------------------------------
                                                      1            2            3            4            5
----------------------------------------------------------------------------------------------------------------
                                         2         $17,580      $15,230
                                         3          20,940       17,610      $16,260
                                         4          24,950       22,600       20,270      $17,930
                                         5          28,740       26,390       24,060       21,720      $19,390
                                         6          32,950       30,610       28,280       25,940       23,610
----------------------------------------------------------------------------------------------------------------
  NOTE: For each additional family member, add $3,280.
  For each additional college student, subtract $2,330.''.

     SEC. 7. TREATMENT OF PREPAYMENT AND SAVINGS PLANS UNDER 
                   STUDENT FINANCIAL AID NEEDS ANALYSIS.

       (a) Definition of Assets.--Section 480(f) of the Higher 
     Education Act of 1965 (20 U.S.C. 1087vv(f)) is amended--
       (1) in paragraph (1), by inserting ``qualified education 
     benefits (except as provided in paragraph (3)),'' after ``tax 
     shelters,''; and
       (2) by adding at the end the following:
       ``(3) A qualified education benefit shall not be considered 
     an asset of a student for purposes of section 475.
       ``(4) In this subsection, the term `qualified education 
     benefit' means--
       ``(A) a program that is described in clause (i) of section 
     529(b)(1)(A) of the Internal Revenue Code of 1986 and that 
     meets the requirements of section 529(b)(1)(B) of such Code;
       ``(B) a State tuition program described in clause (ii) of 
     section 529(b)(1)(A) of the Internal Revenue Code of 1986 
     that meets the requirements of section 529(b)(1)(B) of such 
     Code; and
       ``(C) a Coverdell education savings account (as defined in 
     section 530(b)(1) of the Internal Revenue Code of 1986).''.
       (b) Definition of Other Financial Assistance.--Section 
     480(j) of the Higher Education Act of 1965 (20 U.S.C. 
     1087vv(j)) is amended--
       (1) in the heading, by striking ``; Tuition Prepayment 
     Plans';
       (2) by striking paragraph (2); and
       (3) by redesignating paragraph (3) as paragraph (2).
       (c) Effective Date.--The amendments made by this section 
     shall apply with respect to determinations of need under part 
     F of title IV of the Higher Education Act of 1965 (20 U.S.C. 
     1087kk et seq.) for academic years beginning on or after July 
     1, 2005.

     SEC. 8. ADVISORY COMMITTEE ON STUDENT FINANCIAL ASSISTANCE.

       Section 491 of the Higher Education Act of 1965 (20 U.S.C. 
     1098), as amended by section 2, is further amended--
       (1) in subsection (a)(2)--
       (A) in subparagraph (B), by striking ``and'' after the 
     semicolon;
       (B) in subparagraph (C), by striking the period at the end 
     and inserting a semicolon; and
       (C) by adding at the end the following:
       ``(D) to provide knowledge and understanding of early 
     intervention programs and make recommendations that will 
     result in early awareness by low- and moderate-income 
     students and families of their eligibility for assistance 
     under this title, and, to the extent practicable, their 
     eligibility for other forms of State and institutional need-
     based student assistance; and
       ``(E) to make recommendations that will expand and improve 
     partnerships among the Federal Government, States, 
     institutions, and private entities to increase the awareness 
     and total amount of need-based student assistance available 
     to low- and moderate-income students.'';
       (2) in subsection (d)--
       (A) in paragraph (6), by striking ``, but nothing in this 
     section shall authorize the committee to perform such 
     studies, surveys, or analyses'';
       (B) in paragraph (8), by striking ``and'' after the 
     semicolon;
       (C) by redesignating paragraph (9) as paragraph (10); and
       (D) by inserting after paragraph (8) the following:
       ``(9) monitor the adequacy of total need-based aid 
     available to low- and moderate-income students from all 
     sources, assess the implications for access and persistence, 
     and report those implications annually to Congress and the 
     Secretary; and'';
       (3) in subsection (j), by adding at the end the following:
       ``(6) monitor and assess implementation of improvements 
     called for under this title, make recommendations to the 
     Secretary that ensure the timely design, testing, and 
     implementation of the improvements, and report annually to 
     Congress and the Secretary on progress made toward 
     simplifying overall delivery, reducing data elements and 
     questions, incorporating the latest technology, aligning 
     Federal, State, and institutional eligibility, enhancing 
     partnerships, and improving early awareness of total student 
     aid eligibility for low- and moderate-income students and 
     families.''; and
       (4) in subsection (k), by striking ``2004'' and inserting 
     ``2010''.
                                 ______
                                 
      By Ms. COLLINS (for herself, Mr. Akaka, Mr. Fitzgerald, Mr. 
        Lieberman, and Mr. Voinovich):
  S. 2479. A bill to amend chapter 84 of title 5, United States Code, 
to provide for Federal employees to make elections to make, modify, and 
terminate contributions to the Thrift Savings Fund at any time, and for 
other purposes; to the Committee on Governmental Affairs.
  Ms. COLLINS. Mr. President, today, I am pleased to be joined by my 
colleagues, Senators Akaka, Fitzgerald, Lieberman, and Voinovich in 
introducing the Thrift Savings Plan Open Elections Act of 2004. This 
legislation would provide Federal employees with maximum flexibility to 
tailor their investment decisions by eliminating the current 
restrictions on when employee contributions to the Thrift Savings Plan 
can begin or be modified.
  Since its inception in 1987, the Thrift Savings Plan has provided 
Federal employees with the opportunity to participate in a retirement 
savings plan similar to the 401(k) plans offered by many private 
companies. The open seasons were created to encourage Federal employees 
to contribute money toward their retirement. Open seasons were 
practical during the early years when the Thrift Savings Plan was just 
getting started and lacked the administrative capability to quickly 
enroll participants and to implement investment elections on a real-
time basis. With the introduction of the automatic record-keeping 
system, however, the program has outgrown its existing framework.
  Under current law, newly hired employees can sign up to contribute to 
the Thrift Savings Plan during an initial 60-day eligibility period. If 
an employee chooses not to make an election, he or she must wait until 
an open season to do so. Further, if an employee stops contributing to 
the Thrift Savings Plan outside of an open season, he or she must wait 
until the second open season after contributions stop before 
contributions can resume. These

[[Page S6106]]

restrictions can unfairly penalize employees and discourage their 
participation. But allowing employees to initiate, modify, or terminate 
contributions to the TSP in any period, provided the amount does not 
exceed existing limits for contributions, the legislation ensures that 
Federal employees' investment decisions will no longer be restricted by 
the open season requirement.
  In testimony before the Congress, Andrew Saul, Chairman of the 
Federal Retirement Thrift Investment Board, stated that the Board 
supports the elimination of the open season requirement because it 
would expand participant access and simplify the administration of the 
Thrift Savings Plan. Jim Sauber, Chairman of the Employee Thrift 
Advisory Council, testified in March 2004 that eliminating the TSP open 
season is perhaps the single best way to reach the 13 percent of 
employees in the Federal Employees Retirement System who still do not 
make contributions to the TSP.
  In addition to the support by the Federal Retirement Thrift 
Investment Board and the Employee Thrift Advisory Council, the 
legislation is supported by the American Federation of Government 
Employees, the National Treasury Employees Union, the National 
Association of Retired Federal Employees, the Federal Managers 
Association, and the Senior Executives Association.
  I urge my colleagues to support this important legislation.

                          ____________________