[Congressional Record (Bound Edition), Volume 147 (2001), Part 6]
[Senate]
[Pages 7578-7600]
[From the U.S. Government Publishing Office, www.gpo.gov]



          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mrs. FEINSTEIN (for herself and Mr. Gregg):
  S. 848. A bill to amend title 18, United States Code, to limit the 
misuse of social security numbers, to establish criminal penalties for 
such misuse, and for other purposes; to the Committee on the Judiciary.
  Mrs. FEINSTEIN. Mr. President, I am pleased, along with Senator 
Gregg, to introduce the ``Social Security Number Misuse Prevention 
Act.'' This legislation combats identity theft by making it harder for 
criminals to steal another person's Social Security number, our de 
facto national identifier.
  The United States faces a growing identity theft crisis. The Federal 
Bureau of Investigation estimates 350,000 cases of identity theft occur 
each year. That's one case every two minutes.
  The Federal Trade Commission, FTC, reports that identity theft is the 
fastest growing crime in the country. If recent trends continue, 
reports of identity theft to the FTC will double between 2000 and 2001, 
to over 60,000 cases. Fully 40 percent of all consumer fraud complaints 
received by the FTC in the first three months of 2001 involved identity 
theft.
  Unfortunately, the State most affected by these complaints is 
California. Fully 17 percent of the identity theft complaints the FTC 
received this past winter came from my home state.
  What is identity theft? Identity theft occurs when one person uses 
another person's Social Security number, birth date, driver's license 
number, or other identifying information to obtain credit cards, car 
loans, phone plans or other services in the victim's name.
  Identity thieves can get personal information in a myriad of ways, 
stealing wallets and purses containing identification cards, using 
personal information found on the Internet, stealing mail, including 
pre-approved credit offers and credit statements, fraudulently 
obtaining credit reports or getting personnel records at work.
  Of all sources of identity theft, the most common trigger of the 
crime is the misappropriation of a person's Social Security number. 
Reports to the Social Security Administration of the Social Security 
number misuse have increased from 7,868 in 1997 to 46,839 in 2000, an 
astonishing increase of over 500 percent.
  Let me give some examples of victims whose identities were stolen 
after a thief got hold of their Social Security number: An identity 
theft ring in Riverside County allegedly bilked eight victims of 
$700,000. The thieves stole personal information of employees at a 
large phone company and drained their on-line stock accounts. One 
employee reportedly had $285,000 taken from his account when someone 
was able to access his account by supplying the employee's name and 
social Security number. Three youths robbed a young woman on a San 
Francisco MUNI bus. The thieves stole her driver's license and social 
security card. While the victim was traveling over the Christmas 
holiday, the thieves represented themselves as her and drained her bank 
accounts, applied for cell phones, credit cards and other accounts. 
They also redirected her mail to a general delivery post to the 
Tenderloin. Amy Boyer, a 20 year-old dental assistant from Maine was 
killed in 1999 by a stalker who bought her Social Security number off 
the Internet for $45, and then used it to locate her work address. 
Michelle Brown of Los Angeles, California, had her Social Security 
number stolen in 1999, and it was used to charge $50,000 including a 
$32,000 truck, a $5,000 liposuction operation, and a year-long 
residential lease. While assuming the victim's name, the perpetrator 
also became the object of an arrest warrant for drug smuggling in 
Texas.
  This bill proposes concrete measures to get Social Security numbers 
beyond the reach of criminals.
  The bill prohibits anyone from selling or displaying a Social 
Security number to the general public without the Social Security 
number holder's consent.
  No longer will identity thieves or stalkers, like the man who killed 
Amy Boyer, be able to log anonymously onto a website and obtain another 
person's Social Security number. Information brokers will no longer be 
able to sell Social Security numbers to anyone who asks for a nominal 
fee.
  The bill also requires Federal, State, and local governments to take 
affirmative steps to protect Social Security numbers. Before giving out 
records such as bankruptcy filings, liens, or birth certificates to the 
general public, government entities will need to redact the Social 
Security number.
  Thus, identity thieves can no longer mine Social Security numbers 
from county clerks' offices or state records offices.
  In addition, the bill prohibits States from using Social Security 
numbers as identifying numbers on drivers licenses or printing Social 
Security numbers on checks.
  Privacy advocates contend half of all identity theft cases stem from 
lost or stolen wallets. Public entities should not put individuals at 
risk by requiring them to carry cards which contain Social Security 
numbers on them.
  In addition, the bill will empower individuals who wish to keep their 
Social Security numbers confidential and out of public circulation. 
Companies will be prohibited from denying an individual a good or 
service if he refuses to give out his Social Security number.
  In recognition of the needs of the business community, this 
legislation permits businesses to use Social Security numbers with 
appropriate safeguards for internal uses or in transactions with other 
businesses.
  I want to state up front that the business-to-business exception is 
an area of significant compromise. As a matter of policy, I believe 
that a Social Security number, like other sensitive elements of 
personal information, should be under the control of the person to whom 
it belongs.
  I also understand that many businesses, unfortunately, rely 
extensively on Social Security numbers to conduct a range of 
transactions. Some of these transactions include checking databases to 
ensure the identity of a customer or purchaser.
  The cost of changing to other identifiers can be significant. One 
California health care company, for example, conducted an internal 
study on how much it would cost to switch from Social Security numbers 
to another customer

[[Page 7579]]

identifier. The price tag was over $25 million.
  The bill directs the Attorney General to implement rules to permit 
legitimate business-to-business transactions, but prevent abuse. The 
Attorney general must consider several factors in the rulemaking: (i) 
The need for appropriate safeguards so that employees cannot 
misappropriate Social Security numbers, and (ii) The need to implement 
procedures to prevent identity thieves, stalkers, and others with ill 
intent from posing as legitimate businesses to obtain Social Security 
numbers.
  In drafting the rule, the Attorney General must ensure that any 
business-to-businesss exception is consistent with other privacy laws, 
including Gramm-Leach-Bliley.
  Thus, the bill would be consistent with a district court ruling 
issued last week that recognized limits on financial institutions' use 
of Social Security numbers. In Individual Reference Services Group v. 
Federal Trade Commission, the court held Gramm-Leach-Bliley requires 
banks to give consumers the opportunity to opt-out before their Social 
Security number is sold. I would like to submit into the record a copy 
of a Los Angeles Times article describing the decision.
  I would like to thank Senator Gregg for working so hard with me to 
draft this legislation. I am pleased to report that this bill has 
garnered the support of the Attorney General of California, Bill 
Lockyer, Los Angeles County Sheriff Lee Baca, Crimes Victims United of 
California, the Los Angeles Coalition of Crime Victim Advocates, and 
the Doris Tate Crime Victims Bureau.
  Over 350,000 people a year are victims of identity theft, and the 
numbers continue to grow. Passing the ``Social Security Number Misuse 
Prevention Act'' will help curb this crime by restricting criminal 
access to Social Security numbers.
  I look forward to working with my colleagues in getting this common-
sense bill enacted into law.
  I ask unanimous consent that the text of the bill and the article to 
which I referred be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 848

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Social 
     Security Number Misuse Prevention Act of 2001''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Prohibition of the display, sale, or purchase of social 
              security numbers.
Sec. 4. No prohibition with respect to public records.
Sec. 5. Rulemaking authority of the Attorney General.
Sec. 6. Treatment of social security numbers on government documents.
Sec. 7. Limits on personal disclosure of a social security number for 
              consumer transactions.
Sec. 8. Extension of civil monetary penalties for misuse of a social 
              security number.

     SEC. 2. FINDINGS.

       Congress makes the following findings:
       (1) The inappropriate display, sale, or purchase of social 
     security numbers has contributed to a growing range of 
     illegal activities, including fraud, identity theft, and, in 
     some cases, stalking and other violent crimes.
       (2) While financial institutions, health care providers, 
     and other entities have often used social security numbers to 
     confirm the identity of an individual, the general display to 
     the public, sale, or purchase of these numbers has been used 
     to commit crimes, and also can result in serious invasions of 
     individual privacy.
       (3) The Federal Government requires virtually every 
     individual in the United States to obtain and maintain a 
     social security number in order to pay taxes, to qualify for 
     social security benefits, or to seek employment. An 
     unintended consequence of these requirements is that social 
     security numbers have become tools that can be used to 
     facilitate crime, fraud, and invasions of the privacy of the 
     individuals to whom the numbers are assigned. Because the 
     Federal Government created and maintains this system, and 
     because the Federal Government does not permit individuals to 
     exempt themselves from those requirements, it is appropriate 
     for the Federal Government to take steps to stem the abuse of 
     this system.
       (4) A social security number does not contain, reflect, or 
     convey any publicly significant information or concern any 
     public issue. The display, sale, or purchase of such numbers 
     in no way facilitates uninhibited, robust, and wide-open 
     public debate, and restrictions on such display, sale, or 
     purchase would not affect public debate.
       (5) No one should seek to profit from the display, sale, or 
     purchase of social security numbers in circumstances that 
     create a substantial risk of physical, emotional, or 
     financial harm to the individuals to whom those numbers are 
     assigned.
       (6) Consequently, this Act offers each individual that has 
     been assigned a social security number necessary protection 
     from the display, sale, and purchase of that number in any 
     circumstance that might facilitate unlawful conduct.

     SEC. 3. PROHIBITION OF THE DISPLAY, SALE, OR PURCHASE OF 
                   SOCIAL SECURITY NUMBERS.

       (a) Prohibition.--
       (1) In general.--Chapter 47 of title 18, United States 
     Code, is amended by inserting after section 1028 the 
     following:

     ``Sec. 1028A. Prohibition of the display, sale, or purchase 
       of social security numbers

       ``(a) Definitions.--In this section:
       ``(1) Display.--The term `display' means to intentionally 
     communicate or otherwise make available (on the Internet or 
     in any other manner) to the general public an individual's 
     social security number.
       ``(2) Person.--The term `person' means any individual, 
     partnership, corporation, trust, estate, cooperative, 
     association, or any other entity.
       ``(3) Purchase.--The term `purchase' means providing 
     directly or indirectly, anything of value in exchange for a 
     social security number.
       ``(4) Sale.--The term `sale' means obtaining, directly or 
     indirectly, anything of value in exchange for a social 
     security number.
       ``(5) State.--The term `State' means any State of the 
     United States, the District of Columbia, Puerto Rico, the 
     Northern Mariana Islands, the United States Virgin Islands, 
     Guam, American Samoa, and any territory or possession of the 
     United States.
       ``(b) Limitation on Display.--Except as provided in section 
     1028B, no person may display any individual's social security 
     number to the general public without the affirmatively 
     expressed consent of the individual.
       ``(c) Limitation on Sale or Purchase.--Except as otherwise 
     provided in this section, no person may sell or purchase any 
     individual's social security number without the affirmatively 
     expressed consent of the individual.
       ``(d) Prohibition of Wrongful Use as Personal 
     Identification Number.--No person may obtain any individual's 
     social security number for purposes of locating or 
     identifying an individual with the intent to physically 
     injure, harm, or use the identity of the individual for any 
     illegal purpose.
       ``(e) Prerequisites for Consent.--In order for consent to 
     exist under subsection (b) or (c), the person displaying or 
     seeking to display, selling or attempting to sell, or 
     purchasing or attempting to purchase, an individual's social 
     security number shall--
       ``(1) inform the individual of the general purpose for 
     which the number will be used, the types of persons to whom 
     the number may be available, and the scope of transactions 
     permitted by the consent; and
       ``(2) obtain the affirmatively expressed consent 
     (electronically or in writing) of the individual.
       ``(f) Exceptions.--
       ``(1) In general.--Except as provided in subsection (d), 
     nothing in this section shall be construed to prohibit or 
     limit the display, sale, or purchase of a social security 
     number--
       ``(A) permitted, required, or excepted, expressly or by 
     implication, under section 205(c)(2), 1124A(a)(3), or 1141(c) 
     of the Social Security Act (42 U.S.C. 405(c)(2), 1320a-
     3a(a)(3), and 1320b-11(c)), section 7(a)(2) of the Privacy 
     Act of 1974 (5 U.S.C. 552a note), section 6109(d) of the 
     Internal Revenue Code of 1986, or section 6(b)(1) of the 
     Professional Boxing Safety Act of 1996 (15 U.S.C. 
     6305(b)(1));
       ``(B) for a public health purpose, including the protection 
     of the health or safety of an individual in an emergency 
     situation;
       ``(C) for a national security purpose;
       ``(D) for a law enforcement purpose, including the 
     investigation of fraud, as required under subchapter II of 
     chapter 53 of title 31, United States Code, and chapter 2 of 
     title I of Public Law 91-508 (12 U.S.C. 1951-1959), and the 
     enforcement of a child support obligation;
       ``(E) if the display, sale, or purchase of the number is 
     for a business-to-business use, including, but not limited 
     to--
       ``(i) the prevention of fraud (including fraud in 
     protecting an employee's right to employment benefits);
       ``(ii) the facilitation of credit checks or the 
     facilitation of background checks of employees, prospective 
     employees, and volunteers;
       ``(iii) compliance with any requirement related to the 
     social security program established under title II of the 
     Social Security Act (42 U.S.C. 401 et seq.); or
       ``(iv) the retrieval of other information from, or by, 
     other businesses, commercial

[[Page 7580]]

     enterprises, or private nonprofit organizations,

     except that, nothing in this subparagraph shall be construed 
     as permitting a professional or commercial user to display or 
     sell a social security number to the general public;
       ``(F) if the transfer of such a number is part of a data 
     matching program under the Computer Matching and Privacy 
     Protection Act of 1988 (5 U.S.C. 552a note) or any similar 
     computer data matching program involving a Federal, State, or 
     local agency; or
       ``(G) if such number is required to be submitted as part of 
     the process for applying for any type of Federal, State, or 
     local government benefit or program.
       ``(g) Civil Action in United States District Court; 
     Damages; Attorney's Fees and Costs.--
       ``(1) In general.--Any individual aggrieved by any act of 
     any person in violation of this section may bring a civil 
     action in a United States district court to recover--
       ``(A) such preliminary and equitable relief as the court 
     determines to be appropriate; and
       ``(B) the greater of--
       ``(i) actual damages;
       ``(ii) liquidated damages of $2,500; or
       ``(iii) in the case of a violation that was willful and 
     resulted in profit or monetary gain, liquidated damages of 
     $10,000.
       ``(2) Statute of limitations.--No action may be commenced 
     under this subsection more than 3 years after the date on 
     which the violation was or should reasonably have been 
     discovered by the aggrieved individual.
       ``(3) Nonexclusive remedy.--The remedy provided under this 
     subsection shall be in addition to any other remedy available 
     to the individual.
       ``(h) Civil Penalties.--
       ``(1) In general.--Any person who the Attorney General 
     determines has violated this section shall be subject, in 
     addition to any other penalties that may be prescribed by 
     law--
       ``(A) to a civil penalty of not more than $5,000 for each 
     such violation; and
       ``(B) to a civil penalty of not more than $50,000, if the 
     violations have occurred with such frequency as to constitute 
     a general business practice.
       ``(2) Determination of violations.--Any willful violation 
     committed contemporaneously with respect to the social 
     security numbers of 2 or more individuals by means of mail, 
     telecommunication, or otherwise, shall be treated as a 
     separate violation with respect to each such individual.
       ``(3) Enforcement procedures.--The provisions of section 
     1128A of the Social Security Act (42 U.S.C. 1320a-7a), other 
     than subsections (a), (b), (f), (h), (i), (j), (m), and (n) 
     and the first sentence of subsection (c) of such section, and 
     the provisions of subsections (d) and (e) of section 205 of 
     such Act (42 U.S.C. 405) shall apply to a civil penalty under 
     this subsection in the same manner as such provisions apply 
     to a penalty or proceeding under section 1128A(a) of such Act 
     (42 U.S.C. 1320a-7a(a)), except that, for purposes of this 
     paragraph, any reference in section 1128A of such Act (42 
     U.S.C. 1320a-7a) to the Secretary shall be deemed to be a 
     reference to the Attorney General.''.
       (2) Conforming amendment.--The chapter analysis for chapter 
     47 of title 18, United States Code, is amended by inserting 
     after the item relating to section 1028 the following:

``1028A. Prohibition of the display, sale, or purchase of social 
              security numbers.''.

       (b) Criminal Sanctions.--Section 208(a) of the Social 
     Security Act (42 U.S.C. 408(a)) is amended--
       (1) in paragraph (8), by inserting ``or'' after the 
     semicolon; and
       (2) by inserting after paragraph (8) the following new 
     paragraphs:
       ``(9) except as provided in paragraph (5) of section 
     1028A(a) of title 18, United States Code, knowingly and 
     willfully displays, sells, or purchases (as those terms are 
     defined in paragraph (1) of such section) any individual's 
     social security number (as defined in such paragraph) without 
     the affirmatively expressed consent of that individual after 
     having met the prerequisites for consent under paragraph (4) 
     of such section, electronically or in writing, with respect 
     to that individual; or
       ``(10) obtains any individual's social security number for 
     the purpose of locating or identifying the individual with 
     the intent to injure or to harm that individual, or to use 
     the identity of that individual for an illegal purpose;''.
       (c) Effective Date.--Section 1028A of title 18, United 
     States Code (as added by subsection (a)), and section 208 of 
     the Social Security Act (42 U.S.C. 408) (as amended by 
     subsection (b)) shall take effect 30 days after the date on 
     which the final regulations promulgated under section 5(b) 
     are published in the Federal Register.

     SEC. 4. NO PROHIBITION WITH RESPECT TO PUBLIC RECORDS.

       (a) Public Records Exception.--
       (1) In general.--Chapter 47 of title 18, United States Code 
     (as amended by section 3(a)(1)), is amended by inserting 
     after section 1028A the following:

     ``Sec. 1028B. No prohibition of the display, sale, or 
       purchase of social security numbers included in public 
       records

       ``(a) In General.--Nothing in section 1028A shall be 
     construed to prohibit or limit the display, sale, or purchase 
     of any public record which includes a social security number 
     that--
       ``(1) is incidentally included in a public record, as 
     defined in subsection (d);
       ``(2) is intended to be purchased, sold, or displayed 
     pursuant to an exception contained in section 1028A(f);
       ``(3) is intended to be purchased, sold, or displayed 
     pursuant to the consent provisions of subsections (b), (c), 
     and (e) of section 1028A; or
       ``(4) includes a redaction of the nonincidental occurrences 
     of the social security numbers when sold or displayed to 
     members of the general public.
       ``(b) Agency Requirements.--Each agency in possession of 
     documents that contain social security numbers which are 
     nonincidental, shall, with respect to such documents--
       ``(1) ensure that access to such numbers is restricted to 
     persons who may obtain them in accordance with applicable 
     law;
       ``(2) require an individual who is not exempt under section 
     1028A(f) to provide the social security number of the person 
     who is the subject of the document before making such 
     document available; or
       ``(3) redact the social security number from the document 
     prior to providing a copy of the requested document to an 
     individual who is not exempt under section 1028A(f) and who 
     is unable to provide the social security number of the person 
     who is the subject of the document.
       ``(c) Rule of Construction.--Nothing in this section shall 
     be used as a basis for permitting or requiring a State or 
     local government entity or other repository of public 
     documents to expand or to limit access to documents 
     containing social security numbers to entities covered by the 
     exception in section 1028A(f).
       ``(d) Definitions.--In this section:
       ``(1) Incidental.--The term `incidental' means that the 
     social security number is not routinely displayed in a 
     consistent and predictable manner on the public record by a 
     government entity, such as on the face of a document.
       ``(2) Public record.--The term `public record' means any 
     item, collection, or grouping of information about an 
     individual that is maintained by a Federal, State, or local 
     government entity and that is made available to the 
     public.''.
       (2) Conforming amendment.--The chapter analysis for chapter 
     47 of title 18, United States Code (as amended by section 
     3(a)(2)), is amended by inserting after the item relating to 
     section 1028A the following:

``1028B. No prohibition of the display, sale, or purchase of social 
              security numbers included in public records.''.

     SEC. 5. RULEMAKING AUTHORITY OF THE ATTORNEY GENERAL.

       (a) In General.--Except as provided in subsection (b), the 
     Attorney General may prescribe such rules and regulations as 
     the Attorney General deems necessary to carry out the 
     provisions of section 3.
       (b) Business-to-Business Commercial Display, Sale, or 
     Purchase Rulemaking.--
       (1) In general.--Not later than 1 year after the date of 
     enactment of this Act, the Attorney General, in consultation 
     with the Commissioner of Social Security, the Federal Trade 
     Commission, and such other Federal agencies as the Attorney 
     General determines appropriate, may conduct such rulemaking 
     procedures in accordance with subchapter II of chapter 5 of 
     title 5, United States Code, as are necessary to promulgate 
     regulations to implement and clarify the business-to-business 
     provisions pertaining to section 1028A(f)(1)(E) of title 18, 
     United States Code (as added by section 3(a)(1)). The 
     Attorney General shall consult with other agencies to ensure, 
     where possible, that these provisions are consistent with 
     other privacy laws, including title V of the Gramm-Leach-
     Bliley Act (15 U.S.C. 6801 et seq.).
       (2) Factors to be considered.--In promulgating the 
     regulations required under paragraph (1), the Attorney 
     General shall, at a minimum, consider the following factors:
       (A) The benefit to a particular business practice and to 
     the general public of the sale or purchase of an individual's 
     social security number.
       (B) The risk that a particular business practice will 
     promote the use of the social security number to commit 
     fraud, deception, or crime.
       (C) The presence of adequate safeguards to prevent the 
     misappropriation of social security numbers by the general 
     public , while permitting internal business uses of such 
     numbers.
       (D) The implementation of procedures to prevent identity 
     thieves, stalkers, and others with ill intent from posing as 
     legitimate businesses to obtain social security numbers.

     SEC. 6. TREATMENT OF SOCIAL SECURITY NUMBERS ON GOVERNMENT 
                   DOCUMENTS.

       (a) Prohibition of Use of Social Security Account Numbers 
     on Checks Issued for Payment by Governmental Agencies.--

[[Page 7581]]

       (1) In general.--Section 205(c)(2)(C) of the Social 
     Security Act (42 U.S.C. 405(c)(2)(C)) is amended by adding at 
     the end the following new clause:
       ``(x) No Federal, State, or local agency may display the 
     social security account number of any individual, or any 
     derivative of such number, on any check issued for any 
     payment by the Federal, State, or local agency.''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply with respect to violations of section 
     205(c)(2)(C)(x) of the Social Security Act (42 U.S.C. 
     405(c)(2)(C)(x)), as added by paragraph (1), occurring after 
     the date that is 3 years after the date of enactment of this 
     Act.
       (b) Prohibition of Appearance of Social Security Account 
     Numbers on Driver's Licenses or Motor Vehicle Registration.--
       (1) In general.--Section 205(c)(2)(C)(vi) of the Social 
     Security Act (42 U.S.C. 405(c)(2)(C)(vi)) is amended--
       (A) by inserting ``(I)'' after ``(vi)''; and
       (B) by adding at the end the following new subclause:
       ``(II)(aa) An agency of a State (or political subdivision 
     thereof), in the administration of any driver's license or 
     motor vehicle registration law within its jurisdiction, may 
     not disclose the social security account numbers issued by 
     the Commissioner of Social Security, or any derivative of 
     such numbers, on any driver's license or motor vehicle 
     registration or any other document issued by such State (or 
     political subdivision thereof) to an individual for purposes 
     of identification of such individual.
       ``(bb) Nothing in this subclause shall be construed as 
     precluding an agency of a State (or political subdivision 
     thereof), in the administration of any driver's license or 
     motor vehicle registration law within its jurisdiction, from 
     using a social security account number for an internal use or 
     to link with the database of an agency of another State that 
     is responsible for the administration of any driver's license 
     or motor vehicle registration law.''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply with respect to licenses, registrations, and 
     other documents issued or reissued after the date that is 1 
     year after the date of enactment of this Act.
       (c) Prohibition of Inmate Access to Social Security Account 
     Numbers.--
       (1) In general.--Section 205(c)(2)(C) of the Social 
     Security Act (42 U.S.C. 405(c)(2)(C)) (as amended by 
     subsection (b)) is amended by adding at the end the following 
     new clause:
       ``(xi) No Federal, State, or local agency may employ, or 
     enter into a contract for the use or employment of, prisoners 
     in any capacity that would allow such prisoners access to the 
     social security account numbers of other individuals. For 
     purposes of this clause, the term `prisoner' means an 
     individual confined in a jail, prison, or other penal 
     institution or correctional facility pursuant to such 
     individual's conviction of a criminal offense.''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply with respect to employment of prisoners, or entry 
     into contract with prisoners, after the date that is 1 year 
     after the date of enactment of this Act.

     SEC. 7. LIMITS ON PERSONAL DISCLOSURE OF A SOCIAL SECURITY 
                   NUMBER FOR CONSUMER TRANSACTIONS.

       (a) In General.--Part A of title XI of the Social Security 
     Act (42 U.S.C. 1301 et seq.) is amended by adding at the end 
     the following new section:

     ``SEC. 1150A. LIMITS ON PERSONAL DISCLOSURE OF A SOCIAL 
                   SECURITY NUMBER FOR CONSUMER TRANSACTIONS.

       ``(a) In General.--A commercial entity may not require an 
     individual to provide the individual's social security number 
     when purchasing a commercial good or service or deny an 
     individual the good or service for refusing to provide that 
     number except--
       ``(1) for any purpose relating to--
       ``(A) obtaining a consumer report for any purpose permitted 
     under the Fair Credit Reporting Act;
       ``(B) a background check of the individual conducted by a 
     landlord, lessor, employer, voluntary service agency, or 
     other entity as determined by the Attorney General;
       ``(C) law enforcement; or
       ``(D) a Federal or State law requirement; or
       ``(2) if the social security number is necessary to verify 
     identity and to prevent fraud with respect to the specific 
     transaction requested by the consumer and no other form of 
     identification can produce comparable information.
       ``(b) Other Forms of Identification.--Nothing in this 
     section shall be construed to prohibit a commercial entity 
     from--
       ``(1) requiring an individual to provide 2 forms of 
     identification that do not contain the social security number 
     of the individual; or
       ``(2) denying an individual a good or service for refusing 
     to provide 2 forms of identification that do not contain such 
     number.
       ``(c) Application of Civil Money Penalties.--A violation of 
     this section shall be deemed to be a violation of section 
     1129(a)(3)(F).
       ``(d) Application of Criminal Penalties.--A violation of 
     this section shall be deemed to be a violation of section 
     208(a)(8).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to requests to provide a social security number 
     made on or after the date of enactment of this Act.

     SEC. 8. EXTENSION OF CIVIL MONETARY PENALTIES FOR MISUSE OF A 
                   SOCIAL SECURITY NUMBER.

       (a) Treatment of Withholding of Material Facts.--
       (1) Civil penalties.--The first sentence of section 
     1129(a)(1) of the Social Security Act (42 U.S.C. 1320a-
     8(a)(1)) is amended--
       (A) by striking ``who'' and inserting ``who--'';
       (B) by striking ``makes'' and all that follows through 
     ``shall be subject to'' and inserting the following:
       ``(A) makes, or causes to be made, a statement or 
     representation of a material fact, for use in determining any 
     initial or continuing right to or the amount of monthly 
     insurance benefits under title II or benefits or payments 
     under title VIII or XVI, that the person knows or should know 
     is false or misleading;
       ``(B) makes such a statement or representation for such use 
     with knowing disregard for the truth; or
       ``(C) omits from a statement or representation for such 
     use, or otherwise withholds disclosure of, a fact which the 
     individual knows or should know is material to the 
     determination of any initial or continuing right to or the 
     amount of monthly insurance benefits under title II or 
     benefits or payments under title VIII or XVI and the 
     individual knows, or should know, that the statement or 
     representation with such omission is false or misleading or 
     that the withholding of such disclosure is misleading,

     shall be subject to'';
       (C) by inserting ``or each receipt of such benefits while 
     withholding disclosure of such fact'' after ``each such 
     statement or representation'';
       (D) by inserting ``or because of such withholding of 
     disclosure of a material fact'' after ``because of such 
     statement or representation''; and
       (E) by inserting ``or such a withholding of disclosure'' 
     after ``such a statement or representation''.
       (2) Administrative procedure for imposing penalties.--The 
     first sentence of section 1129A(a) of the Social Security Act 
     (42 U.S.C. 1320a-8a(a)) is amended--
       (A) by striking ``who'' and inserting ``who--''; and
       (B) by striking ``makes'' and all that follows through 
     ``shall be subject to'' and inserting the following new 
     paragraphs:
       ``(1) makes, or causes to be made, a statement or 
     representation of a material fact, for use in determining any 
     initial or continuing right to or the amount of monthly 
     insurance benefits under title II or benefits or payments 
     under title VIII or XVI, that the person knows or should know 
     is false or misleading;
       ``(2) makes such a statement or representation for such use 
     with knowing disregard for the truth; or
       ``(3) omits from a statement or representation for such 
     use, or otherwise withholds disclosure of, a fact which the 
     individual knows or should know is material to the 
     determination of any initial or continuing right to or the 
     amount of monthly insurance benefits under title II or 
     benefits or payments under title VIII or XVI and the 
     individual knows, or should know, that the statement or 
     representation with such omission is false or misleading or 
     that the withholding of such disclosure is misleading,

     shall be subject to''.
       (b) Application of Civil Money Penalties to Elements of 
     Criminal Violations.--Section 1129(a) of the Social Security 
     Act (42 U.S.C. 1320a-8(a)), as amended by subsection (a)(1), 
     is amended--
       (1) by redesignating paragraph (2) as paragraph (4);
       (2) by redesignating the last sentence of paragraph (1) as 
     paragraph (2) and inserting such paragraph after paragraph 
     (1); and
       (3) by inserting after paragraph (2) (as so redesignated) 
     the following new paragraph:
       ``(3) Any person (including an organization, agency, or 
     other entity) who--
       ``(A) uses a social security account number that such 
     person knows or should know has been assigned by the 
     Commissioner of Social Security (in an exercise of authority 
     under section 205(c)(2) to establish and maintain records) on 
     the basis of false information furnished to the Commissioner 
     by any person;
       ``(B) falsely represents a number to be the social security 
     account number assigned by the Commissioner of Social 
     Security to any individual, when such person knows or should 
     know that such number is not the social security account 
     number assigned by the Commissioner to such individual;
       ``(C) knowingly alters a social security card issued by the 
     Commissioner of Social Security, or possesses such a card 
     with intent to alter it;
       ``(D) knowingly displays, sells, or purchases a card that 
     is, or purports to be, a card issued by the Commissioner of 
     Social Security, or possesses such a card with intent to 
     display, purchase, or sell it;
       ``(E) counterfeits a social security card, or possesses a 
     counterfeit social security card with intent to display, 
     sell, or purchase it;

[[Page 7582]]

       ``(F) discloses, uses, compels the disclosure of, or 
     knowingly displays, sells, or purchases the social security 
     account number of any person in violation of the laws of the 
     United States;
       ``(G) with intent to deceive the Commissioner of Social 
     Security as to such person's true identity (or the true 
     identity of any other person) furnishes or causes to be 
     furnished false information to the Commissioner with respect 
     to any information required by the Commissioner in connection 
     with the establishment and maintenance of the records 
     provided for in section 205(c)(2);
       ``(H) offers, for a fee, to acquire for any individual, or 
     to assist in acquiring for any individual, an additional 
     social security account number or a number which purports to 
     be a social security account number; or
       ``(I) being an officer or employee of a Federal, State, or 
     local agency in possession of any individual's social 
     security account number, willfully acts or fails to act so as 
     to cause a violation by such agency of clause (vi)(II) or (x) 
     of section 205(c)(2)(C),

     shall be subject to, in addition to any other penalties that 
     may be prescribed by law, a civil money penalty of not more 
     than $5,000 for each violation. Such person shall also be 
     subject to an assessment, in lieu of damages sustained by the 
     United States resulting from such violation, of not more than 
     twice the amount of any benefits or payments paid as a result 
     of such violation.''.
       (c) Clarification of Treatment of Recovered Amounts.--
     Section 1129(e)(2)(B) of the Social Security Act (42 U.S.C. 
     1320a-8(e)(2)(B)) is amended by striking ``In the case of 
     amounts recovered arising out of a determination relating to 
     title VIII or XVI,'' and inserting ``In the case of any other 
     amounts recovered under this section,''.
       (d) Conforming Amendments.--
       (1) Section 1129(b)(3)(A) of the Social Security Act (42 
     U.S.C. 1320a-8(b)(3)(A)) is amended by striking ``charging 
     fraud or false statements''.
       (2) Section 1129(c)(1) of the Social Security Act (42 
     U.S.C. 1320a-8(c)(1)) is amended by striking ``and 
     representations'' and inserting ``, representations, or 
     actions''.
       (3) Section 1129(e)(1)(A) of the Social Security Act (42 
     U.S.C. 1320a-8(e)(1)(A)) is amended by striking ``statement 
     or representation referred to in subsection (a) was made'' 
     and inserting ``violation occurred''.
       (e) Effective Dates.--
       (1) In general.--Except as provided in paragraph (2), the 
     amendments made by this section shall apply with respect to 
     violations of sections 1129 and 1129A of the Social Security 
     Act (42 U.S.C. 1320-8 and 1320a-8a), as amended by this 
     section, committed after the date of enactment of this Act.
       (2) Violations by government agents in possession of social 
     security numbers.--Section 1129(a)(3)(I) of the Social 
     Security Act (42 U.S.C. 1320a-8(a)(3)(I)), as added by 
     subsection (b), shall apply with respect to violations of 
     that section occurring on or after the effective date under 
     section 3(c).
                                  ____


               [From the Los Angeles Times, May 8, 2001]

                  Curb on Sale of Consumer Data Upheld

                          (By Edmund Sanders)

       Washington.--In a victory for privacy advocates, a federal 
     judge has upheld a proposed government regulation that would 
     effectively end the long-standing practice by credit bureaus 
     of selling consumers' names, addresses and Social Security 
     numbers to marketers, information brokers and others.
       Industry groups are likely to appeal the decision by 
     District Judge Ellen Segal Huvelle, which was disclosed 
     Monday by the Federal Trade Commission. If the decision is 
     upheld, the rule--issued by the FTC last year and set to take 
     effect in July--would work dramatic changes in the way 
     businesses rely upon the credit bureaus' databases for 
     everything from updating junk-mail lists to locating debtors.
       ``It's going to set a higher barrier for the privacy of 
     this kind of information,'' said Robert Gellman, a privacy 
     consultant in Washington.
       Credit bureaus and information brokers, who filed suit last 
     year to block the FTC rules, warned that the court decision 
     may have unintended consequences.
       ``There are many beneficial uses for this information,'' 
     said Clark Walter, a spokesman for Trans Union, the Chicago-
     based credit bureau. He said the databases are used to find 
     fugitives, parents who owe child support, missing heirs and 
     runaway children. ``How these particular functions would be 
     affected remains to be seen,'' Walter said.
       At the heart of the dispute is the top portion of consumer 
     credit reports, known as the credit ``header,'' which is 
     typically limited to a person's name, address, birth date and 
     Social Security number. The header does not include financial 
     information about credit history or bank accounts, which can 
     be released only to creditors and others with a legal right 
     to see it.
       Because it has been considered less sensitive, credit 
     header information has been sold for years. Customers include 
     marketing firms, law enforcement agencies, private 
     investigators and journalists.
       Last year, the FTC issued rules to prohibit credit bureaus 
     from continuing to sell the information unless consumers had 
     first been given an opportunity to block the practice. The 
     agency said the rule was mandated by Congress as part of a 
     1999 financial modernization law, which called for new 
     privacy protections for consumers' financial information.
       The Individual Reference Services Group, a trade group of 
     information companies, argued that the FTC had misinterpreted 
     the law. ``We don't think a name and address is `financial 
     information' under the statute,'' said Ronald Plesser, 
     attorney for the trade group. The companies also argued that 
     the rules violated their constitutional right to free speech.
       The FTC countered that any personally identifiable 
     information provided to financial institutions, even if 
     available from other public sources, should be covered by the 
     law.
       The disclosure of Social Security numbers, in particular, 
     raised the hackles of privacy advocates, who say the practice 
     has led to an increase in identity theft and other fraud.
       In her 62-page ruling, dated April 30, Huvelle said the 
     regulations were lawful and constitutional. ``This gives 
     consumers more control over how their information is used,'' 
     said John Daly, assistant general counsel at the FTC.
       The decision marks the latest defeat for credit bureaus and 
     information brokers, whose operating environment is 
     increasingly hostile.
       A federal appeals court ruled last month that Trans Union 
     may no longer sell marketing lists based upon certain 
     financial characteristics, such as consumers with three or 
     more credit cards, culled from credit reports.
       The FTC banned the practice in 1992, saying it violated 
     federal laws prohibiting the use of credit information for 
     marketing purposes. The other two major credit bureaus halted 
     the practice, but Trans Union continued to sell such lists.
       If credit bureaus are prohibited from selling credit header 
     data, businesses will probably turn to other sources, such as 
     the change-of-address database at the U.S. Postal Service or 
     voter registration records.

  Mr. GREGG. Mr. President, on October 15, 1999, Amy Boyer, a young 
woman from Nashua, NH, was killed by a man who went on the Internet, 
purchased her social security number for $45, used it to find her place 
of work and kill her.
  As a result of that tragic event, and countless others I have 
subsequently become aware of, it became clear to me that the sale of 
social security numbers on the Internet was dangerous and needed to be 
stopped.
  Last year, I introduced Amy Boyer's law to do just that. The purpose 
of that legislation was twofold. First, to ensure that people like Amy 
Boyer's killer would not be able to purchase social security numbers 
and second, to prevent companies like Dogpile, and Docusearch.com from 
being able to sell social security numbers without an individual's 
consent.
  Amy Boyer's law accomplished both of these objectives but became 
mired down in controversy, frankly from both sides, over how to strike 
a balance between legitimate business and other lawful uses of the 
social security number which are necessary in many instances to prevent 
fraud and identity theft and a desire on the part of the privacy 
organizations to significantly limit public access to social security 
numbers.
  Let's face it, like it or not, the Social Security Number has become 
a national identifier of sorts and in many instances, is the only way 
to ensure accurate identification of people. Health care providers use 
the social security number to maintain our health records to ensure we 
are receiving the services we need; banks and financial institutions 
use them to prevent fraud--a social security number tells them that a 
loan applicant is exactly who he says he is. The National Center for 
Missing and Exploited Children and the Association for Children for 
Enforcement of Support, ACES, use social security numbers to track down 
kidnappers and deadbeat dads. Big Brothers/Big Sisters of America use 
social security numbers to do background checks on volunteers to make 
sure that they are not felons or child molesters. A truly blanket 
prohibition that did not include any exceptions whatsoever would close-
out the above uses. In reality, nobody wants this.
  Unfortunately, we were unable to reach a suitable compromise before 
adjourning last session, but I am pleased today to introduce, with 
Senator Feinstein, after many months of very hard work, the Social 
Security Number Misuse Prevention Act of 2001.

[[Page 7583]]

  This is indeed a compromise proposal. Both Senator Feinstein and 
myself have had countless meetings with parties interested in this 
issue and have produced, what I believe to be, a good product. It is 
not a perfect product, but it is a good first step toward balancing 
significant diverging interests. We will, of course, continue to work 
with interested parties to perfect this legislation, but we have agreed 
in concept to certain key principles.
  First, the public access to the social security number must be 
limited because of the significant risk of invasions of privacy and the 
potential for misuse, not the least of which is identity theft. And 
second, that there are certain legitimate purposes for which the social 
security number is essential--and we must protect those legitimate 
uses.
  Let me summarize the bill's main provisions:
  First, the legislation contains a prohibition against obtaining 
social security number with wrongful intent. Persons are prohibited 
from obtaining a social security number for the purpose of locating or 
identifying an individual with the intent to physically injure, harm, 
or use the identity of the individual for any illegal purpose.
  Second, the legislation prohibits the display, sale and purchase of 
social security numbers to and by the general public without the 
individual's consent, except for certain limited purposes. Those 
purposes include: For purposes permitted, required or excepted under 
the Social Security Act, section 7 (a)(2) of the Privacy Act of 1974, 
section 6109(d) of the Internal Revenue Code of 1986 or section 6(b)(1) 
of the Professional Boxing Safety Act of 1996: for a public health 
purpose, including the protection of the health and safety of an 
individual or in an emergency situation; for a national security 
purpose; for a law enforcement purpose, including the investigation of 
fraud and the enforcement of child support obligations; for business-
to-business use, including, but not limited to the prevention of fraud, 
the facilitation of credit checks or background checks of employees, 
prospective employees, and volunteers, compliance with any requirement 
related to the social security program, or the retrieval of other 
information from other businesses or commercial enterprises; except 
that no business may sell or display a social security number to the 
general public. For data matching programs under the Computer Matching 
and Privacy Protection Act of 1988 or any similar data matching program 
involving a Federal, State or local agency; or if such number is 
required to be submitted as part of the process for applying for any 
type of Federal, State, or local government benefit or program.
  Third, an individual may not be required to provide their social 
security number when purchasing a commercial good or service unless the 
social security number is necessary: For purposes relating to the Fair 
Credit Reporting Act, for a background check of the individual 
conducted by a landlord, lessor, employer, volunteer service agency, or 
other entity determined by the Attorney General, for law enforcement, 
or pursuant to a Federal or State law requirement; or if the social 
security number is necessary to verify identity and prevent fraud with 
respect to the specific transaction requested by the consumer and no 
other form of identification can produce comparable information.
  Fourth, within 3 years after the date of enactment of this 
legislation, Social Security numbers may not appear on checks issued 
for payment by Federal, State, or local government agencies.
  Fifth, within 1 year after the date of enactment of this legislation, 
Social Security numbers may not appear on any driver's license, motor 
vehicle registration or any other document issued to an individual for 
purposes of identification of such individual. However, State 
Departments of Motor Vehicles may continue to use social security 
numbers internally and for purposes of sharing information about 
driving records with other jurisdictions.
  Sixth, the legislation prohibits prisoners from gaining access to 
social security numbers.
  Finally, on the issue of Public Records, which was and remains a very 
difficult issue. In fact, last year, it was one of the issues that 
resulted in our inability to pass Amy Boyer's Law. Amy Boyer's law 
allowed Social Security Numbers to continue to appear in public records 
with no limitation on access. It did so in recognition of the fact that 
many states, local governments, and other governmental entities use 
Social Security Numbers in the same way that many businesses do--to 
ensure accurate identification of individuals who use their services 
and to prevent fraud.
  Many States require social security numbers to be used in documents 
such as marriage licenses, bankruptcy records, real estate and tax 
liens, etc. These documents are, under most state laws, a matter of 
public record, which means the general public can readily gain access 
to them. Were we to make the appearance of social security numbers in 
every public record illegal, many states and third party beneficiaries 
whose business is based on providing access to public records to law 
offices and other subscribers would have to redact social security 
numbers from many hundreds of thousands of public documents. This would 
be a huge task, and it is unclear whether we would in any significant 
way, further reduce the illegal activity we are trying to prevent. In 
other words, it is unclear whether the administrative burden and cost 
would outweigh the potential benefit. This was a very real concern.
  At the same time we recognized the very real harm that could be 
caused by unlimited public access to public documents containing social 
security numbers--in many cases, right on the face of the document. 
Social security numbers in public records can be dangerous if a stalker 
knows where to look, and so I made a commitment lasts year to continue 
to look at this problem and to address it in a way that was sound and 
fair, and consistent with the overall principles and goals of the 
legislation.
  As with the other provisions in this legislation, Senator Feinstein 
and I reached a compromise.
  Under our compromise proposal there is no requirement for redaction 
of social security numbers that appear incidentally in public records, 
(i.e. not on the face of a document or in a document in a consistent 
manner). We are trying to limit access to social security numbers for 
routinely appear in a public record consistently and predictably, on 
the same page, in every document.
  For those records, records where the social security number appears 
non-incidentally, the number must be redacted before the public 
document is sold or displayed to the general public. Individuals 
requesting the document who are able to provide the social security 
belonging to the person who is the subject of the document before 
receiving the document may receive an unrelated copy of the public 
document.
  I believe that the Feinstein-Gregg Social Security Number Misuse 
Prevention Act is a well thought-out, tightly woven piece of 
legislation that has effectively recognized and balanced the many 
concerns surrounding the uses of Social Security numbers. Passing this 
legislation is one of the most important things that Congress can do 
this year to reduce identity theft and protect individual privacy while 
permitting the continued legitimate and limited uses of the social 
security number.
  I thank Senator Feinstein and look forward to continuing to work with 
her throughout the legislative process.
                                 ______
                                 
      By Mr. BOND:
  S. 849. A bill to amend provisions of law enacted by the Small 
Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-
121 to ensure full analysis of potential impacts on small entities of 
rules proposed by certain agencies, and for other purposes: to the 
Committee on Small Business.
  Mr. BOND. Mr. President, we are awaiting the imminent arrival of the 
budget from the House. We have had many important things going on in 
this Chamber. The debate on education is tremendously important. Yet I 
think it is necessary that we take a moment and recognize something 
that colleagues on both sides of the aisle will

[[Page 7584]]

find very important, and I know support; and that is, the fact that 
this is Small Business Week.
  All of us know, particularly those of us who serve on the Small 
Business Committee, that small businesses are the dynamic engine which 
keeps the economy of America growing and provides most of the new jobs 
that are created. It provides opportunities, for the entrepreneurs and 
their families, for people to gain the kind of life they wish. In many 
areas, it also provides tremendous innovations that make our economy 
more advanced and enhances the livelihoods of not only the workers but 
the customers of those small businesses.
  This week I have been working with my colleagues on Small Business. 
My ranking member, Senator Kerry, and I, and members of the committee 
have participated in recognition ceremonies for Outstanding Small 
Businesspersons of the Year. There was White House recognition 
yesterday.
  I say to all my colleagues, there is a Small Businessperson of the 
Year from your State. I hope you have had the opportunity to 
congratulate them, to thank them for their work, and also to listen to 
them on what is important for small business.
  Since I took over and had the honor of becoming chairman of the 
Committee on Small Business in 1995, we have made it a point for the 
committee to be the eyes and ears of small business. We have listened 
to what small businesses have had to say, small businesses in Missouri 
and Massachusetts and Minnesota and Georgia and all across the Nation. 
If you ask them, they will tell you.
  We found out a number of things that are of concern to them. They are 
concerned about excessive regulation. They are concerned about 
taxation. They are concerned about the complexity of taxation. They are 
concerned about getting access to the Government contracting business 
that is available, unfortunately, too often only to larger businesses.
  Last year I hosted a national women's small business summit in Kansas 
City, MO, and getting access to defense contracts and other Federal 
Government contracts was high on their list. Working together with 
members of the Small Business Committee, we pushed to get rid of 
bundling and make sure that the small businesses get their fair share 
of contracts.
  I will be introducing a measure, a mentoring and protege bill, to do 
with other agencies of the Federal Government what the Defense 
Department has done, and that is to assign an experienced government 
contractor to work with small businesses to help them get in line for 
the contracts so they can participate in and fulfill those contracts.
  I have, with Senator Kerry, introduced a resolution commending Small 
Business Week. Somebody has put a hold on it. I really hope to reason 
with them and see if we can't get that passed. Almost anything we have 
done in small business in this body has been on a bipartisan basis. We 
hope to overcome that problem.
  There are a number of tax measures that are pending before the Senate 
now. I introduced the Small Business Works Act as a tax measure right 
after this session of Congress convened. It was based upon the tax 
priorities that women business owners had. No. 1 was getting rid of the 
alternative minimum tax. You have to figure out two guides of taxes, 
and then most small businesses are taxed as individuals. Some 21.2 
million of them pay taxes on their personal income tax form. And when 
you have an AMT, you find out you lose many of the business deductions, 
and the small business person winds up paying a higher tax--certainly a 
higher tax, in many instances, than a regular C corporation pays.
  In addition, we would move up and make effective now 100-percent 
deductibility for health insurance paid for by small businesses. A 
proprietor running a small business should have the same opportunities 
to get health insurance for herself and her family as a large 
corporation does for its employees. That is in there.
  On Monday I introduced the Independent Contractor Determination Act. 
One of the things women business owners told us was, it is particularly 
troubling and has been a longstanding headache for small businesses to 
figure out who is an independent contractor and who is not. There is a 
20-factor formula. Nobody understands the 20 factors, but the one thing 
you do understand is, if an IRS agent comes in 3 or 4 years later and 
applies the test, the IRS agent is going to win because nobody knows 
how to figure it out. The result is many small businesses have faced 
very heavy burdens. Some have been put out of business because somebody 
rejiggered them from independent contractor to employee, and this has 
been a tremendous problem. The laws ought to be simple enough to 
understand. There is a lot of complexity in the law.
  One of the things we must do, as we reform the Tax Code, is make it 
simpler. There is no more complex, uninterpretable, undefinable, 
unreasonable provision in the law than the current independent 
contractor provision. We must change that.
  The average small business spends 5 percent of its revenues figuring 
out the tax. That is not paying the taxes, that is just figuring out 
how much they owe. A nickel out of every dollar goes to calculating 
taxes because we have made it too complex. We need to make it simpler.
  Today I introduced a measure to build upon the Red Tape Reduction 
Act, also known as the Small Business Regulatory Enforcement Fairness 
Act. I was very pleased in 1996 to work with my then ranking member, 
Senator Bumpers, and we presented a bill unanimously out of the Small 
Business Committee to provide some relief for small businesses from 
excessive redtape and regulation. We thought we would have all kinds of 
problems getting on the floor, but we worked on a bipartisan basis. We 
had worked with the agencies of government to make sure their concerns 
were expressed.
  The only people who came to the floor were people who wished to be 
added as cosponsors. It passed unanimously, and it has been having an 
impact.
  The purpose of the Red Tape Reduction Act was to ensure that small 
businesses would be given a voice in the regulatory process at the time 
when it could make the difference before the regulation was published. 
The act has proven to be a regulatory process more attentive to the 
impact on small business and, consequently, is more fair and more 
efficient.
  I cite my good friend and constituent Dr. Murray Weidenbaum at the 
Center for the Study of American Business at Washington University who 
told me a couple of years ago that the Red Tape Reduction Act was 
perhaps the only--certainly the most--significant regulatory reform 
measure passed by Congress in recent history, in the last 20 years or 
so.
  We have seen the impact of this provision. The Red Tape Reduction 
Act, among other things, requires that OSHA and EPA convene panels to 
involve small businesses in formulating regulations before the 
regulations are proposed. It gives the agencies the unique opportunity 
to learn upfront what problems their regulation may cause and to 
correct the problems with the least difficulty.
  In one case, EPA totally abandoned a regulation when they recognized 
that the industry could deal with it much more effectively on its own.
  Experience with the panel process has proven to be an unequivocal 
success. The former chief counsel for advocacy of the Small Business 
Administration, Jere Glover, who worked hard to make sure the act 
worked, stated:

       Unquestionably, the SBREFA panel process has had a very 
     salutary impact on the regulatory deliberations of OSHA and 
     EPA, resulting in major changes to draft regulations. What is 
     important to note is that these changes were accomplished 
     without sacrificing the agencies' public policy objectives.

  That is what we had in mind. Many times small businesses get run over 
if they are left out of the process. We had a hearing just a couple 
weeks ago in the Small Business Committee and found out the fisheries 
regulations had worked tremendous hardship on small fishermen along the 
North Carolina

[[Page 7585]]

coast when they decided to change the bag limit, the catch limit, in 
the fall and wiped out many small businesses. They forgot to ask how 
best to implement the fisheries regulation.
  Another business in my State was working on a process to replace a 
particular chemical that the EPA said it was going to phase out. They 
had invested a great deal of time, money, and interest in the process 
of getting it developed. EPA changed the rule and the regulation and 
the time limit in midprocess and left them completely out in the dark.
  These are the kinds of things that Government ought not to be doing. 
Government ought not to be running roughshod over people who are trying 
to contribute to the economy, provide good employment opportunities, 
provide a solid tax base for the community, and provide good wages for 
the proprietor and employees and their families.
  We think the Red Tape Reduction Act can be expanded and can be of 
even greater value. It has demonstrated the value of small business 
input in the regulatory process, but still too many agencies are trying 
to evade the requirements to conduct regulatory flexibility analyses--
that is the technical term for seeing how it will impact the small 
business; ``regulatory flexibility'' analysis is the technical term--to 
figure out how it is going to hurt small business.
  We now realize that the Internal Revenue Service should also be 
required to conduct small business review panels so that their 
regulations will impose the least possible burden on a small business 
while still achieving the mission of the agency.
  I think there is no question we have worked with the new Commissioner 
of the IRS, Commissioner Rossotti. We have seen many steps taken by the 
IRS to relieve the burdens. I don't know anybody who really likes to 
pay taxes. We realize that it is an important part of supporting our 
Government and our system. But at least we ought to do so in a way that 
is the least confusing and burdensome.
  So I think it is important that we provide a mechanism so that 
parties will be able to reserve the benefits of their rights to 
participate at the earliest stages and have the most impact. We believe 
the litigation that is available at the end of the process if an agency 
fails to take into account the burden on small business is important 
because prior to the Redtape Reduction Act, the law had been on the 
books since 1980 that agencies ought to consider the impact on small 
business, and it was absolutely, totally ignored by the agencies; 
without judicial enforcement, they didn't get anywhere. So we added 
judicial enforcement and they started paying attention.
  The Agency Accountability Act, which I introduce today, cures a 
number of additional problems that we have identified. Let me run 
through quickly what it does. No. 1, it requires agencies to publish 
the decision to certify a regulation as not having a significant 
economic impact on a substantial number of small entities separately in 
the Federal Register. That means, in certain circumstances, the agency 
doesn't have to consider the impact on small business. That is how most 
of the bad regulations get through. EPA was infamous for doing that and 
saying it didn't have any impact. The regulation comes down to small 
business, which says we are getting killed. Then they have to fight the 
battle. Then they go to court and prove that they are impacted and the 
EPA didn't pay any attention to them.
  This says if you are going to use that escape clause to say the 
regulation doesn't have any impact on a small business, you have to set 
that out--set out in the Federal Register what you are doing and the 
fact that it does not have an impact. So you can perhaps correct the 
problems if there are small businesses that can show they are impacted 
before the regulation is issued.
  Second, the Triple A Act requires the agency to publish a summary of 
its economic analysis supporting the certification decision; i.e., if 
you say it doesn't have any economic impact, don't just grab it out of 
your hip pocket, or hat. You have to have an analysis to show why it 
would not. You have to make that available to the public so that 
interested parties will be able to see whether, in fact, it was pulled 
out of your hat, or whether it is based on sound economic reasoning.
  The third thing the Triple A does is it allows small entities to seek 
judicial review of this certification decision. They can go to the 
agency and say: Agency, you are trying to get out of the regulatory 
flexibility requirements--you are trying to get out of the requirement 
to see how the impact on small business can be lessened. If they say 
they disagree with them, the small entity can go to court and get it 
enforced.
  When I say ``small entity,'' this is not only available to small 
businesses, it is available to local governments, to not-for-profit 
organizations, eleemosynary institutions, available for the small 
entities in this country that do not have lobbyists or a presence in 
Washington. Small entities are entitled to use this Redtape Reduction 
Act.
  Fourth, the measure directs the Chief Counsel for Advocacy of the 
Small Business Administration to put out a regulation defining the 
terms that the agency has to use in determining whether they can escape 
an analysis of how small business will be impacted. These terms are 
``significant economic impact,'' and ``substantial number of small 
entities.'' We found that a number of agencies like to jack around with 
those terms and skew the facts so that they can sneak out the back door 
without having to do what the bill requires. This gives the advocacy 
counsel the ability to say this is what we mean and this is how you 
have to abide by it. If they don't follow that, then they are ducking 
their responsibilities under SBREFA and the Regulatory Flexibility Act.
  The other thing is, Triple A adds the IRS, U.S. Forest Service, 
National Marine Fisheries Service, and the Fish and Wildlife Service to 
the list of agencies that must conduct small business review panels 
before they can issue proposed regulations.
  All Federal agencies are covered by the provisions of the Regulatory 
Flexibility Act. If you ignore it, you can get hauled into court and 
have your regulation overturned if it has a significant economic impact 
on a substantial number of small entities. But this is to say that 
based on their track record and problems in the past, we are going to 
have you do what OSHA and EPA have been required to do, and that is set 
up panels involving small businesses prior to formulating the 
regulation. If you ask small business how is this regulation going to 
affect you and people like you, you may find out that there are a lot 
better ways of doing it. That is what EPA found out in one of the 
regulations it considered.
  Certainly, an agency is not going to be able to say: Gee, I had no 
idea that it would cause such a hardship on you. It is as important as 
any part of Government service, and it is too bad we have to write it 
into law. We cannot be good Government servants, either as legislators 
or bureaucrats, or members of the executive branch if we don't listen 
to the voices, the hopes, concerns, and problems of average citizens. 
We are just saying under this new measure that there are a couple of 
agencies that have to be told by law to listen to the people they are 
going to regulate. Pay attention to them. They don't have to like all 
the regulations but at least listen to their concerns about how the 
regulations affect them and how you may be able to accomplish the 
purpose of the law you are seeking to administer, without putting 
burdens on small agencies.
  Well, Mr. President, this bill grows out of extensive review of how 
the Redtape Reduction Act has functioned in the last 5 years. We still 
see a lot of frustration by small businesses about how agencies 
continue to find ways to avoid including small business input in 
rulemakings, and some of the actions that our agencies take confirm the 
worst image of agency bureaucrats who are thought to know what is best 
for small business throughout the country, and when the small 
businesses are actually providing jobs, developing technology and 
keeping the economy growing. But somebody here in Washington

[[Page 7586]]

has a lot better idea how they ought to be running their business.
  We need to have an interaction so that the people out there who are 
creating jobs, developing the technology, earning a living for their 
families and themselves can have an input into the agency that is going 
to regulate.
  The General Accounting Office found recently that the EPA missed 
1,098 small companies in the 32 SIC codes of industries that will be 
affected by their rule lowering the threshold for companies to report 
their use of lead. EPA thus concluded that their rule would not have a 
significant economic impact on a substantial number of small entities 
despite reducing the threshold of lead emissions from 25,000 pounds to 
10 pounds--a reduction of 99.96 percent. EPA, instead, relied on an 
average revenue compiled from all companies in the manufacturing 
industries to determine what threshold would be set to trigger the 
small business review panel required by the Redtape Production Act. The 
average included companies such as General Motors, General Electric, 
3M, and others that skewed the average so that it looked as though the 
rule would have no impact on small business.
  But I can tell you that a small business with 11 pounds of lead is 
absolutely clobbered by this rule.
  Although EPA claimed to conduct outreach to find firms that would be 
affected, they only contacted nine sources, although some of these 
sources allegedly contacted have no record of EPA contacting them. I 
think there is no excuse for that type of arrogance and abject 
avoidance of their requirements with respect to small business. This 
shoddy economic analysis exposes a loophole through which EPA should no 
longer be able to drive their trucks, and it will be closed by the 
Agency Accountability Act.
  I submitted previously, when I introduced the measure this morning, 
the GAO testimony presented at the hearing. Now I know there will be 
moans and groans by those who claim that this bill will make the 
regulatory profess more difficult and force agencies to jump through 
hoops and will make it harder to issue new regulations.
  Let me respond as follows: Had the agencies agreed to comply with the 
intent and spirit of SBREFA, rather than defy SBREFA, the Redtape 
Reduction Act, the Agency Accountability Act would not be needed.
  Frankly, if it were clear that agencies were doing what Congress 
intended for them to do, then this bill would be unnecessary. If they 
are doing adequate analysis in reaching out to small business now, then 
this act will have no impact on how they promulgate their regulation.
  I have very simple views on this subject. I want an agency that 
intends to regulate how a business conducts its affairs, to do so 
carefully and only after it has listened to the small businesses that 
will be affected to see if there are ways in which to lessen the burden 
and still achieve the objective.
  Unfortunately, as I said, there is overwhelming evidence that 
agencies are not treating this obligation seriously, and we must tell 
them in forceful terms that we really meant it when we said 5 years 
ago: You have to pay attention to small business.
  I was very pleased we did so in a tremendous bipartisan, unanimous 
vote. I am hoping we can do the same with this agency accountability 
bill. Let all agencies know firsthand: If you do your job right, then 
this should be no problem. If you are not doing your job this way, you 
ought to be because it will cause less headache, less lawsuits, and 
less problems in the end.
  Had EPA done what it should have done in the lead TRI rulemaking, 
there would not be the litigation we are seeing now, and it would have 
saved businesses and the Government untold sums of taxpayers' dollars.
  This body has said they want to treat small businesses fairly. The 
Agency Accountability Act is the next step in doing so.
  As I said earlier, I have introduced with bipartisan support a number 
of measures that I think are going to be very helpful for small 
business. I hope during the course of Small Business Week my colleagues 
will look at these and particularly take the time to listen to the men 
and women of small business who have come to Washington and continue 
the work in their home States to find out what their concerns are.
  I will be cosponsoring a measure that my colleague, Senator Kerry, 
will be introducing to reauthorize and extend a very important STTR 
bill which is a very important act in terms of transferring technology. 
It is a small business technology transfer program. I will have a 
statement that I will add after Senator Kerry introduces the bill. I 
hope this will merit the attention of our colleagues.
  I ask unanimous consent that the testimony of Hubert Potter, Tim 
Kalinowski, and Victor Rezendes of the General Accounting Office before 
the Committee on Small Business and a Summary of Provisions be printed 
in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

 Testimony of Hubert Potter, a Commercial Fisherman From Hobucken, NC, 
       Before the Senate Small Business Committee, April 24, 2001

       Thank you Mr. Chairman and Members of the Committee.
       My name is Hubert Potter. I am a 4th generation commercial 
     fisherman from Hobucken, North Carolina, a fishing community 
     in Pamlico County. I'll be 67 years old this August, and I've 
     been commercial fishing for a living since I was 15.
       I am a member of the North Carolina Fisheries Association, 
     and have been a Board member of that group for several years, 
     including a stint as Vice-Chairman. As such, I've tried to 
     stay on top of the political and bureaucratic issues 
     affecting us.
       Just about all of my experience has been aboard a type of 
     fishing vessel called a trawler. My wife and I have owned 5 
     trawlers over our lifetime, ranging in size from 32 to 75 ft 
     in length. We sold our last one this past September.
       Like just about everything else, there have been a lot of 
     things that stay the same in our way of life. Things like the 
     weather, fish prices, and fish cycles. Just like any red-
     blooded American, us fishermen like it when prices are high, 
     fish are plentiful, and the good Lord provides us with fair 
     weather. We might like all these things, but we also know 
     that it just doesn't work that way all the time, or even most 
     of the time.
       Although we can accept whatever bad weather the Lord gives 
     us, or the natural peaks and valleys of fish cycles put on us 
     by mother nature, it is hard to accept or even understand the 
     lack of sensitivity and sometimes the callousness of our own 
     government. At first it seems funny when we read about that 
     some of the bureaucrats say about the effects of proposed 
     regulations. But, Mr. Chairman, after you've had a chance to 
     sit down and think about what they've said, it can really 
     hurt your feelings. When you get over that, it just plain 
     makes you angry that your own government would say that these 
     regulations will not affect your small business.
       Commercial fishing is very dependent upon the weather, 
     water temperature, currents, and natural fish cycles. Some 
     years there will be lots of fish in a certain area, and in 
     other years there will be few or none. The difference may be 
     due to weather changes, or just because the cycles are 
     different. That's why diversity is so important to us. For 
     example, it it's possible to fish for summer flounder, that's 
     what I would do. Flounder are not available off our coast 
     year round, so we have to do others things. If I wasn't 
     fishing for summer flounder, I would be shrimping.
       One of the most regulated fisheries on the East Coast is 
     the summer flounder fishery. Although us fishermen try to 
     stay on top of all of the regulations, most of us had no idea 
     what the Regulatory Flexibility Act was until we got involved 
     with the North Carolina Fisheries Association in a lawsuit 
     against the National Marine Fisheries Service. That's when we 
     found out that NMFS didn't think that summer flounder 
     regulations had any impact on us as small business people.
       During one of the hearings held in Norfolk, Virginia, over 
     100 fishermen from our state attended at the request of the 
     court. We were all sworn in and I personally took the stand. 
     Allow me to read from the court order: `The federal 
     government did consider three possible quotas for the 1997 
     fishery, but the government failed to do any significant 
     analysis to support its conclusion that there would be no 
     significant impact. It is evident to this Court from the some 
     100 North Carolina fishermen who appeared to testify that 
     their businesses were significantly affected and that there 
     was a significant economic impact. . . .''
       The Judge also said, ``. . . this Court will not stand by 
     and allow the Secretary to attempt to achieve a desirable end 
     by using illegal means. Granted, administrative agencies have 
     a substantial amount of discretion

[[Page 7587]]

     in determining how they will follow Congressional mandates. 
     That discretion, however, does not include rewriting or 
     ignoring statutes.''
       And this quote by Judge Doumar says it all: ``. . . the 
     Secretary has produced a so-called economic report that 
     obviously is designed to justify a prior determination''.
       Mr. Chairman, although our life has been like a roller 
     coaster ride over the years, Renona and I have done ok. But 
     we really fear for the future of our younger fishing families 
     because of all the regulations and the lack of feeling for 
     hard working people. There was one year when our summer 
     flounder fishery was closed in December due to regulations, 
     when families just didn't have the money for Christmas. 
     That's because shrimping, crabbing, and other fisheries have 
     naturally slacked out in December and many of us depended on 
     the summer flounder fishing for Christmas money. Yet, we find 
     out that our own government says that the regulations have no 
     significant impact.
       Maybe they think a slack Christmas is not having an impact. 
     In my wildest dreams, it's hard for me to figure how they 
     think.
       Mr. Chairman, speaking on behalf of commercial fishing 
     families, I want to thank you for scheduling this hearing. 
     Our small businesses are so small that we don't have the time 
     to stay on top of a lot of these kinds of issues. We do know 
     that we are expected to abide by the laws of our land, and we 
     expect that our own government should do that also.
       It's been discouraging to see our incomes drop as 
     regulations increase, and read reports by the government that 
     the regulations will have no significant impact on us. 
     Although it's hard work, we love what we do, and we would 
     like to be able to continue providing our country with a 
     healthy and tasty source of protein.
       We really hope that our government wants us to continue 
     doing that too.
       Thank you, and I would be glad to answer any questions from 
     the Committee.
                                  ____


                      Testimony of Tim Kalinowski

       Good Morning and thank you for the opportunity to address 
     this distinguished committee. My name is Tim Kalinowski and I 
     am the Vice-President of Operations for Foam Supplies, Inc. 
     (FSI) located in Earth City, Missouri.
       FSI is a typical, small, mid western family owned business. 
     It is still run by Dave and Karen Keske who founded the 
     business in 1972. They bought the first facility with the 
     help of two small business loans and built their current 
     facility by offering shares in the building and land to their 
     62 employees, who receive monthly rental income for their 
     investment.
       FSI has always operated in an environmentally responsible 
     manner and we are proud of our reputation. FSI manufacturers 
     rigid non-CFC urethane foams and solvent less urethane 
     dispensing equipment. These products have uses ranging from 
     flotation foam used in boat building to insulation foam used 
     in building construction. Our company has always been a 
     leader in the field. In the 1980's, aware of EPA's plans to 
     phase out CFCs due to its negative effect on the earth's 
     ozone layer, FSI worked aggressively to find suitable 
     substitutes. FSI was the first company to patent an HCFC-22 
     blown urethane foam, years before the EPA mandated phase-out.
       Technology development does not occur overnight and it does 
     not come cheap. FSI spends a lot of money to develop new 
     products and is wiling to do so because it is how we compete 
     against the large companies. FSI is a small company with 
     tight margins and we can only be innovative if we are able to 
     spread the costs over time. FSI had the ability to do this in 
     the CFC rulemaking, because the EPA notified us well in 
     advance of the phase out and we had the time to properly test 
     and prepare new formulations.
       I am here today to take exception to EPA's actions in the 
     July 11, 2000 Notice of Proposed Rulemaking regarding the 
     Significant New Alternatives Policy or SNAP program. The EPA 
     SNAP program was not designed to accelerate the phase out of 
     ozone depleting substances. For example, under the plan 
     developed by EPA and industry in the early 1990's, HCFC-22 
     may be produced and imported until 2010. Use may continue 
     after that date until stocks are depleted. In this recent 
     SNAP proposal EPA has ignored the current production and 
     manufacturing deadline and has proposed to accelerate the 
     deadline for not only the manufacture, but also the use of 
     these substitutes to 2005. This new deadline would hit small 
     businesses extremely hard because it changes the rules 
     midstream and gives us less time to develop new products and 
     also absorb the costs of research and development. In 
     addition to finding this new deadline unacceptable, it is our 
     position that this action is not within the scope of the SNAP 
     program.
       While this particular issue is extremely important to my 
     small business, the concern that I bring before this 
     committee has more to do with how the EPA approached this 
     proposed rulemaking. I think everyone would agree that 
     regulation works best when all concerned parties work 
     together to consider all the issues. When the regulatory 
     process is by-passed and rules are broken the resulting 
     regulation can be both harmful and ineffective. Sadly, EPA 
     did not follow the rules when it proposed the SNAP program 
     last year.
       In late June, 2000 during an unrelated call to EPA, I was 
     informed that EPA was about to publish this proposed rule in 
     the Federal Register. When questioning why the EPA had not 
     contacted manufacturers or end users that this proposal was 
     being considered, I was told that they considered it a 
     success that they were able to keep this proposal quiet, 
     prior to publication.
       This would have been less of a concern if EPA understood 
     our industry.
       In the NPRM the EPA stated that: (1) ``EPA believes that 
     today's proposal will not result in a significant cost to 
     appliance manufacturers or consumers''; (2) ``This rule would 
     not have a significant impact on a substantial number of 
     small entities because we expect the cost of the SNAP 
     requirements to be minor''; and (3) ``EPA has determined that 
     it is not necessary to prepare a regulatory flexibility 
     analysis in connection with this proposal.''
       We take great exception to these remarks.
       I am here to tell you that this rule will have an affect on 
     thousands of small manufacturers across the country. The only 
     economic study that EPA seems to have done was based on data 
     from a multi-billion dollar appliance manufacturer. If EPA 
     was truly interested in knowing what companies would be 
     impacted by this rule, they only had to make a few phone 
     calls or pull up a few web sites to identify boatbuilders, 
     truck body manufacturers, refrigerator equipment 
     manufacturers, and many other small entities. But they never 
     did. In fact they overlooked our industry. They did not know 
     how much this rule would cost my small business and they did 
     not know how many small businesses would face similar costs.
       The only phone call that I am aware of to an end-user was 
     made after the rule was proposed. An EPA staff person 
     contacted the National Marine Manufacturers Association and 
     informed them that boat builders never had an extension and 
     were currently violating the law. When the NMMA called me for 
     a clarification, there was panic in the voice on the other 
     end of the phone. They believed that by commenting they had 
     struck a hornet's nest. I faxed them a copy of the initial 
     rule, which clearly stated that boat builders did have an 
     extension and were not in violation of the law. EPA was 
     eventually forced to recognize that indeed boat builders did 
     have an extension and were overlooked in this rulemaking 
     process.
       Instead of accusing boat builders of operating illegally, 
     EPA should have learned from them and tried to find out how 
     the proposed rule affected them. EPA would have learned that 
     the Coast Guard requires boats under 20 feet to have 
     flotation foam injected or poured into the hull of the boat. 
     EPA would have learned that over 1500 small business boat 
     builders use these products and would be impacted by this 
     rule. EPA would have known that it made a big mistake in 
     overlooking these types of small businesses and that it 
     needed to go back and look, listen, and learn about these 
     impacts.
       The EPA also stated that ``non-ozone depleting substitutes 
     are now available for all end-users.'' As evidence they cite 
     a 1998 United Nations Technical Options Committee Report. 
     However, one of the authors of that report took exception to 
     EPA's interpretation of the report and commented that, ``the 
     proposed rule incorrectly interprets the UNTOC 1998 report. 
     (Copies of the author's comments are in your handouts)
       The bottom line is that this rule will affect many small 
     businesses that EPA never considered when the proposal was 
     developed. In addition, it is obvious that the EPA staff did 
     not do their homework, because the proposed alternatives are 
     more expensive, unavailable at this time, less effective or 
     present other VOC or flammability hazards.
       This rule will severely jeopardize FSI and it's customers 
     who cannot possibly pass on the increased chemical and 
     testing costs to their customers and still hope to be able to 
     compete with the larger corporations.
       Another very important overlooked casualty of this rule 
     would be the environment itself. Breakthroughs in any 
     industry are commonly a result of the efforts of the little 
     guy who has to stay one step ahead of the big corporations 
     just to stay in business. Our industry is constantly trying 
     to develop new products, which benefit our customers and 
     improve the environment. There are products being tested and 
     developed by FSI and others like us that would have to be 
     abandoned due to this new deadline. These products would not 
     only be better for the environment, but also more cost 
     effective for the small businessman.
       Dave and Karen Keske's of FSI and other small business 
     entrepreneurs want to be able to continue to dedicate their 
     limited resources to test and develop new products. These are 
     products that they are confident will be better for their 
     customers and for the environment. This will only happen if 
     the issues and concerns of companies directly impacted by the 
     rules are made aware of these rules before they are proposed. 
     This was supposed to happen in this rulemaking. The SBREFA 
     law requires it and in this case the law was ignored. Because 
     this has happened, EPA has put FSI and many other

[[Page 7588]]

     small businesses in serious economic jeopardy.
       In closing, I would like to make one point very clear, FSI 
     is not looking for special treatment. We only want to be 
     treated in accordance with the law. It is our belief that 
     when the playing field is kept level, FSI and other small 
     businesses prosper.
       Thank you for your attention.
                                  ____


                      Testimony of Victor Rezendes

       I am pleased to be here today to discuss the implementation 
     of the Regulatory Flexibility Act of 1980 (RFA), as amended, 
     and the Small Business Regulatory Enforcement Fairness Act of 
     1996 (SBREFA). As you requested, I will discuss our work on 
     the implementation of these two statutes in recent years, 
     with particular emphasis on a report that we prepared for 
     this committee last year on the implementation of the acts by 
     the Environmental Protection Agency (EPA).
       The RFA requires federal agencies to examine the impact of 
     their proposed and final rules on ``small entities'' (small 
     businesses, small governmental jurisdictions, and small 
     organizations) and to solicit the ideas and comments of such 
     entities for this purpose. Specifically, whenever agencies 
     are required to publish a notice of proposed rulemaking, the 
     RFA requires agencies to prepare an initial and a final 
     regulatory flexibility analysis. However, the RFA also states 
     that those analytical requirements do not apply if the head 
     of the agency certifies that the rule will not have a 
     ``significant economic impact on a substantial number of 
     small entities,'' or what I will--for the sake of brevity--
     term a ``significant impact.'' SBREFA was enacted to 
     strengthen the RFA's protections for small entities, and some 
     of the act's requirements are built on this ``significant 
     impact'' determination. For example, one provision of SBREFA 
     requires that before publishing a proposed rule that may have 
     a significant impact, EPA and the Occupational Safety and 
     Health Administration must convene a small business advocacy 
     review panel for the draft rule, and collect the advice and 
     recommendations of representatives of affected small entities 
     about the potential impact of the draft rule.
       We have reviewed the implementation of the RFA and SBREFA 
     several times during recent years, with topics ranging from 
     specific provisions in each statute to the overall 
     implementation of the RFA. Although both of these reform 
     initiatives have clearly affected how federal agencies 
     regulate, we believe that their full promise has not been 
     realized. To achieve that promise, Congress may need to 
     clarify what it expects the agencies to do with regard to the 
     statutes' requirements. In particular, Congress may need to 
     clearly delineate--or have some other organization 
     delineate--what is meant by the terms ``significant economic 
     impact'' and ``substantial number of small entities.'' The 
     RFA does not define what Congress meant by these terms and 
     does not give any entity the authority or responsibility to 
     define them governmentwide. As a result, agencies have had to 
     construct their own definitions, and those definitions vary. 
     Over the past decade, we have recommended several times that 
     Congress provide greater clarity with regard to these terms, 
     but to date Congress has not acted on our recommendations.
       The questions that remain unanswered are numerous and 
     varied. For example, does Congress believe that the economic 
     impact of a rule should be measured in terms of compliance 
     costs as a percentage of businesses' annual revenues or the 
     percentage of work hours available to the firms? If so, is 3 
     percent (or 1 percent) of revenues or work hours the 
     appropriate definition of ``significant?'' Should agencies 
     take into account the cumulative impact of their rules on 
     small entities, even within a particular program area? Should 
     agencies count the impact of the underlying statutes when 
     determining whether their rules have a significant impact? 
     What should be considered a ``rule'' for purposes of the 
     requirement in the RFA that the agencies review rules with a 
     significant impact within 10 years of their promulgation? 
     Should agencies review rules that had a significant impact at 
     the time they were originally published, or only those that 
     currently have that effect?
       These questions are not simply matters of administrative 
     conjecture within the agencies. They lie at the heart of the 
     RFA and SBREFA, and the answers to the questions can be a 
     substantive effect on the amount of regulatory relief 
     provided through those statutes. Because Congress did not 
     answer these questions when the statutes were enacted, 
     agencies have had to developed their own answers. If Congress 
     does not like the answers that the agencies have developed, 
     it needs to either amend the underlying statutes and provide 
     what it believes are the correct answers or give some other 
     entity the authority to issue guidance on these issues.


                         proposed epa lead rule

       The implications of the current lack of clarity with regard 
     to the term ``significant impact'' and the discretion that 
     agencies have to define it were clearly illustrated in a 
     report that we prepared for this committee last year. One 
     part of our report focused on a proposed rule that EPA 
     published in August 1999 that would, upon implementation, 
     lower certain reporting thresholds for lead and lead 
     compounds under the Toxics Release Inventory program from as 
     high as 25,000 pounds to 10 pounds. EPA estimated that 
     approximately 5,600 small businesses would be affected by the 
     rule, and that the first-year costs of the rule for each of 
     these small businesses would be between $5,200 and $7,500. 
     EPA said that the total cost of the rule in the first year of 
     implementation would be about $116 million. However, EPA 
     certified that the rule would not have a significant impact, 
     and therefore did not trigger certain analytical and 
     procedural requirements of the RFA.
       Mr. Chairman, last year you asked us to review the 
     methodology that EPA used in the economic analysis for the 
     proposed lead rule and describe key aspects of that 
     methodology that may have contributed to the agency's 
     conclusion that the rule would not have a significant impact. 
     You also asked us to determine whether additional data or 
     analysis could have yielded a different conclusion about the 
     rule's impact on small entities. Finally, you also asked us 
     to describe and compare the rates at which EPA's major 
     program offices certified that their substantive proposed 
     rules would not have a significant impact. We did not examine 
     whether lead was a persistent bioaccumulative toxic or the 
     value of the Toxics Release Inventory program in general.
       EPA's current guidance on how the RFA should be implemented 
     gives the agency's program offices substantial discretion 
     with regard to certification decisions but also provides 
     numerical guidelines to help define what constitutes a 
     significant impact. For example, the guidance indicates that 
     a rule should be presumed eligible for certification as not 
     having a significant impact if it does not impose annual 
     compliance costs amounting to 1 percent of estimated annual 
     revenues on any number of small entities. However, if those 
     compliance costs amount to 3 percent or more of revenues on 
     1,000 or more small entities, the guidance indicates that the 
     program office should presume that the rule is ineligible for 
     certification.
       These numerical guidelines establish what appears to be a 
     high threshold for what constitutes a significant impact. For 
     example, an EPA rule could theoretically impose $10,000 in 
     compliance costs on 10,000 small businesses, but the 
     guidelines indicate that the agency can presume that the rule 
     does not trigger the requirements of the RFA as long as those 
     costs do not represent at least 1 percent of the affected 
     businesses' annual revenues. The guidance does not take into 
     account the profit margins of the businesses involved. 
     Therefore, if the profit margin in the affected businesses is 
     less than 5 percent, the costs required to implement a rule 
     could conceivably take one-fifth of that profit and, under 
     EPA's guidelines, still not be considered to have a 
     significant impact. Neither does the guidance take into 
     account the cumulative impact of the agency's rules on small 
     businesses. Therefore, if EPA issued 100 rules, each of which 
     imposed compliance costs amounting to one-half of 1 percent 
     of annual sales on 10,000 businesses, the agency could 
     certify each of the rules as not having a significant impact 
     even though the cumulative impact amounted to 50 percent of 
     the affected businesses' revenues. Consideration of 
     cumulative regulatory impact is not even required within a 
     particular area like the Toxics Release Inventory program. 
     Each toxic substance added to the approximately 600 
     substances already listed in the program, or each change in 
     the reporting threshold for a listed toxin, constitutes a 
     separate regulatory action under the RFA.
       An agency's conclusions about the impact of a rule on small 
     entities can also be driven by the agency's analytical 
     approach. In its original economic analysis for the proposed 
     lead rule, EPA made a number of assumptions that clearly 
     contributed to its determination that no small entities would 
     experience significant economic effects. For example, to 
     estimate the annual revenues of companies expected to file 
     new Toxics Release Inventory reports for lead, EPA assumed 
     that (1) the new filers would have employment and economic 
     characteristics similar to current filers, (2) different 
     types of manufacturers would experience similar economic 
     effects, and (3) the revenues of the smallest manufacturers 
     covered by the proposed rule could be exemplified by the firm 
     at the 25th percentile of the agency's projected revenue 
     distribution for small manufacturers. As a result of these 
     and other assumptions, EPA estimated that the smallest 
     manufacturers affected by the proposed lead rule had annual 
     revenues of $4 million. Using that $4 million revenue 
     estimate and other information, EPA concluded that none of 
     the 5,600 small businesses would experience first-year 
     compliance costs of 1 percent or more of their annual 
     revenues. Therefore, EPA certified that the proposed lead 
     rule would not have a significant impact.
       EPA revised these and other parts of the economic analysis 
     for the proposed lead rule before submitting it to the Office 
     of Management and Budget (OMB) for final review in July 2000. 
     According to a summary of the draft revised economic analysis 
     that we reviewed, EPA changed several analytic assumptions 
     and methods, and revised its estimates of the rule's impact 
     on small businesses. Specifically, the agency said that the

[[Page 7589]]

     lead rule would affect more than 8,600 small companies (up 
     from about 5,600 in the original analysis), and as many as 
     464 of them would experience first-year compliance costs of 
     at least 1 percent of their annual revenues (up from zero in 
     the original estimate). Nevertheless, EPA again concluded 
     that the rule would not have a significant impact. During our 
     review, we discovered that the agency's revised estimate of 
     the number of small companies that would experience a 1 
     percent economic impact was based on only 36 of the 69 
     industries that the agency said could be affected by the 
     rule. EPA officials said that the other 33 industries were 
     not included in the agency's estimate because of lack of 
     data.
       We attempted to provided a more complete picture of how the 
     lead rule would affect small businesses by estimating how 
     many companies in these missing 33 industries could 
     experience a first-year economic impact of at least 1 percent 
     of annual revenues. We obtained data from the Bureau of the 
     Census for 32 of these 33 industries and estimated that as 
     many as 1,098 additional small businesses could experience 
     this 1-percent effect. If EPA had used this analytic approach 
     in combination with its own studies, it would have concluded 
     that as many as 1,500 small businesses would experience 
     compliance costs amounting to at least 1 percent of annual 
     revenues. Therefore, using its own guidance, EPA could have 
     concluded that the rule should not be certified, prepared a 
     regulatory flexibility analysis, and convened an advocacy 
     review panel for the rule. However, we ultimately concluded 
     that the agency's initial and revised analyses and the 
     conclusions that it based on those studies were within the 
     broad discretion that the RFA and the EPA guidance provided 
     in determining what constituted a ``significant economic 
     impact'' on a ``substantial number of small entities.''
       In the final lead rule that EPA published in January 2001, 
     EPA set the new reporting threshold for lead at 100 pounds--
     up from 10 pounds in the proposed rule. However, just as it 
     did for the proposed rule, EPA concluded that the final rule 
     would not have a significant impact. EPA said that it reached 
     this conclusion because it did not believe the rule would 
     have a significant economic impact (defined as annual costs 
     between 1 and 3 percent of annual revenues) on more than 250 
     of the 4,100 small businesses expected to be affected by the 
     rule. EPA also illustrated what it viewed as nonsignificant 
     impact in terms of work hours. The agency said that it would 
     take a first-time filer about 110 hours to fill out the form. 
     Because the smallest firm that could be affected by the rule 
     must have at least 20,000 labor hours per year (10 employees 
     times 50 weeks per year per employee times 40 hours per 
     week), EPA said that the 110 hours required to fill out the 
     Toxics Release Inventory form in the first year represents 
     only about one-half of 1 percent of the total amount of time 
     the firm has available in that year.
       EPA's determination that the proposed lead rule would not 
     have a significant impact on small entities was not unique. 
     Its four major program offices certified about 78 percent of 
     the substantive proposed rules that they published in the 
     2\1/2\ years before SBREFA took effect in 1996 but certified 
     96 percent of the proposed rules published in the 2\1/2\ 
     years after the act's implementation. In fact, two of the 
     program offices--the Office of Prevention, Pesticides and 
     Toxic Substances and the Office of Solid Waste--certified all 
     47 of their proposed rules in this post-SBREFA period as not 
     having a significant impact. The Office of Air and Radiation 
     certified 97 percent of its proposed rules during this 
     period, and the Office of Water certified 88 percent. EPA 
     officials told us that the increased rate of certification 
     after SBREFA's implementation was caused by a change in the 
     agency's RFA guidance on what constituted a significant 
     impact. Prior to SBREFA, EPA's policy was to prepare a 
     regulatory flexibility analysis for any rule that the agency 
     expected to have any impact on any small entities. The 
     officials said that this guidance was changed because the 
     SBREFA requirement to convene an advocacy review panel for 
     any proposed rule that was not certified made the 
     continuation of the agency's more inclusive RFA policy too 
     costly and impractical.


                 Previous Reports On the RFA and SBREFA

       We have issued several other reports in recent years on the 
     implementation of the RFA and SBREFA that, in combination, 
     illustrate both the promise and the problems associated with 
     the statutes. For example, in 1991, we examined the 
     implementation of the RFA with regard to small governments 
     and concluded that each of the four federal agencies we 
     reviewed had a different interpretation of key RFA 
     provisions. We said that the act allowed agencies to 
     interpret when they believed their proposed regulations 
     affected small government, and recommended that Congress 
     consider amending the RFA to require the Small Business 
     Administration (SBA) to develop criteria regarding whether 
     and how to conduct the required analyses.
       In 1994, we noted that the RFA required the SBA Chief 
     Counsel for Advocacy to monitor agencies' compliance with the 
     act. However, we also said that one reason for agencies' lack 
     of compliance with the RFA's requirements was that the act 
     did not expressly authorize SBA to interpret key provisions 
     in the statute and did not require SBA to develop criteria 
     for agencies to follow in reviewing their rules. We said that 
     if Congress wanted to strengthen the implementation of the 
     RFA, it should consider amending the act to (1) provide SBA 
     with clearer authority and responsibility to interpret the 
     RFA's provisions, and (2) require SBA, in consultation with 
     OMB, to develop criteria as to whether and how federal 
     agencies should conduct RFA analyses.
       In our 1998 report on the implementation of the small 
     business advocacy review requirements in SBREFA, we said that 
     the lack of clarity regarding whether EPA should have 
     convened panels for two of its proposed rules was traceable 
     to the lack of agreed-upon governmentwide criteria as to 
     whether a rule has a significant impact. Nevertheless, we 
     said that the panels that had been convened were generally 
     well received by both the agencies and the small business 
     representatives. We also said that if Congress wished to 
     clarify and strengthen the implementation of the RFA and 
     SBREFA, it should consider (1) providing SBA or another 
     entity with clearer authority and responsibility to interpret 
     the RFA's provisions and (2) requiring SBA or some other 
     entity to develop criteria defining a ``significant economic 
     impact on a substantial number of small entities.'' In 1999, 
     we noted a similar lack of clarity regarding the RFA's 
     requirement that agencies review their existing rules that 
     have a significant impact within 10 years of their 
     promulgation. We said that if Congress is concerned that this 
     section of the RFA has been subject to varying 
     interpretations, it may wish to clarify those provisions. We 
     also recommended that OMB take certain actions to improve the 
     administration of these review requirements, some of which 
     have been implemented.
       Last year we convened a meeting at GAO on the rule review 
     provision of the RFA, focusing on why the required reviews 
     were not being conducted. Attending that meeting were 
     representatives from 12 agencies that appeared to issue rules 
     with an impact on small entities, representatives from 
     relevant oversight organizations (e.g., OMB and SBA's Office 
     of Advocacy), and congressional staff from the House and 
     Senate Committees on Small Business. The meeting revealed 
     significant differences of opinion regarding key terms in the 
     statute. For example, some agencies did not consider their 
     rules to have a significant impact because they believed the 
     underlying statutes, not the agency-developed regulations, 
     caused the effect on small entities. There was also confusion 
     regarding whether the agencies were supposed to review rules 
     that had a significant impact on small entities at the time 
     the rule was first published in the Fedeal Register or those 
     that currently have such an impact. It was not even clear 
     what should be considered to ``rule'' under RFA's rule review 
     requirements--the entire section of the Code of Federal 
     Regulations that was affected by the rule, or just the part 
     of the existing rule that was being amended. By the end of 
     the meeting it was clear that, as one congressional staff 
     member said, ``determining compliance with (the RFA) is less 
     obvious that we believed before.''
       Mr. Chairman, this concludes my prepared statement. I 
     reveal would be happy to responded to any questions.
                                  ____


            Agency Accountability Act--Summary of Provisions


                         Section 1. Short Title

       This act may be cited as the ``Agency Accountability Act of 
     2001''.


                    Section 2. Findings and Purposes

    Section 3. Ensuring Full Analysis of Potential Impacts on Small 
             Entities of Rules Proposed by Certain Agencies

       This section improves the procedure for the conducting 
     Small Business Advocacy Review Panels by requiring the agency 
     to collaborate with the Chief Counsel for Advocacy of the 
     Small Business Administration in selecting the small entity 
     representatives. It requires the agency to publish the panel 
     report in the Federal Register and to distribute the report 
     to the small entity representatives.


                         Section 4. Definitions

       This section expands the list of agencies required to 
     conduct Small Business Advocacy Review Panels for regulations 
     that will have a significant economic impact on a substantial 
     number of small entities to include the Internal Revenue 
     Service of the Treasury Department, the National Marine 
     Fisheries Service of the Commerce Department, the U.S. Forest 
     Service of the Agriculture Department, and the U.S. Fish and 
     Wildlife Service of the Interior Department. The section also 
     allows organizations that primarily represent small entities 
     to serve as Small Entity Representatives. Finally, this 
     section directs the Chief Counsel for Advocacy of the Small 
     Business Administration to promulgate a rule making to 
     further define the terms ``significant economic impact'' and 
     ``substantial number of small entities'' and to consider the 
     indirect impacts regulations have on small businesses when 
     promulgating these regulations.

[[Page 7590]]




            Section 5. Collection of Information Requirement

       This section revises the conditions under which the 
     Internal Revenue Service must conduct an initial regulatory 
     flexibility analysis for interpretative regulations. If the 
     IRS is promulgating a temporary regulation, the IRS may avoid 
     this requirement but it must inform the Chief Counsel for 
     Advocacy at the time of the decision and include an 
     explanation of why the temporary regulation is required 
     because using a notice and comment procedure would be 
     impracticable, unnecessary, or contrary to the public 
     interest, and an explanation of the reasons that 
     circumstances warrant an exception from the panel review 
     requirement. This notice and explanation must also be 
     published in the Federal Register.


           Section 6. Initial Regulatory Flexibility Analysis

       This sections adds the requirement of conducting a cost/
     benefit analysis of the regulation to the requirements of the 
     Initial Regulatory Flexibility Analysis required under the 
     Regulatory Flexibility Act. Agencies are also directed to 
     take into account, to the extent practical, the cumulative 
     cost of their regulations on small businesses and the effect 
     of the proposed regulation on those cumulative costs. 
     Finally, agencies are directed to make an initial 
     certification that the benefits of the proposed rule justify 
     the costs of the proposed rule to small entities.


            Section 7. Final Regulatory Flexibility Analysis

       This section adds cost/benefit analyses to the requirements 
     of the Final Regulatory Flexibility Analysis called for under 
     the Regulatory Flexibility Act. It also requires agencies to 
     make a final certification that the benefits of the 
     regulation justify the costs of the regulation to the small 
     entities that will be subject to it. Finally, agencies are 
     required to describe the comments received on the Initial 
     Regulatory Flexibility Analysis and a statement of any change 
     made as a result of those comments.


          Section 8. Publication of Decision to Certify a Rule

       This section requires agencies to publish separately in the 
     Federal Register their decision to certify a regulation as 
     not having a significant economic impact on a substantial 
     number of small entities instead of the current requirement 
     of publishing that decision with the proposed rule. This also 
     requires the agency to publish a summary of the economic 
     analysis supporting that decision and indicates what must be 
     in that summary. The complete analysis is to be made 
     available on the Internet to the extent practicable.


          Section 9. Judicial review of Certification Decision

       This section makes the agency decision to certify a 
     regulation as not having a singificant economic impact on a 
     substantial number of small entities judicially reviewable 
     and specifies that the remedy shall be voiding of the 
     certification and requiring the agency to conduct the Initial 
     Regulatory Flexibility Analysis, Final Regulatory Flexibility 
     Analysis, and the small business advocacy review panel if 
     required.


   Section 10. Exclusion of Agency Outreach to Small Businesses from 
             Certain Collection of Information Requirements

       This section excludes outreach efforts to small businesses 
     to determine the impact of regulations from the requirements 
     for Office of Management and Budget clearance under the 
     Paperwork Reduction Act.


                       Section 11. Effective Date

       This act shall take effect 90 days after the date of 
     enactment.
                                 ______
                                 
      By Mr. CHAFEE (for himself, Mr. Graham, Mrs. Lincoln, Mr. 
        Torricelli, and Mr. Kohl):
  S. 850. A bill to expand the Federal tax refund intercept program to 
cover children who are not minors; to the Committee on Finance.
  Mr. CHAFEE. Mr. President, I am pleased to be joined today by 
Senators Graham, Lincoln, Torricelli, and Kohl in introducing the Child 
Support Fairness and Tax Refund Interception Act of 2001.
  The Child Support Fairness and Tax Refund Interception Act of 2001 
closes a loophole in current federal statute by expanding the 
eligibility of one of the most effective means of enforcing child 
support orders, that of intercepting the federal tax refunds of parents 
who are delinquent in paying their court-ordered financial support for 
their children.
  Under current law, eligibility for the federal tax refund offset 
program is limited to cases involving minors, parents on public 
assistance, or adult children who are disabled. Custodial parents of 
adult, non-disabled children are not assisted under the IRS tax refund 
intercept program, and in many cases, they must work multiple jobs in 
order to make ends meet. Some of these parents have gone into debt to 
put their college-age children through school.
  The legislation we are introducing today will address this inequity 
by expanding the eligibility of the federal tax refund offset program 
to cover parents of all children, regardless of whether the child is 
disabled or a minor. This legislation will not create a cause of action 
for a custodial parent to seek additional child support. In will merely 
assist the custodial parent in removing debt that is owed for a level 
of child support that was determined by a court.
  Improving our child support enforcement programs is an issue that 
should be of concern to us all as it remains a serious problem in the 
United States. According to the most recent government statistics, 
there are approximately twelve million active cases in which a child 
support order requires a noncustodial parent to contribute to the 
support of his or her child. Of the $22 billion owed in 1999, only $12 
billion has been collected. In 1998, only 23 percent of children 
entitled to child support through our public system received some form 
of payment, despite federal and state efforts. Similar shortfalls in 
previous years bring the combined delinquency total to approximately 
$47 billion. We can fix this injustice in our federal tax refund offset 
program by helping some of our most needy constituents receive the 
financial assistance they are owed.
  While previous administrations have been somewhat successful in using 
tax refunds as a tool to collect child support payments, more needs to 
be done. The IRS tax refund interception program has only collected 
one-third of tardy child support payments. The Child Support Fairness 
and Tax Refund Interception Act of 2001 will remove the current barrier 
to fulfilling an individual's obligation to pay child support, while 
helping to provide for the future of our nation's children.
  I urge my colleagues to join me in supporting this important 
legislation, and ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 850

       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 ``Child Support Fairness and 
     Tax Refund Interception Act of 2001''.

     SEC. 2. FINDINGS.

       The Congress finds the following:
       (1) Enforcing child support orders remains a serious 
     problem in the United States. There are approximately 
     12,000,000 active cases in which a child support order 
     requires a noncustodial parent to contribute to the support 
     of his or her child. Of the $22,000,000,000 owed in 1999 
     pursuant to such orders, $12,000,000,000, or 54 percent, has 
     been collected.
       (2) It is an injustice for the Federal Government to issue 
     tax refunds to a deadbeat spouse while a custodial parent has 
     to work 2 or 3 jobs to compensate for the shortfall in 
     providing for their children.
       (3) The Internal Revenue Service (IRS) program to intercept 
     the tax refunds of parents who owe child support arrears has 
     been successful in collecting a tenth of such arrears.
       (4) The Congress has periodically expanded eligibility for 
     the IRS tax refund intercept program. Initially, the program 
     was limited to intercepting Federal tax refunds owed to 
     parents on public assistance. In 1984, the Congress expanded 
     the program to cover parents not on public assistance. 
     Finally, the Omnibus Budget Reconciliation Act of 1990 made 
     the program permanent and expanded the program to cover 
     parents of adult children who are disabled.
       (5) The injustice to the custodial parent is the same 
     regardless of whether the child is disabled, non-disabled, a 
     minor, or an adult, so long as the child support obligation 
     is provided for by a court or administrative order. It is 
     common for parents to help their adult children finance a 
     college education, a wedding, or a first home. Some parents 
     cannot afford to do that because they are recovering from 
     debt they incurred to cover expenses that would have been 
     covered if they had been paid the child support owed to them 
     in a timely manner.
       (6) This Act would address this injustice by expanding the 
     program to cover parents of all adult children, regardless of 
     whether the child is disabled.
       (7) This Act does not create a cause of action for a 
     custodial parent to seek additional child support. This Act 
     merely helps the custodial parent recover debt they are owed 
     for

[[Page 7591]]

     a level of child support that was set by a court after both 
     sides had the opportunity to present their arguments about 
     the proper amount of child support.

     SEC. 3. USE OF TAX REFUND INTERCEPT PROGRAM TO COLLECT PAST-
                   DUE CHILD SUPPORT ON BEHALF OF CHILDREN WHO ARE 
                   NOT MINORS.

       Section 464 of the Social Security Act (42 U.S.C. 664) is 
     amended--
       (1) in subsection (a)(2)(A), by striking ``(as that term is 
     defined for purposes of this paragraph under subsection 
     (c))''; and
       (2) in subsection (c)--
       (A) in paragraph (1)--
       (i) by striking ``(1) Except as provided in paragraph (2), 
     as used in'' and inserting ``In''; and
       (ii) by inserting ``(whether or not a minor)'' after ``a 
     child'' each place it appears; and
       (B) by striking paragraphs (2) and (3).
                                 ______
                                 
      By Mr. THOMPSON (for himself, Mr. Kohl, Mr. Voinovich, Mr. Levin, 
        Mr. Thurmond, Ms. Collins, and Mr. Fitzgerald):
  S. 851. A bill to establish a commission to conduct a study of 
government privacy practices, and for other purposes; to the Committee 
on Governmental Affairs.
  Mr. THOMPSON. Mr. President, I rise today to introduce the 
``Citizens' Privacy Commission Act of 2001.'' This legislation will 
establish an 11-member commission to examine how Federal, State, and 
local governments collect and use our personal information and to make 
recommendations to Congress as we consider how to map out government 
privacy protections for the future. The Citizens' Privacy Commission, 
whose members will include experts with a diversity of experiences, 
will look at the spectrum of privacy concerns involving Federal, State, 
and local government, from protecting citizens' genetic information, to 
guaranteeing the safe use of Social Security numbers, to ensuring 
confidentiality to citizens visiting government web sites.
  As we all know, Americans are increasingly concerned about the 
potential misuse of their personal information. A variety of measures 
intended to address the collection, use, and distribution of personal 
information by the private sector have been introduced in Congress. 
Recent events, however, suggest that government privacy practices 
warrant closer scrutiny. For example, details surfaced last summer 
about the FBI's new e-mail surveillance system--Carnivore. Civil 
libertarians and Internet users alike continue to question the 
legitimacy of this ``online wiretapping.''
  Also last summer, after the White House Office of National Drug 
Control Policy was found to be using ``cookies'' on Internet search 
engines, I requested that GAO investigate Federal agencies' use of 
these information-collection devices on their own Web sites. GAO only 
had time to investigate a small sample of Federal agency sites, but 
they found a number of unauthorized ``cookies,'' including one that was 
operated by a third-party private company on an agency Web site under 
an agreement that gave the private company co-ownership of the data 
collected on visitors to the site.
  As a follow-up to the GAO investigation, Congressman Jay Inslee and I 
worked together on an amendment to require all agency Inspectors 
General to report to Congress on each agency's Internet information-
collection practices. Fewer than half of the Inspectors General have 
completed their investigations, but the preliminary findings are cause 
for concern. In audits performed this past winter, sixteen Inspectors 
General identified sixty-four agency Web sites that were violating the 
privacy policies established by the last Administration by using 
information-collection devices called ``cookies'' without the required 
approval.
  Last fall, Congressmen Armey and Tauzin released a GAO report that 
revealed that 97 percent of the Web sites of Federal agencies, 
including the Federal Trade Commission, weren't in compliance with 
privacy standards that the FTC was advocating for private sector Web 
sites.
  On top of all these examples, there is the issue of computer security 
at Federal agencies, which has been notoriously lax for years. GAO and 
Federal agency Inspectors General report time and time again that 
sensitive information on citizens' health and financial records is 
vulnerable to hackers. Just this spring, GAO issued a report which 
explained how easily their investigators were able to hack into IRS 
computers and gain access to citizens' e-filed taxes. Not surprisingly, 
a recent poll shows that most Americans perceive government as the 
greatest threat to their personal privacy, above both the media and 
corporations.
  Last year, Senator Kohl and I sponsored the Senate companion bill to 
the Hutchinson-Moran Privacy Commission Act. This bill would have 
created a commission to study privacy issues in both the government and 
the private sector. The House bill failed a suspension vote by a narrow 
margin. There was a lack of consensus on whether a commission was 
warranted for the private sector issues being deliberated by the 
Congress. There was no disagreement, however, on the need for a 
commission to study the government's management of citizens' personal 
privacy. Many privacy advocates believe that the Privacy Act of 1974 
and other laws addressing government privacy practices need to be 
updated, but we need a better understanding of the extent of the 
problem and of what exactly needs to be done.
  Federal, State, and local governments collect, use, and distribute a 
large quantity of personal information for legitimate purposes. Yet 
because governments operate under different incentives and under a 
different legal relationship than the private sector, they may pose 
unique privacy problems. Unlike businesses, governments collect 
personal information under the force of law. Furthermore, governments 
do not face the market incentives that can discourage information 
collection or sharing. With the power and authority of government and 
the breadth of information it collects comes the potential for mistakes 
or abuse. The risk of privacy violations could also threaten to 
undermine the public's confidence in e-Government, our effort to make 
government more accessible and responsive to citizens through the 
Internet. In fact, according to a recent Pew Internet and American Life 
report, only 31 percent of Americans say they trust the government to 
do the right thing most of the time or all of the time.



  The last Federal privacy commission operated over 25 years ago, from 
1975 to 1977. Since then, there have been enormous leaps in technology. 
Today, a few keystrokes on a computer hooked up to the Internet can 
produce a quantity of information that was unimaginable in 1975. The 
question we must answer today is the same question Congress addressed 
in 1975: ``How can government achieve the correct balance between 
protecting personal privacy and allowing appropriate uses of 
information?'' The technological advances and other changes that have 
occurred since the 1970's, however, demand a reevaluation of the 
government privacy protections that we currently have in place. While 
we have passed laws laying out a framework for the Federal government, 
it is time to reassess the laws designed to safeguard citizens' privacy 
in light of the current state of technology.
  The Citizens' Privacy Commission will help us find the balance 
between protecting the privacy of individuals and permitting specific 
and appropriate uses of personal information for legitimate and 
necessary government purposes. The Commission will be directed to study 
a wide variety of issues relating to personal privacy and the 
government, including the collection, use, and distribution of personal 
information by Federal, State, and local governments, as well as 
current legislative and regulatory efforts to respond to privacy 
problems in the government. In the course of its examination of these 
issues, the Commission will also be required to hold at least three 
field hearings around the country and to set up a Web site to 
facilitate public participation and public comment. After 18 months of 
study, the Commission will submit a report to Congress on its findings, 
including any recommendations for legislation to reform or augment 
current laws. The Commission's report will be available for 
consideration by the next Congress.
  It is my hope that we all can work together to pass the Citizens' 
Privacy

[[Page 7592]]

Commission Act of 2001 to help us make informed and thoughtful 
decisions to protect the privacy of the American people. I would like 
to thank Senator Kohl, who has worked with me on a privacy commission 
bill for some time, as well as Senators Voinovich, Levin, Thurmond, 
Collins, and Fitzgerald for joining us as cosponsors. I urge my 
colleagues to support this important legislation.
  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. 851

       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 ``Citizens' Privacy Commission 
     Act of 2001''.

     SEC. 2. FINDINGS.

       Congress finds the following:
       (1) Americans are increasingly concerned about their civil 
     liberties and the security, collection, use, and distribution 
     of their personal information by government, including 
     medical records and genetic information, educational records, 
     health records, tax records, library records, driver's 
     license numbers, and other records.
       (2) The shift from a paper based government to an 
     information technology reliant government calls for a 
     reassessment of the most effective way to balance personal 
     privacy and information use, keeping in mind the potential 
     for unintended effects on technology development and privacy 
     needs.
       (3) Concerns have been raised about the adequacy of 
     existing government privacy laws and the adequacy of their 
     enforcement in light of new technologies.

     SEC. 3. ESTABLISHMENT.

       There is established a commission to be known as the 
     ``Citizens' Privacy Commission'' (in this Act referred to as 
     the ``Commission'').

     SEC. 4. DUTIES OF COMMISSION.

       (a) Study.--The Commission shall conduct a study of issues 
     relating to protection of individual privacy and the 
     appropriate balance to be achieved between protecting 
     individual privacy and allowing appropriate uses of 
     information, including the following:
       (1) The collection, use, and distribution of personal 
     information by Federal, State, and local governments.
       (2) Current efforts and proposals to address the 
     collection, use, and distribution of personal information by 
     Federal and State governments, including--
       (A) existing statutes and regulations relating to the 
     protection of individual privacy, including section 552a of 
     title 5, United States Code (commonly referred to as the 
     Privacy Act of 1974) and section 552 of that title (commonly 
     referred to as the Freedom of Information Act); and
       (B) privacy protection efforts undertaken by the Federal 
     Government, State governments, foreign governments, and 
     international governing bodies.
       (3) The extent to which individuals in the United States 
     can obtain redress for privacy violations by government.
       (b) Field Hearings.--The Commission shall conduct at least 
     3 field hearings in different geographical regions of the 
     United States.
       (c) Report.--
       (1) In general.--Not later than 18 months after the 
     appointment of all members of the Commission--
       (A) a majority of the members of the Commission shall 
     approve a report; and
       (B) the Commission shall submit the approved report to the 
     Congress and the President.
       (2) Contents.--The report shall include a detailed 
     statement of findings, conclusions, and recommendations 
     regarding government collection, use and disclosure of 
     personal information, including the following:
       (A) Findings on potential threats posed to individual 
     privacy.
       (B) Analysis of purposes for which sharing of information 
     is appropriate and beneficial to the public.
       (C) Analysis of the effectiveness of existing statutes, 
     regulations, technology advances, third-party verification, 
     and market forces in protecting individual privacy.
       (D) Recommendations on whether additional legislation or 
     regulation is necessary, and if so, specific suggestions on 
     proposals to reform or augment current laws and regulations 
     relating to citizens' privacy.
       (E) Analysis of laws, regulations, or proposals which may 
     impose unreasonable costs or burdens, raise constitutional 
     concerns, or cause unintended harm in other policy areas, 
     such as security, law enforcement, medical research and 
     treatment, employee benefits, or critical infrastructure 
     protection.
       (F) Cost analysis of legislative or regulatory changes 
     proposed in the report.
       (G) Recommendations on non-legislative solutions to 
     individual privacy concerns, including new technology, 
     education, best practices, and third party verification.
       (H) Recommendations on alternatives to government 
     collection of information, including private sector 
     retention.
       (I) Review of the effectiveness and utility of third-party 
     verification.
       (d) Additional Report.--Together with the report under 
     subsection (c), the Commission shall submit to the Congress 
     and the President any additional report of dissenting 
     opinions or minority views by a member of the Commission.
       (e) Interim Report.--The Commission may submit to the 
     Congress and the President an interim report approved by a 
     majority of the members of the Commission.

     SEC. 5. MEMBERSHIP.

       (a) Number and Appointment.--The Commission shall be 
     composed of 11 members appointed as follows:
       (1) 2 members appointed by the President.
       (2) 2 members appointed by the Majority Leader of the 
     Senate.
       (3) 2 members appointed by the Minority Leader of the 
     Senate.
       (4) 2 members appointed by the Speaker of the House of 
     Representatives.
       (5) 2 members appointed by the Minority Leader of the House 
     of Representatives.
       (6) 1 member, who shall serve as Chairperson of the 
     Commission, appointed jointly by the President, the Majority 
     Leader of the Senate, the Minority Leader of the Senate, the 
     Speaker of the House of Representatives, and the Minority 
     Leader of the House of Representatives.
       (b) Diversity of Views.--The appointing authorities under 
     subsection (a) shall seek to ensure that the membership of 
     the Commission has a diversity of experiences and expertise 
     on the issues to be studied by the Commission, such as views 
     and experiences of Federal, State, and local governments, the 
     media, the academic community, consumer groups, public policy 
     groups and other advocacy organizations, civil liberties 
     experts, and business and industry (including small business, 
     the information technology industry, the health care 
     industry, and the financial services industry).
       (c) Date of Appointment.--The appointment of the members of 
     the Commission shall be made not later than 30 days after the 
     date of the enactment of this Act.
       (d) Terms.--Each member of the Commission shall be 
     appointed for the life of the Commission.
       (e) Vacancies.--A vacancy in the Commission shall be filled 
     in the same manner in which the original appointment was 
     made.
       (f) Compensation; Travel Expenses.--Members of the 
     Commission shall serve without pay, but shall receive travel 
     expenses, including per diem in lieu of subsistence, in 
     accordance with sections 5702 and 5703 of title 5, United 
     States Code.
       (g) Quorum.--A majority of the members of the Commission 
     shall constitute a quorum, but a lesser number may hold 
     hearings.
       (h) Meetings.--
       (1) In general.--The Commission shall meet at the call of 
     the Chairperson or a majority of its members.
       (2) Initial meeting.--Not later than 45 days after the date 
     of the enactment of this Act, the Commission shall hold its 
     initial meeting.

     SEC. 6. DIRECTOR; STAFF; EXPERTS AND CONSULTANTS.

       (a) Director.--
       (1) In general.--Not later than 40 days after the date of 
     enactment of this Act, the Chairperson of the Commission 
     shall appoint a Director without regard to the provisions of 
     title 5, United States Code, governing appointments to the 
     competitive service.
       (2) Pay.--The Director shall be paid at the rate payable 
     for level III of the Executive Schedule established under 
     section 5314 of such title.
       (b) Staff.--The Director may appoint staff as the Director 
     determines appropriate.
       (c) Applicability of Certain Civil Service Laws.--
       (1) In general.--The staff of the Commission shall be 
     appointed without regard to the provisions of title 5, United 
     States Code, governing appointments in the competitive 
     service.
       (2) Pay.--The staff of the Commission shall be paid in 
     accordance with the provisions of chapter 51 and subchapter 
     III of chapter 53 of that title relating to classification 
     and General Schedule pay rates, but at rates not in excess of 
     the maximum rate for grade GS-15 of the General Schedule 
     under section 5332 of that title.
       (d) Experts and Consultants.--The Director may procure 
     temporary and intermittent services under section 3109(b) of 
     title 5, United States Code.
       (e) Staff of Federal Agencies.--
       (1) In general.--Upon request of the Director, the head of 
     any Federal department or agency may detail, on a 
     reimbursable basis, any of the personnel of that department 
     or agency to the Commission to assist it in carrying out this 
     Act.
       (2) Notification.--Before making a request under this 
     subsection, the Director shall give notice of the request to 
     each member of the Commission.

     SEC. 7. POWERS OF COMMISSION.

       (a) Hearings and Sessions.--The Commission may, for the 
     purpose of carrying out this Act, hold hearings, sit and act 
     at times and places, take testimony, and receive evidence as 
     the Commission considers appropriate. The Commission may 
     administer

[[Page 7593]]

     oaths or affirmations to witnesses appearing before it.
       (b) Powers of Members and Agents.--Any member or agent of 
     the Commission may, if authorized by the Commission, take any 
     action which the Commission is authorized to take by this 
     section.
       (c) Obtaining Official Information.--
       (1) In general.--Except as provided in paragraph (2), if 
     the Chairperson of the Commission submits a request to a 
     Federal department or agency for information necessary to 
     enable the Commission to carry out this Act, the head of that 
     department or agency shall furnish that information to the 
     Commission.
       (2) Exception for national security.--If the head of that 
     department or agency determines that it is necessary to guard 
     that information from disclosure to protect the national 
     security interests of the United States, the head shall not 
     furnish that information to the Commission.
       (d) Website.--The Commission shall establish a website to 
     facilitate public participation and the submission of public 
     comments.
       (e) Mails.--The Commission may use the United States mails 
     in the same manner and under the same conditions as other 
     departments and agencies of the United States.
       (f) Administrative Support Services.--Upon the request of 
     the Director, the Administrator of General Services shall 
     provide to the Commission, on a reimbursable basis, the 
     administrative support services necessary for the Commission 
     to carry out this Act.
       (g) Gifts and Donations.--The Commission may accept, use, 
     and dispose of gifts or donations of services or property to 
     carry out this Act, but only to the extent or in the amounts 
     provided in advance in appropriation Acts.
       (h) Contracts.--The Commission may contract with and 
     compensate persons and government agencies for supplies and 
     services, without regard to section 3709 of the Revised 
     Statutes (41 U.S.C. 5).
       (i) Subpoena Power.--
       (1) In general.--The Commission may issue subpoenas 
     requiring the attendance and testimony of witnesses and the 
     production of any evidence relating to any matter that the 
     Commission is empowered to investigate by section 4. The 
     attendance of witnesses and the production of evidence may be 
     required by such subpoena from any place within the United 
     States and at any specified place of hearing within the 
     United States.
       (2) Failure to obey a subpoena.--If a person refuses to 
     obey a subpoena issued under paragraph (1), the Commission 
     may apply to a United States district court for an order 
     requiring that person to appear before the Commission to give 
     testimony, produce evidence, or both, relating to the matter 
     under investigation. The application may be made within the 
     judicial district where the hearing is conducted or where 
     that person is found, resides, or transacts business. Any 
     failure to obey the order of the court may be punished by the 
     court as civil contempt.
       (3) Service of subpoenas.--The subpoenas of the Commission 
     shall be served in the manner provided for subpoenas issued 
     by a United States district court under the Federal Rules of 
     Civil Procedure for the United States district courts.
       (4) Service of process.--All process of any court to which 
     application is made under paragraph (2) may be served in the 
     judicial district in which the person required to be served 
     resides or may be found.

     SEC. 8. PRIVACY PROTECTIONS.

       (a) Destruction or Return of Information Required.--Upon 
     the conclusion of the matter or need for which individually 
     identifiable information was disclosed to the Commission, the 
     Commission shall either destroy the individually identifiable 
     information or return it to the person or entity from which 
     it was obtained, unless the individual that is the subject of 
     the individually identifiable information has authorized its 
     disclosure.
       (b) Disclosure of Information Prohibited.--The Commission--
       (1) shall protect individually identifiable information 
     from improper use; and
       (2) may not disclose such information to any person, 
     including the Congress or the President, unless the 
     individual that is the subject of the information has 
     authorized such a disclosure.
       (c) Proprietary Business Information and Financial 
     Information.--The Commission shall protect from improper use, 
     and may not disclose to any person, proprietary business 
     information and proprietary financial information that may be 
     viewed or obtained by the Commission in the course of 
     carrying out its duties under this Act.
       (d) Individually Identifiable Information Defined.--In this 
     section, the term ``individually identifiable information'' 
     means any information, whether oral or recorded in any form 
     or medium, that identifies an individual, or with respect to 
     which there is a reasonable basis to believe that the 
     information can be used to identify an individual.

     SEC. 9. BUDGET ACT COMPLIANCE.

       Any new contract authority authorized by this Act shall be 
     effective only to the extent or in the amounts provided in 
     advance in appropriation Acts.

     SEC. 10. TERMINATION.

       The Commission shall terminate 30 days after submitting a 
     report under section 4(c).

     SEC. 11. AUTHORIZATION OF APPROPRIATIONS.

       (a) In General.--There are authorized to be appropriated to 
     the Commission $3,000,000 to carry out this Act.
       (b) Availability.--Any sums appropriated pursuant to the 
     authorization in subsection (a) shall remain available until 
     expended.

  Mr. KOHL. Mr. President, I rise today to introduce the ``Citizens' 
Privacy Commission Act'' with my colleague, Senator Fred Thompson. 
Privacy has become an issue of paramount importance in this era of 
electronic commerce, advanced communications, and far-reaching business 
conglomerates. Our challenge is to clearly define privacy concerns and 
decide how best to protect privacy as technology and the economy move 
forward. However, even as we consider privacy guidelines for the 
private sector, the government should follow the highest privacy 
standards and demonstrate not only that they are preferable, but that 
they work.
  The measure we introduce today would create a Commission to examine 
how the various levels of government collect, use and share information 
about citizens. Although the recent privacy debate has been focused on 
online privacy and how the private sector collects and sells personally 
identifiable information, the government should not be overlooked. All 
levels of government have their own websites that are as capable of 
collecting sensitive information. There is also concern that the 
Privacy Act of 1974, which regulates how the government can collect, 
use and share personal information, is not being enforced or properly 
adhered to by federal government agencies. Furthermore, there is 
evidence that some government websites continue to collect information 
through the use of ``cookies'' in direct violation of former President 
Clinton's June 2000 executive order forbidding them to do so absent a 
``compelling reason'' to do so.
  Our proposal is simple, and its goals are modest and meaningful. 
Specifically, our measure creates an 11 member, bipartisan panel to 
study data collection practices, privacy protection standards, and 
existing privacy laws that apply to government collection and use of 
personal information. We also ask the Commission to examine pending 
privacy initiatives before Congress. Furthermore, we ask the Commission 
to determine if federal legislation is needed, and what impact new 
privacy laws would be. Finally, we direct the Commission to detail its 
findings and recommendations in a Final Report to be issued 18 months 
after enactment.
  There is ample precedent for this Commission. In the mid-1970's, the 
privacy debate focused on government collection and misuse of personal 
data. Ultimately, Congress enacted the Freedom of Information Act, the 
Privacy Act, and the Privacy Study Commission. Since that time, 
however, very little attention has been paid to genuine concerns about 
government use of sensitive personal information. Having passed 
critical legislation in the 1970s, many people felt satisfied that the 
issue was taken care of. Unfortunately, we have grown lax about 
policing ourselves in this area. This bill will right the course and 
change that. In fact, this legislation provides us with the opportunity 
to establish a model of privacy protection. The intellectual capital 
created by the work of this Commission will help us set a responsible 
example for the private sector.
  Privacy protection is a unique struggle, cutting across the public 
and private sector and involving virtually every sector of our nation's 
economy. Perhaps there is no possibility of a universal principle 
defining necessary privacy protections. But the federal government has 
an unparalleled opportunity to try to craft a set of guidelines for 
privacy protection that can serve as a model. We believe the time has 
come for Congress to enact reasonable and thoughtful privacy 
legislation. This legislation is a sensible first step in that process.
  In closing, let me be clear that this bill is neither a ploy to 
prevent the enactment of more specific privacy proposals, nor a 
stalling tactic to suspend discussion of privacy protection until the 
Commission publishes its final report. Rather, this legislation is both 
a

[[Page 7594]]

genuine effort to gather information on this increasingly complex topic 
and a plan to accomplish something positive in this field. This is 
legislation that can and should be passed by the Congress. Therefore, I 
truly hope we can move quickly to enact this measure into law, so that 
the Commission can get to work as soon as possible.
                                 ______
                                 
      By Mrs. FEINSTEIN (for herself, Mr. Thomas, Mr. Leahy, Mr. 
        Jeffords, Mr. Lieberman, Mr. Levin, Mr. Wellstone, Mrs. Boxer, 
        Mr. Akaka, Mr. Feingold, Mr. Kennedy, Mrs. Murray, and Mr. 
        Torricelli):
  S. 852. A bill to support the aspirations of the Tibetan people to 
safeguard their distinct identity; to the Committee on Foreign 
Relations.
  Mrs. FEINSTEIN. Mr. President, I rise today to address the tragedy 
that is unfolding in Tibet and, alongside Senators Thomas, Leahy, 
Jeffords, Lieberman, Levin, Wellstone, Boxer, Akaka, Feingold, Kennedy, 
Murray, and Toricelli introduce the Tibetan Policy Act of 2001.
  This legislation is intended to safeguard the legitimate aspirations 
of the Tibetan people in their struggle to preserve their cultural and 
religious identity, and to encourage dialogue between the Dalai Lama or 
his representative and the Government of the People's Republic of China 
about the future of Tibet.
  As many of my colleagues are aware, I have worked for well over a 
decade, since before I came to the Senate, to find the right balance 
for establishing a lasting, constructive dialogue between Chinese and 
Tibetan leaders. I have tried to do so with the best interests of both 
sides in mind. For years, I have tried to build trust and improve 
communication between Chinese and Tibetan leaders.
  For me this is very personal. I first met the Dalai Lama in 1978. I 
have watched him, I have seen him, I have talked with him many, many 
times.
  The Dalai Lama has pledged, over and over again, that what he wants 
is ``one-country, two systems'' approach, whereby Tibetans could live 
their life, practice their religion, educate their children, and 
maintain their language with dignity and respect among the Han Chinese 
people.
  I have had the opportunity to speak, at great length, with the 
President of China and other senior members of the Chinese leadership 
about Tibet.
  For years, I believed compromise, good will, and moderation were the 
right tools for tearing down obstacles and building cooperation between 
the peoples of China and Tibet.
  I have even carried messages between the Dalai Lama and the President 
of China seeking to bring the two together.
  In 1997, for example, I carried a letter from the Dalai Lama to 
President Jiang which, in part, stated that ``I have, for my part, 
openly and in confidence conveyed to you that I am not demanding 
independence for Tibet, which I believe is fundamental to the Chinese 
government.'' The letter also suggested that the Dalai Lama and 
President Jiang meet to discuss relations between the Tibetans and the 
Chinese government, and the ``maintenance and enhancement of those 
cultural, civic, and religious institutions that are so important to 
the Tibetan people and others throughout the world.''
  What I got back was essentially that the Dalai Lama was just a 
splittist and that his word was not good.
  I, for one, believe he is sincere, in his non-violence, in his 
dedication to being a monk, in his concern for the Tibetan people, 
heritage, and religion.
  Yet Beijing has consistently ignored promises to preserve indigenous 
Tibetan political, cultural and religious systems. Indeed, Beijing has 
not kept its commitments made twice by China's paramount leaders--Deng 
Xiaoping in 1979 and Jiang Zemin in 1997.
  I believe that the time has come for the United States government to 
increase our attention to enhanced Tibetan cultural and religious 
autonomy.
  And I feel that I can no longer, in conscience, sit quietly and allow 
the situation in Tibet, the wiping away of Tibetan culture from the 
Tibetan Plateau, in fact, to deteriorate further.
  In many ways, introducing this legislation, especially now, is a very 
difficult step for me. I have a strong, abiding interest in good 
relations between the United States and China, and I am fully aware 
that in the current environment there will be many in China who would 
rather dismiss this legislation out of hand than work together to 
address the underlying issues.
  But, the many reasonable overtures made by me, many of my colleagues 
in Congress, and other individuals and organizations throughout the 
world to work together with China over the past several years to 
address this issue have thus far failed to persuade Beijing to 
reconsider its approach to Tibet.
  And there does not appear to be a ``good time'' in U.S.-China 
relations to introduce this legislation.
  So I would say this to my friends in China that as they consider this 
legislation and its intent: I take this action now because I and many 
of my colleagues are at the point where we feel that this legislation 
is necessary to open Beijing's eyes to a simple truth: honoring the 
basic rights of minorities in China is not a threat to China's 
sovereignty, and running roughshod over its own citizens is not in 
China's best interest.
  I say this because many senior Chinese leaders, including Mao Zedong, 
Zhou En Lai, Deng Xiaoping, Hu Yaobang, and Jiang Zemin have 
acknowledged as much in the past.
  And I say this because the aspirations of the Tibetan people are not 
for independence, but for autonomy and respect for their cultural and 
religious institutions. As both the letter I conveyed to President 
Jiang in 1997 and the Dalai Lama's statement on the 41st Anniversary of 
the Tibetan National Uprising stated, ``my approach envisages that 
Tibet enjoy genuine autonomy within the framework of the People's 
Republic of China . . . such a mutually beneficial solution would 
contribute to the stability and unity of China, their two most 
important priorities, while at the same time the Tibetans would be 
ensured of their basic right to preserve their own civilization and to 
protect the delicate environment of the Tibetan plateau.''
  And I say this because I recognize that China is a rising great 
nation, with a rich culture and long history. Careful reading of its 
history shows that China, like the United States, draws real strength 
from its diversity, from its cultural, religious, and ethnic 
multiplicity.
  But, I am now convinced China's leadership will not modify its 
behavior in Tibet until it becomes crystal clear that China's behavior 
risks tarnishing its international image and burdening China with 
tangible costs.
  Unfortnately, the situation in Tibet today is dreadful, and promises 
only to get worse. Beijing is pursuing policies that threaten the 
Tibetan people's very existence and distinct identity, and Chinese 
security forces hold the region in an iron grip.
  As Secretary Powell stated in his confirmation hearing before the 
Foreign Relations Committee. ``It is a very difficult situation right 
now with the Chinese sending more and more Han Chinese in to settle 
Tibet.'' Chinese settlers are flooding into Tibet, displacing ethnic 
Tibetans, guiding development in ways that clash with traditional 
Tibetan needs and values, and monopolizing local resources.
  I do not want to debate the complex historical interactions that 
characterize the history of relations between China and Tibet. I am not 
interested in arguing about events in the past. What I am interested in 
is the quality of life and the right to exist as these concepts apply 
to Tibetans and Chinese today.
  And, without question, a strong case can be made that Tibet has fared 
poorly under Chinese stewardship during the past fifty years: Beijing 
has consistently ignored promises to preserve indigenous Tibetan 
political, cultural and religious systems and institutions, despite 
having formally guaranteed these rights in the 1951 Seventeen Point 
Agreement that incorporated Tibet into China. And, as I stated earlier, 
Beijing has never seriously moved

[[Page 7595]]

itself to carry through on promises to find solutions to the Tibet 
problem, promises made at least twice by China's paramount leaders, 
Deng Xiaoping in 1979 and Jiang Zemin in 1997. Tibet has been the scene 
of many grassroots movements protesting unwelcome Chinese intrusions 
and policies since 1956, when Beijing first began seriously disrupting 
Tibetan society by forcefully imposing so-called ``democratic reforms'' 
in the region. China's response to Tibetan protests has typically been 
violent, excessive, and unrestrained. In 1959, Beijing viciously and 
bloodily suppressed the massive popular protest known as the Lhasa 
Uprising. Indeed, it is estimated that nearly 1.2 million Tibetans died 
at the hands of Chinese forces during the worst years of violence, 
between 1956 and 1976. International commissions and third-party courts 
of opinion, most notably the International Commission of Jurists and 
numerous United Nations resolutions, consistently pointed fingers at 
China as a violator in Tibet of fundamental human rights and of the 
basic principles of international law.
  According to the 2000 State Department Country Report on Human Rights 
Practices: Chinese Government authorities continued to commit numerous 
serious human rights abuses in Tibet, including instances of torture, 
arbitrary arrest, detention without public trial, and lengthy detention 
of Tibetan nationalists for peacefully expressing political or 
religious views. Tight controls on religion and on other fundamental 
freedoms continued and intensified during the year.
  And, as Human Rights Watch/Asia reports, China's activities are 
targeting not just the present, but Tibet's future as well: Children in 
the Tibetan capital, Lhasa, are being discouraged from expressing 
religious faith and practicing devotional activities as part of the 
authorities' campaign in middle schools and some primary schools. 
Children aged between seven and thirteen in schools targeted by the 
campaign are being told that Tibetan Buddhist practice is `backward 
behavior' and an obstacle to progress. In some schools, children are 
given detention of forced to pay fines when they fail to observe a ban 
on wearing traditional Buddhist ``protection cords.''
  Corrupt officials. Oppressive police tactics and midnight arrests. 
Seizure and imprisonment without formal charges. Beatings and 
unexplained deaths while in custody. The steady grinding down of 
Tibetan cultural and religious institutions. The list of abuses in 
Tibet goes on and on. There is no need for me to repeat them here.
  I say all this as one who wants to work with China's leadership to 
help find a solution to this, and other, problems, and see a positive 
relationship between the U.S. and China, and between the people of 
China and the people of Tibet.
  I want to be a positive force for bringing Tibetan and Chinese 
leaders to the table for face-to-face dialog.
  It is not my intention with this legislation to merely point fingers 
and lay blame. My intent in introducing the Tibetan Policy Act of 2001 
is not to stigmatize or chastise China.
  My intent in introducing the Tibetan Policy Act of 2001 is to place 
the full faith of the U.S. Government behind efforts to preserve the 
distinct cultural, religious and ethnic autonomy of the Tibetan people.
  Specifically, the Tibetan Policy Act of 2001: Outlines Tibet's unique 
historical, cultural and religious heritage and describes the efforts 
by the United States, the Dalai Lama, and others to initiate dialogue 
with China on the status of Tibet. Codifies the position of Special 
Coordinator for Tibetan Issues at the Department of State, assures that 
relevant U.S. Government reports will list Tibet as a separate section 
under China and that the Congressional-Executive Commission on the 
People's Republic of China will hold Beijing to acceptable standards of 
behavior in Tibet. Authorizes $2.75 million for humanitarian assistance 
for Tibetan refugees, scholarships for Tibetan exiles, and human rights 
activities by Tibetan non-governmental organizations. Establishes U.S. 
policy goals for international economic assistance to and in Tibet to 
ensure that ethnic Tibetans benefit from development policies in Tibet. 
Calls on the Secretary of State to make best efforts to establish an 
office in Lhasa, the Capital of Tibet. Provides U.S. support for 
consideration of Tibet at the United Nations. Ensures that Tibetan 
language training is available for foreign service officers. Highlights 
concerns about the lack of religious freedom in Tibet by calling on 
China to cease activities which attack the fundamental characteristics 
of religious freedom in Tibet.
  In addition, the Tibet Policy Act expresses the Sense of the Congress 
that: The President and the Secretary of State should initiate steps to 
encourage China to enter into negotiations with the Dalai Lama or his 
representatives on the question of Tibet and the cultural and religious 
autonomy of the Tibetan people. That the President and the Secretary of 
State should request the immediate and unconditional release of 
political or religious prisoners in Tibet; seek access for 
international humanitarian organizations to prisons in Tibet; and seek 
the immediate medical parole of Ngawang Choephel and other Tibetan 
prisoners known to be in ill-health. The United States will seek ways 
to support economic development, cultural preservation, health care, 
and education and environmental sustainability for Tibetans inside 
Tibet.
  The Tibetan Policy Act does not aim to punish anyone. I do not 
believe that threats or force will sway Beijing from its present 
course.
  But, I am convinced that we must send a clear message.
  I am under no illusion that passing the Tibetan Policy Act of 2001 
will immediately change the situation in Tibet.
  Nor am I under any illusion that changing current conditions in Tibet 
will be an easy process. It will be a long and difficult process 
requiring patience and perseverance.
  But I am hopeful that better, more effective efforts on our part and 
better coordination with like-minded members of the international 
community will encourage China to change its thinking and modify its 
behavior toward Tibet.
  To paraphrase an old Chinese proverb: you have to take a first step 
to start any journey. This legislation, I hope, is a first step in 
bringing together the Dalai Lama or his representative and the Chinese 
government to discuss the future of Tibet and to take action to 
safeguard the distinct cultural, religious, and social identity of the 
Tibetan people.
  I urge my colleagues here in the Senate, as well as my friends in 
China, to join with me in taking it.
                                 ______
                                 
      By Mrs. BOXER:
  S. 855. A bill to protect children and other vulnerable 
subpopulations from exposure to environmental pollutants, to protect 
children from exposure to pesticides in schools, and to provide parents 
with information concerning toxic chemicals that pose risks to 
children, and for other purposes; to the Committee on Environment and 
Public Works.
  Mrs. BOXER. Mr. President, today I am reintroducing a bill to protect 
children from the dangers posed by pollution and toxic chemicals in our 
environment. The Children's Environmental Protection Act, (CEPA), is 
based on the fact that children are not small adults. Children eat more 
food, drink more water, and breathe more air as a percentage of their 
body-weight than adults. Children also grow rapidly, and therefore are 
physiologically more vulnerable to toxic substances than adults. This 
makes them more susceptible to the dangers posed by those substances.
  How is this understanding that children suffer higher risks from the 
dangers posed by toxic and harmful substances taken into account in our 
environmental and public health standards? Do we gather and consider 
data that specifically evaluates how those substances affect children? 
If that data is lacking, do we apply extra caution when we determine 
the amount of toxics that can be released into the air and water, the 
level of harmful contaminants that may be present in our drinking 
water, or the amount of pesticides that may be present in our food?

[[Page 7596]]

  In most cases, the answer to all of these questions is ``no.'' In 
fact, most of these standards are designed to protect adults rather 
than children. In most cases, we do not even have the data that would 
allow us to measure how those substances specifically affect children. 
And, in the face of that uncertainty, we generally assume that what we 
don't know about the dangers toxic and harmful substances pose to our 
children won't hurt them. We generally don't apply extra caution to 
take account of that uncertainty.
  CEPA would change the answers to those questions from ``no'' to 
``yes.'' It would childproof our environmental laws. CEPA is based on 
the premise that what we don't know about the dangers toxic and harmful 
substances pose to our children may very well hurt them.
  CEPA would require the Environmental Protection Agency (EPA) to set 
environmental and public health standards to protect children. It would 
require EPA to explicitly consider the dangers that toxic and harmful 
substances pose to children when setting those standards. Finally, if 
EPA discovers that it does not have specific data that would allow it 
to measure those dangers, EPA would be required to apply an additional 
safety factor, an additional measure of caution, to account for that 
lack of information. The Safe Drinking Water Act Amendments of 1996 
included my amendment to require EPA to set drinking water standards at 
safe levels for children. All of our environmental laws should reflect 
the special needs of children. CEPA would ensure that children's health 
risks are properly taken into account.
  This process would, I acknowledge, take some time. So, while EPA is 
in the process of updating the standards, CEPA would provide parents 
and teachers with a number of tools to immediately protect their 
children from toxic and harmful substances.
  First, CEPA would require EPA to provide all schools and day care 
centers that receive federal funding a copy of EPA's guide to help 
schools adopt a least toxic pest management policy. CEPA would also 
prohibit the use of dangerous pesticides--those containing known or 
probably carcinogens, reproductive toxins, acute nerve toxins and 
endocrine disrupters--in those areas. Under CEPA, parents would also 
receive advance notification before pesticides are applied on school or 
day care center grounds.
  Second, CEPA would expand the federal Toxics Release Inventory (TRI) 
to require the reporting of toxic chemical releases that may pose 
special risks to children. In particular, CEPA provides that releases 
of small amounts of lead, mercury, dioxin, cadmium and chromium be 
reported under TRI. These chemicals are either highly toxic, persist in 
the environment or can accumulate in the human body over many years--
all features that render them particularly dangerous to children. Lead, 
for example, will seriously affect a child's development, but is still 
released into the environment through lead smelting and waste 
incineration. CEPA would then require EPA to identify other toxic 
chemicals that may present special risks to children, and to provide 
that releases of those chemicals be reported under TRI.
  Third, CEPA would direct EPA to create a list of recommended safer-
for-children products that minimize potential risks to children.
  Finally, CEPA would require EPA to create a family right-to-know 
information kit that would include practical suggestions to help 
parents reduce their children's exposure to toxic and harmful 
substances in the environment.
  My CEPA bill is based on the premise that what we don't know about 
the dangers that toxic and harmful substances pose to our children may 
very well hurt them. It would require EPA to apply caution in the face 
of that uncertainty. And, ultimately, it would childproof our 
environmental laws to ensure that those laws protect the most 
vulnerable among us--our children.
  I encourage my colleagues to support this bill.
                                 ______
                                 
      By Mr. KERRY (for himself, Mr. Bond, Mr. Cleland, Ms. Landrieu, 
        Mr. Bennett, Mr. Levin, Mr. Lieberman, Mr. Harkin, Mr. 
        Bingaman, Mr. Enzi, and Ms. Cantwell):
  S. 856. A bill to reauthorize the Small Business Technology Transfer 
Program, and for other purposes; to the Committee on Small Business.
  Mr. KERRY. Mr. President, today I rise to introduce legislation to 
reauthorize the Small Business Administration's Small Business 
Technology Transfer, STTR, Program.
  The STTR program funds cooperative R&D projects between small 
companies and research institutions as an incentive to advance the 
nation's technological progress. For those of us who were here when 
Congress created this program in 1992, we will remember that we were 
looking for ways to move research from the laboratories to market. What 
could we do to keep promising research from stagnating in Federal labs 
and research universities? Our research in this country is world 
renowned, so it wasn't a question of good science and engineering. We, 
without a doubt, have one of the finest university systems in the 
world, and we have outstanding research institutions. What we needed 
was more development, development of innovative technology. We needed a 
system that would take this research and find ways it could be applied 
to everyday life and national priorities. One such company is Sterling 
Semiconductor. Sterling, in conjunction with the University of 
Colorado, has developed silicon carbide wafers for use in 
semiconductors that can withstand extreme temperatures and conditions. 
In addition to defense applications, these wafers can be used for 
everything from traffic lights to automobile dashboards and 
communications equipment.
  With technology transfer, it was not just the issue of the tenured 
professor who risked security if he or she left to try and 
commercialize their research; it was also an issue of creating 
businesses and jobs that maximized the contributions of our scientists 
and engineers once they graduated. There simply weren't enough 
opportunities at universities and labs for these bright individuals to 
do research and development. The answer was to encourage the creation 
of small businesses dedicated to research, its development, and 
ultimately moving that research out of the lab and finding a commercial 
application.
  We knew that the SBA's existing Small Business Innovation Research, 
SBIR, program had proven to be extremely successful over the previous 
10 years, so we established what is now known as the Small Business 
Technology Transfer program. The STTR program complements the SBIR 
program. Whereas the SBIR program funds R&D projects at small 
companies, STTR funds cooperative R&D projects between a small company 
and a research institution, such as a university or federally funded 
R&D lab. The STTR program fosters development and commercialization of 
ideas that either originate at a research institution or require 
significant research institution involvement, such as expertise or 
facilities, for their successful development.
  This has been a very successful program. One company, Cambridge 
Research Instruments of Woburn, Massachusetts, has been working on an 
STTR project with the Marine Biological Lab in Woods Hole. They have 
developed a liquid crystal-based polarized light microscope for 
structural imaging. While that is a mouthful, I'm told that it helps in 
manufacturing flat screen computer monitors, and even helps improve the 
in vitro fertilization procedure. Together this company and the lab 
expect to have sales in excess of $1 million dollars next year from 
this STTR project.
  As this example illustrates, the STTR program serves an important 
purpose for this country's research and development, our small 
businesses, our economy, and our nation. The program is set to expire 
at midnight on Sunday, September 30th. By the way, we absolutely have 
no intention of letting reauthorization get down to the wire, which was 
the unfortunate fate of the

[[Page 7597]]

reauthorization of the SBIR program last year. I have worked in 
partnership with Senator Bond to develop this legislation, and as part 
of the process we have consulted with and listened to our friends in 
the House, both on the Small Business Committee and the Science 
Committee. We do not see this legislation as contentious, and we have 
every intention of seeing this bill signed into law well before 
September.
  Shaping this legislation has gone beyond policy makers; we have 
reached out to small companies that conduct the STTR projects and 
research universities and Federal labs. On my part, I sponsored two 
meetings in Massachusetts on March 16th to discuss the STTR program. At 
my office in Boston, there was a very helpful discussion with six of 
Massachusetts' research universities expressing what they like and 
dislike about the program, and why they use it, or don't use it more. 
The meeting included the licensing managers from Boston University, 
Harvard, MIT, Northeastern University, and the University of 
Massachusetts. They said they need to hear more about the STTR program 
and have more outreach to their scientists and engineers so that they 
understand when and how to apply for the program. Based on their 
suggestions, we've included an outreach mandate in our bill. In 
addition, we're trying to provide SBA with more resources in its Office 
of Technology to be responsive to the concerns of STTR institutions and 
small businesses.
  Later that day, my office was part of a meeting in Newton at 
Innovative Training Systems in which about 20 leaders and 
representatives of small high-tech companies talked about the SBIR and 
STTR programs. They make a tremendous contribution to the economy and 
state of Massachusetts. They said that the Phase II award for STTR 
should be raised form $500,000 to $750,000 to be consistent with the 
SBIR program. Otherwise, since a minimum of 30 percent of the award 
goes to the university partner, it was too little money to really 
develop the research.
  As I said, we listened to them. And we also listened to what the 
program managers of the participating agencies had to say. Agencies 
participate in this program if their extramural R&D budget is greater 
than $1 billion. Consequently, there are five eligible agencies: the 
Department of Defense, the Department of Energy, the National 
Aeronautics and Space Administration, the Department of Health and 
Human Services, and the National Science Foundation. For the STTR 
projects, they set aside .15 percent of their extramural R&D budget. 
The comes to about $65 million per year invested in these 
collaborations between small business and research institutions.
  Combining all the suggestions for improvement, the STTR Program 
Reauthorization Act of 2001 does the following:
  1. It reauthorizes the program for nine years, setting the expiration 
date for September 30th, 2010.
  2. Starting in two years, FY2003, it raises in small increments the 
percentage that Departments and Agencies set aside for STTR R&D. In 
FY2004, the percentage increases from .15 percent to .3 percent. After 
three years, in FY2007, the bill raises the percentage from .3 percent 
to .5 percent;
  3. Starting in two years, FY2003, the legislation raises the Phase II 
grant award amount from $500,000 to $750,000;
  4. It requires the participating agencies to implement an outreach 
program to research institutions in conjunction with any such outreach 
done with the SBIR program;
  5. As last year's legislation did for the SBIR program, this bill 
strengthens the data collection requirements regarding awards and the 
data rights for companies and research institutions that conduct STTR 
projects. The goal is to collect better information about the companies 
doing the projects, as well as the research and development, so that we 
can measure success and track technologies.
  While I believe that these changes reflect common sense and are 
reasonable, I would like to discuss two of the proposed changes.
  First, I would like to talk about reauthorizing the program for nine 
years. The STTR program was a pilot program when it was first enacted 
in 1992. Upon review in 1997, the results of the program were generally 
good and the program was reauthorized that year. A more recent review 
and study of the program shows that the program has become more 
successful as it has had more time to develop. Specifically, the 
commercialization rate of the research is higher than for most research 
and development expenditures. Further, universities and research is 
higher than for most research and development expenditures. Further, 
universities and research institutions have developed excellent working 
relationships with small businesses, and the program has also had good 
geographic diversity, involving small companies and research 
institutions throughout the country. The nine-year reauthorization will 
allow the agencies, small businesses and universities to gradually ramp 
up to the higher percentage in a predictable and orderly manner.
  Second, I would like to talk about the gradual, incremental increases 
in the percentages reserved for STTR contracts and the increase in the 
Phase II awards. When we reached out to the small businesses and the 
research institutions that conduct STTR projects, and the program 
managers of the five agencies that participate in the STTR program, we 
heard two recurring themes: one, raise the amount of the Phase II 
awards; and two, increase the amount of the percentage reserved for 
STTR projects.
  Speaking to the first issue, we heard that the Phase II awards of 
$500,000 generally are not sufficient for the research and development 
projects and should be increased to $750,000, the same as the SBIR 
Phase II awards, to make the awards worth applying for the small 
businesses and research institutions.
  As for the second issue, we were told that the percentage of .15 
reserved for STTR awards needed to be increased in order to better meet 
the needs of the agencies. Last year, that .15 percent of the five 
agencies' extramural research and development budgets amounted to a 
total $65 million dollars available for small businesses and research 
institutions to further develop research and transfer technology from 
the lab to market through the STTR program. Less than a quarter of one 
percent to help strengthen this country's technological progress is not 
extravagant; in fact, it is not adequate support for this important 
segment of the economy.
  Nevertheless, we are very conscientious about the needs of the 
departments and agencies to meet their missions for the nation and have 
proposed gradual increases that take into full consideration the 
realities of implementing the changes for the agencies and departments 
that participate in the program. Consequently, the legislation does not 
increase the percentage for STTR awards until two full years after the 
program has been reauthorized.
  We are also conscientious about the fact that we want more research, 
not less, so we have timed the increase of the Phase II awards to 
coincide with the initial percentage increase reserved for STTR 
projects.
  Overall, we believe this gradual increase will help encourage more 
innovation and greater cooperation between research institutions and 
small businesses. As the program requires, at least 30 percent of these 
additional funds will go to university and research institutions. Not 
only do the universities and research institutions that collaborate 
with small businesses get 30 percent of the STTR award money for each 
contract, they also benefit in that they often receive license fees and 
royalties. We are also conscientious about being fiscally responsible, 
the percentage increases will have no budget implication since it does 
not increase the amount of the money spent. Rather, it ultimately, 
after six years, redirects one half of one percent to this very 
successful program which benefits the economy overall.
  This bill will ensure that this successful program is continued and 
increased. It will also provide Congress with important information and 
data

[[Page 7598]]

on the program and encourage more outreach to small businesses and 
research institutions.
  I want to encourage my colleagues to learn about this program, to 
find out the benefits to their state's hi-tech small businesses and 
research universities and labs, and to join me in passing this 
legislation in the Senate as soon as possible. To my friend from 
Missouri, Senator Bond, I want to thank you and your staff for working 
with me and my staff to build this country's technological progress. I 
also want to thank all of the cosponsors: Senators Cleland, Landrieu, 
Bennett, Levin, Lieberman, Harkin, bingaman, Enzi, and Cantwell.
  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. 856

       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 ``Small Business Technology 
     Transfer Program Reauthorization Act of 2001''.

     SEC. 2. EXTENSION OF PROGRAM AND EXPENDITURE AMOUNTS.

       (a) In General.--Section 9(n)(1) of the Small Business Act 
     (15 U.S.C. 638(n)(1)) is amended to read as follows:
       ``(1) Required expenditure amounts.--
       ``(A) In general.--With respect to each fiscal year through 
     fiscal year 2010, each Federal agency that has an extramural 
     budget for research, or research and development, in excess 
     of $1,000,000,000 for that fiscal year, shall expend with 
     small business concerns not less than the percentage of that 
     extramural budget specified in subparagraph (B), specifically 
     in connection with STTR programs that meet the requirements 
     of this section and any policy directives and regulations 
     issued under this section.
       ``(B) Expenditure amounts.--The percentage of the 
     extramural budget required to be expended by an agency in 
     accordance with subparagraph (A) shall be--
       ``(i) 0.15 percent for each fiscal year through fiscal year 
     2003;
       ``(ii) 0.3 percent for each of fiscal years 2004 through 
     2006; and
       ``(iii) 0.5 percent for fiscal year 2007 and each fiscal 
     year thereafter.
       (b) Conforming Amendment.--Section 9 of the Small Business 
     Act (15 U.S.C. 638) is amended in subsections (b)(4) and 
     (e)(6), by striking ``pilot'' each place it appears.

     SEC. 3. INCREASE IN AUTHORIZED PHASE II AWARDS.

       (a) In General.--Section 9(p)(2)(B)(ix) of the Small 
     Business Act (15 U.S.C. 638(p)(2)(B)(ix)) is amended--
       (1) by striking ``$500,000'' and inserting ``$750,000''; 
     and
       (2) by inserting before the semicolon at the end the 
     following: ``, and shorter or longer periods of time to be 
     approved at the discretion of the awarding agency where 
     appropriate for a particular project''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall be effective beginning in fiscal year 2004.

     SEC. 4. AGENCY OUTREACH.

       Section 9(o) of the Small Business Act (15 U.S.C. 638(o)) 
     is amended--
       (1) in paragraph (12), by striking ``and'' at the end;
       (2) in paragraph (13), by striking the period at the end 
     and inserting a semicolon; and
       (3) by adding at the end the following:
       ``(14) implement an outreach program to research 
     institutions and small business concerns for the purpose of 
     enhancing its STTR program, in conjunction with any such 
     outreach done for purposes of the SBIR program; and''.

     SEC. 5. POLICY DIRECTIVE MODIFICATIONS.

       Section 9(p) of the Small Business Act (15 U.S.C. 638(p)) 
     is amended by adding at the end the following:
       ``(3) Modifications.--Not later than 120 days after the 
     date of enactment of this paragraph, the Administrator shall 
     modify the policy directive issued pursuant to this 
     subsection to clarify that the rights provided for under 
     paragraph (2)(B)(v) apply to all Federal funding awards under 
     this section, including the first phase (as described in 
     subsection (e)(6)(A)), the second phase (as described in 
     subsection (e)(6)(B)), and the third phase (as described in 
     subsection (e)(6)(C)).''.

     SEC. 6. STTR PROGRAM DATA COLLECTION.

       (a) In General.--Section 9(o) of the Small Business Act (15 
     U.S.C. 638(o)), as amended by this Act, is amended by adding 
     at the end the following:
       ``(15) collect, and maintain in a common format in 
     accordance with subsection (v), such information from 
     awardees as is necessary to assess the STTR program, 
     including information necessary to maintain the database 
     described in subsection (k).''.
       (b) Database.--Section 9(k) of the Small Business Act (15 
     U.S.C. 638(k)) is amended--
       (1) in paragraph (1)--
       (A) by inserting ``or STTR'' after ``SBIR'' each place it 
     appears;
       (B) in subparagraph (C), by striking ``and'' at the end;
       (C) in subparagraph (D), by striking the period at the end 
     and inserting ``; and''; and
       (D) by adding at the end the following:
       ``(E) with respect to assistance under the STTR program 
     only--
       ``(i) whether the small business concern or the research 
     institution initiated their collaboration on each assisted 
     STTR project;
       ``(ii) whether the small business concern or the research 
     institution originated any technology relating to the 
     assisted STTR project;
       ``(iii) the length of time it took to negotiate any 
     licensing agreement between the small business concern and 
     the research institution under each assisted STTR project; 
     and
       ``(iv) how the proceeds from commercialization, marketing, 
     or sale of technology resulting from each assisted STTR 
     project were allocated (by percentage) between the small 
     business concern and the research institution.''; and
       (2) in paragraph (2)--
       (A) by inserting ``or an STTR program under subsection 
     (n)(1)'' after ``(f)(1)'';
       (B) in subparagraph (A)(iii), by inserting ``and STTR'' 
     after ``SBIR''; and
       (C) in subparagraph (D), by inserting ``or STTR'' after 
     ``SBIR''.
       (c) Simplified Reporting Requirements.--Section 9(v) of the 
     Small Business Act (15 U.S.C. 638(v)) is amended by inserting 
     ``or STTR'' after ``SBIR'' each place it appears.
       (d) Reports to Congress.--Section 9(b)(7) of the Small 
     Business Act (15 U.S.C. 638(b)(7)) is amended by striking 
     ``and (o)(9)'' and inserting ``, (o)(9), and (o)(15)''.

  Mr. BOND. Mr. President, I am pleased to join with Senator John 
Kerry, my colleague and ranking member on the Small Business Committee, 
in sponsoring legislation to reauthorize the Small Business Technology 
Transfer, STTR, Program. This program has proven itself to be highly 
effective. The bill we are introducing today acknowledges the success 
of the STTR Program by expanding it during the length of the 
reauthorization so that its benefits will increase in the coming years.
  The STTR Program was created in 1992 to stimulate technology transfer 
from research institutions to small firms while, at the same time, 
accomplishing the Federal government's research and development goals. 
The program is designed to convert the billions of dollars invested in 
research and development at our nation's universities, federal 
laboratories and nonprofit research institutions into new commercial 
technologies. It does this by joining the ideas and resources of 
research institutions with the commercialization experience of small 
companies.
  Each agency with an extramural research and development budget of 
more than $1 billion participates in the program. Currently, the 
Department of Defense, the National Institutes of Health, the National 
Aeronautics and Space Administration, NASA, the National Science 
Foundation, NSF, and the Department of Energy, DOE, have STTR Programs.
  To receive an award under the STTR Program, a research institution 
and a small firm jointly submit a proposal to conduct research on a 
topic that reflects an agency's mission and research and development 
needs. The proposals are then peer-reviewed and judged on their 
scientific, technical and commercial merit. Similar to the Small 
Business Innovation Research Program, awards are provided in three 
phases. Phase one awards are designed to determine the scientific and 
technical merit and feasibility of a proposed research idea, with 
funding for individual awards limited to $100,000. Phase two awards 
further develop research from phase one and emphasize the idea's 
commercialization potential, with individual awards up to $500,000. 
Phase three awards consist of non-Federal funds for the commercial 
application of the technology, non-STTR Federal funds for the 
commercialization of products or services intended for procurement by 
the Federal government, or non-STTR Federal funds for continued 
research and development of the technology.
  The benefits of fostering collaboration between research institutions 
and small firms are numerous. Small firms have shown themselves to be 
excellent at commercializing research when they are provided the 
opportunity to take advantage of the expertise and resources that 
reside in our nation's universities. A recent Small Business 
Administration Office of Advocacy report

[[Page 7599]]

reviewed the rate of return for research and development by large and 
small firms both with and without university partners. When these firms 
do not have university partners, their rate of return is 14 percent. 
When a collaboration is formed between universities and small firms, 
however, the rate of return jumps to 44 percent. By contrast, the rate 
of return only increases to 30 percent when large firms and 
universities collaborate.
  Moreover, partnerships between small firms and universities have led 
to world-class high-technology economic development. Numerous studies 
cite the emergence of Silicon Valley and the Route 128 corridor in 
Massachusetts as directly resulting from the partnerships and 
technology transfer that occurred, and are still occurring, among small 
firms, Stanford University and the Massachusetts Institute of 
Technology. The cooperation between industry and these universities has 
strengthened considerably our economic competitiveness in the world. 
The STTR Program seeks to foster this same type of economic development 
in the hundreds of communities around the country that contain 
universities and federal laboratories. And, the STTR Program has proven 
to be immensely successful at growing small firms from these types of 
partnerships.
  The Committee on Small Business has recently received data on the 
commercial success of small firms that received STTR awards between 
1995 and 1997. The results are truly outstanding. Of the 102 projects 
surveyed in that time-frame, 53 percent had either resulted in sales or 
the companies involved in the projects had received follow-on 
developmental funding for the technology. To date, these projects had 
resulted in $132 million from sales and $53 million in additional 
developmental funding. Moreover, the Committee has learned that the 
companies who had received these STTR awards are projecting an 
additional $186 million in sales in 2001 and an estimated additional 
$900 million in sales by 2005. These numbers are even more remarkable 
when one considers that it typically takes between 7 to 10 years to 
successfully commercialize new technologies.
  In addition to proving to be an amazing commercial success, the STTR 
Program has also provided high-quality research to the Federal 
Government. In the most recent published report of the General 
Accounting Office on the STTR Program, Federal agencies rated highly 
the technical quality of the proposals. The DOE, as an example, rated 
the quality of the proposed research in the top ten percent of all 
research funded by the Department.
  A good example of the benefits that the STTR Program provides to 
small firms and universities is the experience of Engineering Software 
Research and Development, Inc. in St. Louis, MO. Engineering Software, 
in partnership with Washington University in St. Louis, received a 
phase two award from the Air Force to develop an innovative method of 
analyzing the stresses placed on composite materials. While this 
technology is currently being used in the aeronautics industry, it has 
many other practical applications.
  The STTR Program permitted Dr. Barna Szabo, who had originated an 
algorithm he developed at Washington University, to transfer the 
technology to Engineering Software, which had the software 
infrastructure to transition the technology from an academic to a 
practical commercial application. According to Dr. Szabo, Engineering 
Software has received to date at an estimated $1.25 million in sales 
and follow-on developmental funding resulting from the technology 
funded by the STTR award and that the STTR Program was of great 
assistance in transferring the technology from the academic environment 
to actual use and application.
  Based on the proven success of the STTR Program to date, this 
legislation increases the funds allocated for the program. This 
increase is phased-in through the length of the reauthorization. When a 
program is working as well as the STTR Program, it would be a mistake 
if Congress did not build on its success.
  This is especially true for Federal investment in small business 
research and development. Despite report after report demonstrating 
that small businesses innovate at a greater rate than large firms, 
small businesses only receive less than four percent of all Federal 
research and development dollars. This number has remained essentially 
unchanged for the past 22 years. Increasing funds for the STTR Program 
sends a strong message that the Federal Government acknowledges the 
contributions that small businesses have made and will continue to make 
to government research and development efforts and to our nation's 
economy.
  I am pleased that my colleague Senator Kerry and I have worked 
together on this bi-partisan legislation. It is a good bill for the 
small business high-technology community and will ensure that our 
Federal research and development needs are well met in the next decade. 
When this bill is debated by the full Senate, I trust that it will 
receive the support of all of our colleagues.
  Ms. CANTWELL. Mr. President, research and development has been a 
fundamental driver of the growth of our economy. It is critical that we 
continue significant investment in R&D and improve commercialization of 
the research undertaken at our non-profit institutions.
  I thank the Small Business Committee ranking member John Kerry and 
Chairman Christopher Bond for taking a leadership role in reauthorizing 
the Small Business Technology Transfer program. The program is a 
companion to the very successful Small Business Innovation Research 
(SBIR) program which funds R&D projects undertaken by small businesses. 
Under the STTR program, the U.S. Departments of Defense, Energy, and 
Health and Human Services, the National Aeronautics and Space 
Administration, and the National Science Foundation must set-aside .15 
percent of their research dollars for award to small high technology 
firms that partner with non-profit research institutions.
  The STTR program is scheduled to expire on September 30, 2001. The 
Kerry-Bond bill, entitled the Small Business Technology Transfer 
Program Reauthorization Act of 2001, extends the program until 2010. In 
addition to extending the STTR program it gradually increases the 
percentage of Federal R&D funding going to the program from .15 percent 
to .5 percent over 9 years. There is also a provision to encourage 
agencies to increase outreach to small business and universities to 
promote the STTR Program.
  Many of our most successful businesses in the changing economy were 
only recently small businesses. Going back only 25 years, one of my 
State's largest employers, Microsoft, was a small business. Even today, 
many of the innovators driving the rapid industrial evolution work in 
small businesses. But the risk and expense of conducting serious R&D 
efforts can be beyond the means of many of these businesses.
  On the other side of the equation, the commercial value of non-profit 
research often remains unrealized because there are not adequate 
opportunities to bring researchers together with those who could best 
make the research into a marketable product.
  This program fills a very important need by bringing together the 
capabilities of our non-profit research institutions with the 
entrepreneurial spirit of our small businesses. The program holds great 
promise as one way to meet the scientific and technological challenges 
of our changing economy. And this program has already been successful 
throughout the United States. In my state alone over the past 5 years, 
52 grants have been awarded for work in biotechnology, medicine, fluid 
mechanics, chemistry, electronics and computer technologies. I am very 
pleased to be able to lend my support to this program and look forward 
to this bill moving rapidly into law.

[[Page 7600]]



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