[Congressional Record (Bound Edition), Volume 148 (2002), Part 11]
[Senate]
[Pages 15369-15374]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. JEFFORDS (for himself Mr. Bingaman, Mrs. Lincoln, and Mrs. 
        Murray):
  S. 2819. A bill to amend title XXI of the Social Security Act to 
permit qualifying States to use a portion of their unspent allotments 
under the State children's health insurance program to expand health 
coverage under that program or for expenditures under the Medicaid 
program, and for other purposes; to the Committee on Finance.
  Mr. JEFFORDS. Mr. President, today I am pleased to introduce the 
SCHIP Budget Allocation Bill of 2002. This important legislation 
addresses the allocation of budgeted but unspent SCHIP funds that are 
currently out of the reach of States and are scheduled to be returned 
to the treasury at the end of fiscal year 2002 under BIPA provisions. 
With our economy in recession, the healthcare needs of the pediatric 
Medicaid and SCHIP populations have not been in greater jeopardy in 
recent memory. Our bill will address several important and essential 
issues. First, it will financially reward those States that are doing 
an outstanding job with their SCHIP and Medicaid pediatric populations. 
Second, it will provide financial incentives to those States that have 
not yet achieved SCHIP eligibility standards. Third, it will provide 
additional Medicaid revenue, through an enhancement of the Federal 
Medicaid Assistant Percentage, FMAP, to States experiencing budget 
shortfalls due to the current recession. And lastly, it will protect 
children's healthcare services during this period of Medicaid cutbacks 
on benefits and services.
  SCHIP's first year of implementation was 1998. At that time program 
budgeting was not done based on an actuarial estimate of per capita 
program costs, but rather excessive funds were committed to insure 
adequate funding. What has evolved since 1998 is a surplus of budgeted 
funds whose allocation and fate has been determined by a complex State-
by-State budgeting process that allows for cross subsidization between 
States and has resulted in large sums of unspent funds to accumulate. 
An unintended consequence of this intricate budgeting process is that 
it allows States with unspent allocated funds and States with unspent 
redistributed funds to lose access to these funds at the end of this 
fiscal year. In total, over forty States will lose access to allocated 
monies, only to see budgeted funds diverted back to the treasury; money 
that could be used to shore up the health care needs of children in 
Medicaid. In reviewing available options, we see the opportunity to 
merge the original goals of SCHIP, namely to provide for the health 
care needs of as many children as possible, while addressing the major 
budget problems currently being experienced by most States. Our bill 
would accomplish this by allowing unspent SCHIP monies to be used to 
enhance the FMAP for State Medicaid services for pediatric and pregnant 
women beneficiaries. Prior to initiating and introducing this bill, we 
evaluated the SCHIP budget, with CMS and CBO data, and found that the 
program had adequate residual funds to allow for these monies to be 
used by States to weather these difficult economic times without 
financially damaging the actuarially projected needs of SCHIP.
  Our proposal has been reviewed in detail and endorsed by the American 
Academy of Pediatrics. This advocacy group shares our concern that 
unless decisive action is taken, access to health care for indigent 
children will suffer in our current economic climate. Today, please 
join with me and my colleagues, Senators Bingaman, Lincoln, and Murray 
in supporting this bill. We can not and must not allow children's 
health care to suffer during these difficult economic times.
                                 ______
                                 
      By Mrs. CARNAHAN (for herself and Mr. Leahy):
  S. 2820. A bill to increase the priority dollar amount for unsecured 
claims, and for other purposes; to the Committee on the Judiciary.
  Mrs. CARNAHAN. Mr. President, on behalf of myself and Senator Leahy, 
I am introducing legislation to protect the employees of corporations 
that declare bankruptcy. This bill will also put a stop to the 
outrageous practice of giving unearned bonuses to select individuals 
immediately before declaring bankruptcy. With the failures of Enron, 
and now WorldCom, Americans have seen how cruel bankruptcy can be for 
the employees who dedicated themselves to their companies. While some 
executives received extra pay just before the bankruptcy, workers were 
left holding the bag. Workers have faced mass layoffs. And in many 
cases, workers have been denied their rightful severance pay.
  I understand that bankruptcy is intended to shield corporations from 
their creditors while they restructure their business. However, I do 
not believe that corporations truly need protection from their own 
workers. It seems to be the other way around. Workers need greater 
protection from corporations that accept their labor and then refuse to 
pay.
  The legislation I am introducing today will allow employees, and 
former employees, to recover a greater share of the money that their 
company owes them. This bill also puts a stop to the indefensible 
practice of paying some executives large sums of money just before 
claiming that the company does not have the money to pay its average 
workers. Let me explain each of these provisions in detail.
  First, this bill increases the priority claim amount for employee 
wages and benefits to $13,500. Under current law, employees are only 
entitled to receive $4,650 for wages and benefits that they are owed. 
If their employers owes them more, for severance or other obligations, 
the employees must fight with all the other unsecured creditors in the 
restructuring process. In light of the Enron bankruptcy, where 
employees were owed average severance packages of $35,000, it is clear 
that the current limit must be increased as a matter of fairness.
  Let me be clear. This bill only affects employees who are owed money 
by their employer. Increasing the priority claim creates no new 
obligation for a company to pay severance or other compensation. It 
merely makes it possible for employees to recover more of what is 
rightfully owed to them. It is appropriate that employees are given a 
priority in recovering debts. Employees depend on their paychecks to 
buy food, pay the rent, and provide for their families. And unlike 
investors or creditors that can diversify their risks, workers cannot 
diversify their employment.
  In the case of the Enron bankruptcy, the parties have agreed that 
employees are entitled to collect, up front, $13,500 to cover wages, 
accrued vacation, contributions to benefit plans, and promised 
severance. This figure reflects a reasonable settlement. It recognizes 
the expenses that workers face as they seek new employment.
  This bill includes a second provision which is designed to restore 
funds to the bankrupt estate which were unjustly dispersed immediately 
prior to the bankruptcy. My legislation permits the bankruptcy court to 
recover excessive employee compensation paid in the 90 days preceding 
bankruptcy, if it determines that that compensation was out of the 
ordinary course or unjust enrichment. These funds would be

[[Page 15370]]

recovered for the benefit of the estate and its creditors.
  In the days leading up to its bankruptcy, Enron paid millions of 
dollars in so-called retention bonuses to executives. However, these 
executives actually had no obligation to stay with the company through 
its restructuring; indeed, most of them have since left. It is 
unacceptable for a company to pay millions to some employees, without 
any justification, and then weeks later claim that it cannot make basic 
severance payments to the vast majority of its workers. This amendment 
will ensure that bankruptcy courts have the authority to prevent such 
outcomes in the future.
  These are common sense reforms that protect employees and creditors 
faced with a corporate bankruptcy. In the wake of Enron and WorldCom, 
Americans are learning some very difficult lessons about the failures 
of large corporations. We ought to heed these lessons and ensure that 
workers and investors are better protected in the future. I encourage 
my colleagues to support this legislation. And I ask unanimous consent 
that the text of the legislation be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2820

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

     SECTION 1. FAIR TREATMENT OF COMPENSATION IN BANKRUPTCY.

       (a) Increased Priority Claim Amount for Employee Wages and 
     Benefits.--Section 507(a) of title 11, United States Code, is 
     amended--
       (1) in paragraph (3), by striking ``$4,000'' and inserting 
     ``$13,500''; and
       (2) in paragraph (4), by striking ``$4,000'' and inserting 
     ``$13,500''.
       (b) Recovery of Excessive Compensation.--Section 547 of 
     title 11, United States Code, is amended by adding at the end 
     the following:
       ``(h) The court, on motion of a party of interest, may 
     avoid any transfer of compensation made to a present or 
     former employee, officer, or member of the board of directors 
     of the debtor on or within 90 days before the date of the 
     filing of the petition that the court finds, after notice and 
     a hearing, to be--
       ``(1) out of the ordinary course of business; or
       ``(2) unjust enrichment.''.
                                 ______
                                 
      By Mr. WYDEN:
  S. 2822. A bill to prevent publicly traded corporations from issuing 
stock options to top management in a manner that is detrimental to the 
long-term interests of shareholders; to the Committee on Banking, 
Housing, and Urban Affairs.
  Mr. WYDEN. Mr. President, it seems like every morning, Americans wake 
up to another headline about the collapse of a big United States 
corporation. The failures have devastated the savings of millions of 
hardworking Americans, savings they were depending on for their 
retirement, or to pay for their kids' college education.
  When the smoke clears and the fall-out settles, the issue of stock 
options comes to the fore. Report after report details the massive 
fortunes amassed by the directors and top executives of so many of the 
companies that are at the center of the storm. So often, these 
executives were granted huge stock option packages, which they cashed 
out quickly for multimillion dollar payouts shortly before the company 
went over the brink.
  The landmark legislation that the Senate passed unanimously last 
week, and which I strongly supported, will curb significant corporate 
abuses and accounting scandals, but it does not touch the issues 
surrounding stock options. It is time the Senate acted to do so. 
Therefore, today I am introducing the Prevention of Stock Option Abuse 
Act.
  There is no question in my mind that some companies have abused stock 
options, using them as a vehicle for funneling large amounts of wealth 
to top executives. What's more, options have been granted in ways that 
fail to serve their intended purpose of aligning the interests of 
management with the long-term interests of the company. Instead, 
several of the massive option grants have created perverse incentives, 
enabling top executives to get fabulously rich by pumping up the 
company's short-term share price. The tactics they use to do so may 
jeopardize the company's long-term financial health, but by the time 
the long term impact is felt, the executives have already cashed out 
and left the firm.
  When an executive develops a big personal stake in options, it can 
lead to a big conflict of interest. Too often, the company's long-term 
interests take a back seat to the executive's desire for personal 
reasons to boost the short- term share price. When the betting is 
between massaging the numbers to ``manage'' quarterly profit 
projections and improving the quality of the business through such 
things as R&D investments, short-term profits, and the value of 
executive stock options, can be the odds-on favorite.
  But the abuse of stock options in the executive suite should not be 
taken as an indictment of stock options in general. I remain convinced 
that stock option plans, as long as they are broad-based plans that 
extend to rank-and-file employees as well as CEOs, can play a very 
important role in our economy. They can enable corporations to attract 
and retain good workers and top talent. And they can improve motivation 
and productivity, by giving employees a strong personal interest in the 
long-term success of the corporation.
  Therefore, the legislation I am introducing today aims to stop the 
abuses at the top while not gutting options that are so vital to rank-
and-file workers. It focuses on restoring the link between the long-
term interests of the company and those of senior management, and 
giving shareholders knowledge about and control over the stock options 
of corporate leaders.
  Specifically, the bill would direct the Securities and Exchange 
Commission to issue rules, applicable to all publicly traded companies, 
in three main areas.
  First, to increase shareholder influence and oversight with respect 
to grants of stock options, the bill calls for rules requiring 
shareholder approval of stock option plans. This would help prevent the 
all too common ``I'll-scratch-your-back-if-you-scratch-mine'' culture 
of clubby directors and top executives voting each other huge option 
packages with little or no shareholder input.
  Second, the bill contains tough provisions to ensure that stock 
options will provide incentives for corporate officers and directors to 
act in the best long-term interests of their corporations, rather than 
incentives to stimulate short-term run-ups in the stock price. It would 
do this by establishing substantial vesting periods for options and 
holding periods for stock shares, so that top executives do not have 
the ability to quickly cash out and jump ship.
  The holding period would be multi-tiered. Directors and officers 
would be allowed to sell up to one quarter of their shares six months 
after acquiring them, to permit a degree of diversification or to meet 
their current financial needs. But for the majority, they would be 
required to wait at least three years. And they would be required to 
hold on to some of their stock until at least six months after leaving 
the company.
  Third, and finally, to improve the transparency of stock option 
grants to directors and officers, the bill calls for rules to provide 
better and more frequent information to shareholders and investors. 
Shareholders deserve more information than that contained in the 
average footnote. Specifically, the bill would require stock option 
information to be reported quarterly, not just annually, and broken out 
into a separate, easy-to-find section in each company's public SEC 
filings.
  To date, there have been two paths offered to deal with the issue of 
stock options. Some think the problem is so severe that options should 
be pared back across the board and that Congress should dictate new 
accounting rules for them. Others say that business as usual should be 
the order of the day, and that no immediate action is necessary.
  The bill that I have introduced today seeks to lay out a third path. 
It offers a way to ensure that broad-based stock options can continue 
to be a useful tool

[[Page 15371]]

for deserving workers, shareholders and the economy as a whole, while 
still curbing abuses by those in the executive suites whose conduct is 
over the line. I don't claim that the bill is the complete solution in 
its present form, but I believe it offers a strong framework for a new 
approach, and I look forward to working with my colleagues and others 
to refine and improve it as it moves through the legislative process.
  The job of cleaning up corporate corruption will not be complete 
until Congress acts to correct the abuse of stock options. I hope my 
colleagues will join me in this effort to put tough new rules in place 
that will retain broad-based stock options for workers and curb their 
abuse by top management.
                                 ______
                                 
      By Mr. AKAKA (for himself and Mr. Craig):
  S. 2823. A bill to amend the Organic Act of Guam for the purposes of 
clarifying the local judicial structure of Guam; to the Committee on 
Energy and Natural Resources.
  Mr. AKAKA. Mr. President, I am pleased to introduce legislation with 
the senior Senator from Idaho, Mr. Craig, which amends the Organic Act 
of Guam to clarify Guam's judicial structure by ensuring that it is a 
unified and co-equal branch of the Government of Guam. The Organic Act 
establishes the executive and legislative branches of the Government of 
Guam. This legislation would simply include Guam's judicial branch in 
the Organic Act.
  Similar legislation, H.R. 521, was introduced in the House of 
Representatives by Representative Robert Underwood of Guam. The Bush 
Administration has no objection to the enactment of H.R. 521. The 
Congressional Budget Office also estimated that the legislation would 
have no impact on the federal budget.
  For those of us who have followed and worked on territorial issues 
for a long time, we do our best to balance the role of Congress when 
overriding federal interests are involved with the concerns expressed 
by territorial leaders and the general public. In this case, the 
establishment of an independent judicial branch on Guam is an 
overriding federal interest and is broadly supported by the people of 
Guam. This bill is supported by General Ben Blaz, former Guam Delegate 
to Congress, Guam Governor Carl Guiterrez, Justice Philip Carbullido, 
Acting Chief Justice of Guam's Supreme Court, the Guam Bar Association, 
Guam's legal community, the National Conference of Chief Justices, and 
the Guam Pacific Daily News.
  I believe that today's legislation is necessary to ensure the 
integrity and independence of Guam's judicial system as co-equal with 
the executive and legislative branches of the Government of Guam. I 
look forward to working with my colleagues in the Senate on this 
important issue.
  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. 2823

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

     SECTION 1. JUDICIAL STRUCTURE OF GUAM.

       (a) Judicial Authority; Courts.--Section 22(a) of the 
     Organic Act of Guam (48 U.S.C. 1424(a)) is amended to read as 
     follows:
       ``(a)(1) The judicial authority of Guam shall be vested in 
     a court established by Congress designated as the `District 
     Court of Guam', and a judicial branch of Guam which branch 
     shall constitute a unified judicial system and include an 
     appellate court designated as the `Supreme Court of Guam', a 
     trial court designated as the `Superior Court of Guam', and 
     such other lower local courts as may have been or shall 
     hereafter be established by the laws of Guam.
       ``(2) The Supreme Court of Guam may, by rules of such 
     court, create divisions of the Superior Court of Guam and 
     other local courts of Guam.
       ``(3) The courts of record for Guam shall be the District 
     Court of Guam, the Supreme Court of Guam, the Superior Court 
     of Guam (except the Traffic and Small Claims divisions of the 
     Superior Court of Guam) and any other local courts or 
     divisions of local courts that the Supreme Court of Guam 
     shall designate.''.
       (b) Jurisdiction and Powers of Local Courts.--Section 22A 
     of the Organic Act of Guam (48 U.S.C. 1424-1) is amended to 
     read as follows:
       ``Sec. 22A. (a) The Supreme Court of Guam shall be the 
     highest court of the judicial branch of Guam (excluding the 
     District Court of Guam) and shall--
       ``(1) have original jurisdiction over proceedings necessary 
     to protect its appellate jurisdiction and supervisory 
     authority and such other original jurisdiction as the laws of 
     Guam may provide;
       ``(2) have jurisdiction to hear appeals over any cause in 
     Guam decided by the Superior Court of Guam or other courts 
     established under the laws of Guam;
       ``(3) have jurisdiction to issue all orders and writs in 
     aid of its appellate, supervisory, and original jurisdiction, 
     including those orders necessary for the supervision of the 
     judicial branch of Guam;
       ``(4) have supervisory jurisdiction over the Superior Court 
     of Guam and all other courts of the judicial branch of Guam;
       ``(5) hear and determine appeals by a panel of three of the 
     justices of the Supreme Court of Guam and a concurrence of 
     two such justices shall be necessary to a decision of the 
     Supreme Court of Guam on the merits of an appeal;
       ``(6) make and promulgate rules governing the 
     administration of the judiciary and the practice and 
     procedure in the courts of the judicial branch of Guam, 
     including procedures for the determination of an appeal en 
     banc; and
       ``(7) govern attorney and judicial ethics and the practice 
     of law in Guam, including admission to practice law and the 
     conduct and discipline of persons admitted to practice law.
       ``(b) The Chief Justice of the Supreme Court of Guam--
       ``(1) shall preside over the Supreme Court unless 
     disqualified or unable to act;
       ``(2) shall be the administrative head of, and have general 
     supervisory power over, all departments, divisions, and other 
     instrumentalities of the judicial branch of Guam; and
       ``(3) may issue such administrative orders on behalf of the 
     Supreme Court of Guam as necessary for the efficient 
     administration of the judicial branch of Guam.
       ``(c) The Chief Justice of the Supreme Court of Guam, or a 
     justice sitting in place of such Chief Justice, may make any 
     appropriate order with respect to--
       ``(1) an appeal prior to the hearing and determination of 
     that appeal on the merits; or
       ``(2) dismissal of an appeal for lack of jurisdiction or 
     failure to take or prosecute the appeal in accordance with 
     applicable laws or rules of procedure.
       ``(d) Except as granted to the Supreme Court of Guam or 
     otherwise provided by this Act or any other Act of Congress, 
     the Superior Court of Guam and all other local courts 
     established by the laws of Guam shall have such original and 
     appellate jurisdiction over all causes in Guam as the laws of 
     Guam provide, except that such jurisdiction shall be subject 
     to the exclusive or concurrent jurisdiction conferred on the 
     District Court of Guam under section 22 of this Act.
       ``(e) The qualifications and duties of the justices and 
     judges of the Supreme Court of Guam, the Superior Court of 
     Guam, and all other local courts established by the laws of 
     Guam shall be governed by the laws of Guam and the rules of 
     such courts.''.
       (c) Technical Amendments.--(1) Section 22C(a) of the 
     Organic Act of Guam (48 U.S.C. 1424-3(a)) is amended by 
     inserting ``which is known as the Supreme Court of Guam,'' 
     after ``appellate court authorized by section 22A(a) of this 
     Act,''.
       (2) Section 22C(d) of the Organic Act of Guam (48 U.S.C. 
     1424-3(d)) is amended--
       (A) by inserting ``, which is known as the Supreme Court of 
     Guam,'' after ``appellate court provided for in section 
     22A(a) of this Act''; and
       (B) by striking ``taken to the appellate court'' and 
     inserting ``taken to such appellate court''.

     SEC. 2. APPEALS TO UNITED STATES SUPREME COURT.

       Section 22B of the Organic Act of Guam (48 U.S.C. 1424-2) 
     is amended by striking ``: Provided, That'' and all that 
     follows through the end and inserting a period.
                                 ______
                                 
      By Mr. DORGAN (for himself and Mr. Warner):
  S. 2825. A bill to amend the Internal Revenue Code of 1986 to allow a 
nonrefundable tax credit for contributions to congressional candidates; 
to the Committee on Finance.
  Mr. DORGAN. Mr. President, earlier this year we enacted a bold new 
campaign finance reform bill. After years of debate and delay, the 
Congress passed and the President signed this far-reaching legislation, 
known as McCain-Feingold. This new law eliminates the large ``soft 
money'' contributions from our campaign finance system and it expanded 
the role that some individuals can play by raising the individual 
campaign contribution limits.
  But there is one critical area that the McCain-Feingold bill didn't 
address, one important problem that the new law doesn't solve: how to 
give low-

[[Page 15372]]

and middle-income families an incentive to contribute to the candidate 
of their choice.
  Today, I am introducing a bill with my colleague from Virginia, 
Senator Warner, that will do just that. It will empower millions of 
working Americans to become engaged in our political system, by 
providing a tax credit to those who donate money to congressional 
candidates.
  As campaigns become more and more expensive, the number of small 
contributors is actually decreasing. The current campaign finance 
system is becoming dominated by big dollar contributors. This is not 
healthy for our campaigns and it is not good for our democracy.
  My bill would make middle income Americans more able to donate to 
candidates. Specifically, my bill would provide a maximum $400 tax 
credit to married couples earning up to $120,000 for their campaign 
contributions. For singles with income up to $60,000, the tax credit 
would apply to contributions up to $200. This credit will provide a 
dollar for dollar offset for contributions, an incentive that could 
encourage the vast majority of working families to consider 
contributions to the candidates of their choice.
  This is not a new idea. This type of credit was a part of our tax 
system for more than a decade in the 1970s and 1980s. It has been a 
part of many campaign finance reform proposals over the years, 
proposals that have been introduced and supported by both Democrats and 
Republicans. And this policy proposal is the focus of a new study by 
the American Enterprise Institute, AEI, which concluded that this 
approach would help to elevate small donors from the supporting role 
that they now play. So, our proposal has been successful in the past, 
and it has had broad support from both parties over the past thirty 
years.
  Participation in the political process is key to a strong democracy. 
This bill will help broaden participation and will provide an incentive 
for more Americans to be included in political campaigns. That is 
healthy for our form of government.
  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. 2825

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

     SECTION 1. CREDIT FOR CONTRIBUTIONS TO CONGRESSIONAL 
                   CANDIDATES.

       (a) General Rule.--Subpart A of part IV of subchapter A of 
     chapter 1 of the Internal Revenue Code of 1986 (relating to 
     nonrefundable personal credits) is amended by inserting after 
     section 25B the following new section:

     ``SEC. 25C. CONTRIBUTIONS TO CONGRESSIONAL CANDIDATES.

       ``(a) General Rule.--In the case of an eligible individual, 
     there shall be allowed as a credit against the tax imposed by 
     this chapter for the taxable year an amount equal to the 
     total of contributions to candidates for the office of 
     Senator or Representative in, or Delegate or Resident 
     Commissioner to, the Congress.
       ``(b) Maximum Credit.--The credit allowed by subsection (a) 
     for a taxable year shall not exceed $200 ($400 in the case of 
     a joint return).
       ``(c) Verification.--The credit allowed by subsection (a) 
     shall be allowed, with respect to any contribution, only if 
     such contribution is verified in such manner as the Secretary 
     shall prescribe by regulations.
       ``(d) Definitions.--For purposes of this section--
       ``(1) Candidate; contribution.--The terms `candidate' and 
     `contribution' have the meanings given such terms in section 
     301 of the Federal Election Campaign Act of 1971.
       ``(2) Eligible individual.--The term `eligible individual' 
     means any taxpayer whose adjusted gross income for the 
     taxable year does not exceed $60,000 ($120,000 in the case of 
     a joint return).''.
       (b) Conforming Amendments.--
       (1) Section 642 of the Internal Revenue Code of 1986 
     (relating to special rules for credits and deductions of 
     estates or trusts) is amended by adding at the end the 
     following new subsection:
       ``(j) Credit for Certain Contributions Not Allowed.--An 
     estate or trust shall not be allowed the credit against tax 
     provided by section 25C.''.
       (2) The table of sections for subpart A of part IV of 
     subchapter A of chapter 1 of such Code is amended by 
     inserting after the item relating to section 25B the 
     following new item:

``Sec. 25C. Contributions to congressional candidates.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2002.
                                 ______
                                 
      By Mr. SCHUMER (for himself, Mr. Craig, Mr. Kennedy, and Mr. 
        McCain):
  S. 2826. A bill to improve the national instant criminal background 
check system; and for other purposes; to the Committee on the 
Judiciary.
  Mr. SCHUMER. Mr. President, we are an odd group of Senators, but not 
when it comes to making sure that guns are kept away from drug addicts, 
felons, illegal aliens and others.
  Today, we're announcing an extremely important new bill that would 
plug up the gaping holes that are currently in the Justice Department's 
gun background check system.
  This bill is needed to prevent brutal, senseless murders like the one 
that took place in a Long Island church a few months ago from ever 
happening again.
  For those of you who may not know what happened, on March 8, 2002, 
Peter J. Troy walked into Britt's Firearms in Mineolan, NY and 
purchased a .22 caliber semi-automatic rifle. Four days later, he 
walked into a church in Lynbrook, NY, Our Lady of Peace, and shot and 
killed the Reverend Lawrence M. Penzes and Eileen Tosner.
  Mr. Troy had a history of mental health problems, and had been 
admitted to Bellevue Hospital Center and Nassau University Medical 
Center on at least two occasions. In addition, Mr. Troy's mother had a 
restraining order issued against him in February 1998, which he 
violated on more than one occasion.
  Yet despite his history of mental illness and violent behavior, Mr. 
Troy was approved to purchase the rifle by a Federal background check. 
In fact, there was no records on Peter J. Troy in the National Instant 
Criminal Background Check System, NICS, at all.
  That never, ever should have happened. We knew Peter Troy was a 
violent man. We knew he was mentally ill. He had no business owning a 
gun, and he proved it, to the shock and horror of everyone in Long 
Island and to everyone else in this Nation.
  Had the Federal system that checks all gun purchasers picked up on 
the fact that Peter Troy was both mentally ill and was subject to a 
restraining order, he never would have been sold a rifle and the 
murders may never had occurred.
  All the signs were there and all the signs were ignored. That's why 
we need to tighten State reporting laws so that the violent and the 
mentally ill, people who aren't allowed to purchase guns, aren't able 
to purchase guns. Otherwise, this could happen again and again.
  The Federal Gun Control Act bars people who have been committed to a 
mental institution or convicted of a felony from purchasing a firearm. 
That's not the problem.
  The problem is that this kind of information is not always shared 
with the NICS system. The INS, for example, doesn't always share info 
about an illegal alien with the Justice Department or a State doesn't 
forward info about an involuntary commitment to the FBI.
  So when the background check is performed, the information never 
appears, red flags aren't raised, and the gun purchase goes right 
through.
  In other words, the Federal background check is only as good as the 
records that are in it.
  How poor is our background check system? This year, Americans for Gun 
Safety released a report showing that over a 30-month period, 10,000 
felons obtained a gun simply because faulty records made it impossible 
to complete a background check on time.
  And their report warned that this 10,000 figure is only the tip of 
the iceberg. It doesn't include the thousands of illegal immigrants, 
domestic abusers, and the severely mentally ill who are not in the 
system at all and cannot be stopped by a background check no matter how 
much time is allowed.

[[Page 15373]]

  It's catch as catch can, and we're not catching very much.
  Under the bill we're introducing, if someone is trying to buy a gun, 
and if they are either: 1. under indictment; 2. been convicted of a 
crime punishable by more than a year; 3. is a fugitive from justice; 4. 
is a known drug addict; 5. if they've been committed to a mental 
institution; 6. is subject to a court order restraining them from 
domestic violence; or 7. been convicted of a domestic violence 
misdemeanor, the State will be legally required to let the FBI know.
  It's a lot of information. There's no question about it. But most of 
this information is kept by the states. And most of it is automated. So 
for the majority of these categories, it's a matter of getting the 
information from point A, the State, to point B--the FBI. 
Unfortunately, most States, including New York, do not have good 
records on mental health, and that's going to take some more work.
  The bill provides $375 million per year for three years, for States 
to get their records in order and to automate them to ensure that they 
get to the FBI quickly.
  It also requires Federal agencies to share the records they keep with 
NICS. For example, the INS would be required to share its records on 
illegal aliens with NICS.
  I want to thank my colleagues who are with me today, particularly 
Senator Craig, for recognizing that this is a public safety issue that 
needs urgent attention and not a ``gun control'' issue per se. Working 
together, we can get this done in the Senate with the same speed the 
House got it done.
  Mr. CRAIG. Mr. President, I am pleased to join my colleagues in an 
unprecedented alliance today, introducing legislation to improve the 
National Instant Background Check System (NICS). While we have 
frequently demonstrated our differing views of second amendment issues, 
we stand together when it comes to enforcing laws against criminal gun 
violence, and that is the subject of our legislation.
  The vast majority of gun owners in our country today understand that 
the right to keep and bear arms comes with a grave duty to use firearms 
responsibly and within the law.
  The NICS system deals with the tiny but dangerous fraction of 
Americans who have lost their firearm rights because they are proven 
lawbreakers, convicted felons--or because they do not have the capacity 
to understand their responsibilities as firearm users. Our federal laws 
prohibit these individuals from possessing or acquiring firearms, and 
the NICS system is made up of the records of these ``prohibited 
persons.'' This is the list against which prospective gun purchasers 
are checked when the law requires a background check. State and local 
agencies still play a big role, conducting checks on almost half the 
applications based on their own records.
  We want the system to be fast, so that it does not unduly burden 
individuals in the exercise of their second amendment rights. That 
means the records need to be automated, so we don't have the kind of 
delays that happen when local law enforcement has to manually check 
written records.
  It is equally critical to all of us that the system be accurate. 
Accuracy means we need to be able to remove a record if it is no longer 
relevant--for example, if it's a record of an indictment on charges 
that were later dropped. It also means we need all relevant records--
records pertaining not only to convicted felons, but also those who are 
adjudicated mentally incompetent and drug abusers, and all other 
categories prohibited by federal law from possessing firearms.
  Accurate, automated records means truly instant checks, fewer delays 
for law-abiding gun purchases, and better use as a tool to prevent 
violent criminals from obtaining firearms.
  U.S. taxpayers have spend hundreds of millions of dollars in less 
than a decade, helping to improve all States' criminal history records 
for law enforcement purposes. It is time to focus our national strategy 
on getting the job completed, to the benefit of not just the gun-
purchasing public but all Americans concerned about the safety of their 
communities.
  Our bill sets out the objectives needed to complete the NICS system, 
and it provides incentives and strategies for accomplishing those 
objectives. We have been working in tandem with like-minded members in 
the other body, and the bill we introduce today reflects the changes 
made by the House Judiciary Committee in the original proposal. Among 
other things, this bill specifies the records still needed from federal 
agencies to fill in the gaps, and requires the removal of records that 
are no longer relevant. It provides inventive for States to improve 
their systems through grants and waivers of current matching fund 
requirements. It calls on DOJ and the mental health community to 
develop privacy protocols so that mental health records can be properly 
added to the system.
  I am also pleased that the bill incorporates a provision of great 
importance to law-abiding gun owners, making permanent the prohibition 
against charging a federal fee for background checks. Congress has 
supported this prohibition repeatedly, acknowledging that any such 
check is being done for law enforcement purposes and not as a service 
or convenience to gun purchasers. It makes good sense to codify that 
prohibition, once and for all.
  In sum, this is an important and timely measure. I appreciate the 
work that the cosponsors have done to get us to this point, and I urge 
all our colleagues to support the bill's enactment.
  Mr. McCAIN. Mr. President, along with Senators Schumer, Craig, and 
Kennedy, I rise today to introduce the ``Our Lady of Peace Act'' that 
has the strong support of major organizations across the political 
spectrum.
  This legislation fixes a huge hole in our system--a hole that delays 
legitimate firearms purchases and allows criminals and other prohibited 
buyers to obtain guns. The hole is the faulty records in the National 
Instant Criminal Background Check System, NICS. Based on a report 
released by Americans for Gun Safety Foundation in January 2002, 
Congress has learned that millions of records are missing from the NICS 
database. Over a 30-month period, 10,000 criminals obtained a firearm 
despite a background check because the records couldn't be checked 
properly within the 3 days allowed by federal law. In addition, 
thousands of other prohibited buyers will never be stopped because very 
few restraining orders, drug abuse or mental disability records are 
kept at all. This report makes it clear that if we are to be serious 
about stopping criminals, wife-beaters and illegal aliens from slipping 
through a background check, we had better fix this broken system.
  Better records mean more accurate background checks--checks which 
stop prohibited buyers while allowing legitimate buyers to be approved. 
And better records put the ``instant'' back into instant check, because 
delays occur when records have to be searched manually. In fact, the 
only reason why criminal background checks sometime take several days 
is because records have to be checked by hand instead of computer.
  The figure is astonishing. There are over 30 million missing records.
  For felony records, the typical state has automated only 58 percent 
of its felony conviction records. The FBI estimates that out of 39 
million felony arrest records, 16 million of them lack final 
disposition information. Without final disposition records, background 
checks must rely on time consuming manual searches of courthouse files 
to approve or deny firearms purchases.
  On the issue of mental health, 33 States keep no mental health 
disqualifying records and no state supplies mental health disqualifying 
records to NICS. The General Accounting Office, GAO, estimates that 2.7 
million mental illness records should be in the NICS databases, but 
less than 100,000 records are available, nearly all from VA mental 
hospitals. States have supplied only 41 mental health records to NICS. 
Combined with the federal records, the GAO estimates that only 8.6 
percent of the records of those disqualified from buying a firearm for 
mental health reasons are accessible on the NICS database.
  In the case of drug abusers, the GAO estimates that only 3 percent of 
the 14

[[Page 15374]]

million records of drug abusers are automated, not including felons and 
wanted fugitives. States have supplied only 97 of those records to NICS 
which the GAO estimates as representing less than 0.1 percent of the 
total records of those with drug records that would deny them a 
firearm.
  On the issue of domestic violence, 20 States lack a database for 
either domestic violence misdemeanants or temporary restraining orders 
or both, 42 percent of all NICS denials based on restraining orders 
come from one State--Kentucky--which does the best job of automating 
TRO's from the bench. The Department of Justice estimates that nearly 2 
million restraining order records are missing from the database.
  In the case of illegal aliens/non-immigrant status records, the GAO 
estimates that over 2 million illegal alien records are absent from the 
NICS database. Through 2001, NICS had no records of non-immigrants in 
the United States making it impossible to stop visitors to the U.S. on 
tourist or student visas from purchasing firearms.
  The benefits of better records are simple and important. They lead to 
accurate and instant background checks. Better records mean we would be 
able to stop far more prohibited buyers from obtaining a gun than we do 
now. When a restraining order, drug abuse or mental health record is 
missing, nothing in the NICS system indicates a reason to delay the 
sale and search records. NICS simply approves the transaction usually 
within 3 minutes.
  Poor records are why and this legislation will fix the system. This 
bill requires Federal agencies such as the Immigration and 
Naturalization Service, INS, and the VA to provide all records of those 
disqualified from purchasing a firearm to NICS. For INS, it would mean 
sending millions of records of those here on tourist visas, student 
visas, and all other non-immigrant visas to NICS. Each State would be 
allowed to receive a waiver for up to 5 years of the 10 percent 
matching requirement for the National Criminal History Improvement 
Grants, NCHIP, when that state automates and makes available to NICS at 
least 95 percent of records of those disqualified from purchasing a 
firearm. This bill also requires states to automate and send to NICS 
all disqualifying records under Federal and State law, including 
domestic violence misdemeanors, restraining orders, criminal conviction 
misdemeanors, drug abuse and other relevant records to NICS.
  We also provides grants of $250 million per year for 3 years to 
States to improve background check records, automate systems, enhance 
states capacities to perform background checks, supply mental health 
records and domestic violence records to NICS. We also give grants of 
$125 million per year for 3 years to States to assess their systems for 
rapidly getting criminal conviction, domestic violence records and 
other records from the courtroom into the NICS database and for 
improving those systems so as to eliminate the lag time between 
conviction and entry into NICS.
  Better records mean instant checks: 72 percent of background checks 
are approved and completed within minutes, but 5 percent take days to 
complete for one reason only faulty records force law enforcement into 
time consuming searches to locate final disposition records for felony 
and domestic violence convictions. It is our hope that this legislation 
will finally make our records system complete and totally stop 
prohibited buyers from gaining access to firearms while allowing 
legitimate buyers to be approved.

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