[Congressional Record (Bound Edition), Volume 152 (2006), Part 12]
[Senate]
[Pages 16771-16789]
[From the U.S. Government Publishing Office, www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. DOMENICI:
  S. 3773. A bill to increase the number of Federal judgeships, in 
accordance with recommendations by the Judicial Conference, in 
districts that have an

[[Page 16772]]

extraordinarily high immigration caseload; to the Committee on the 
Judiciary.
  Mr. DOMENICI. Mr. President, I rise today with Senators Kyl and 
Cornyn to introduce legislation that creates the new Federal judgeships 
recommended by the 2005 Judicial Conference for our U.S. district 
courts that have a serious overload of immigration cases.
  I believe it is imperative to equip all of our Federal agencies with 
the assets they need to secure our borders and enforce our immigration 
laws. That includes equipping our U.S. district courts with enough 
judges to handle the criminal immigration cases that appear on their 
dockets. The immigration reform bill passed by the Senate in May 
recognizes that with increased border security and immigration 
enforcement there will be increased prosecutions, and the bill calls 
for more immigration judges to handle those prosecutions. But the bill 
fails to recognize that repeat immigration law violators can be charged 
with a felony and tried in U.S. District Court. We need to increase the 
number of judges in our district courts that handle such cases, 
particularly in those districts that are already overwhelmed with 
immigration cases.
  The legislation I am proposing creates eleven new Federal judgeships, 
as recommended by the Judicial Conference, in the U.S. district courts 
in which at least 50 percent of their criminal cases are immigration 
cases. The bill affects four districts, all of which border Mexico. In 
fiscal year 2004, the Western District of Texas had 5599 criminal case 
filings, 3,688 of those cases, over 65 percent, dealt with immigration. 
The District Court of Arizona had 4,007 criminal filings, of which 
2,404 cases, or 59 percent, were immigration filings. The Southern 
District of California has 2,206 immigration filings, 64 percent of 
their 3,400 total criminal filings. Lastly, the District of New Mexico 
had 2,497 criminal filings, 60 percent of them, 1,502 cases, were 
immigration cases.
  Based on these caseloads, I think we should already be giving these 
districts new judgeships. But to increase our border security and 
immigration enforcement efforts without equipping these courts to 
handle the even larger immigration caseloads that they are expected to 
face would be tantamount to willful negligence.
  The New Mexico District Chief Judge, Martha Vazquez, wrote me a 
letter in May about the situation the New Mexico District faces. Judge 
Vazquez wrote:

       As it is, the burden on Article III Judges in this District 
     is considerable. This District ranks first among all 
     districts in criminal filings per judgeship: 405 criminal 
     filings compared to the national average of 87. As in all 
     federal districts along the southwest border, the majority of 
     cases filed in this District relate to immigration offenses 
     under United States Code, Title 8 and drug offenses arising 
     under Title 21. Immigration and drug cases account for 
     eighty-five percent of the caseload in the District of New 
     Mexico. . . In fiscal year 1997, there were 240 immigration 
     felony filings in the District of New Mexico. By fiscal year 
     2005, the number of immigration felony filings increased to 
     1,826, which is an increase of 661 percent . . . Increasing 
     the number of Immigration Judges will do nothing to reduce 
     the increasing caseload in the border states' federal courts.

  The Albuquerque Tribune has also documented the burden immigration 
cases put on district courts. An April 17 article entitled ``Judges See 
Ripple Effect of Policy on Immigration,'' stated:

       U.S. District Chief Judge Martha Vazquez of Santa Fe 
     oversees a court that faces a rising caseload from illegal 
     border crossings and related crime. And help from Washington 
     is by no means certain . . . From Sept. 30, 1999 to Sept. 30, 
     2004 (the end of the fiscal year), the caseload in the New 
     Mexico federal district court increased 57.5 percent, from 
     2,804 to 4,416. In the 2004 fiscal year alone, 2,126 felony 
     cases were heard, almost half of all cases in the entire 10th 
     Circuit, which includes Colorado, Kansas, Oklahoma, Utah and 
     Wyoming. Most typical immigration cases go before an 
     immigration judge, and the subjects are deported. But people 
     deported once and caught crossing illegally again can be 
     charged with a felony. And that brings the defendant into 
     federal district court. Those are the cases driving up New 
     Mexico's caseload . . . Some days as many as 90 defendants 
     crowd the courtroom in Las Cruces . . . The same problems are 
     afflicting federal border courts in Arizona, California, and 
     Texas.

  Similar problems were documented in a May 23 Reuters article entitled 
``Bush Border Patrol Plan to Pressure Courts'' which said:

       President George W. Bush's plan to send thousands of 
     National Guard troops to the U.S.-Mexico border could spark a 
     surge in immigration cases and U.S. courts are ill prepared 
     to handle them . . . Even without the stepped-up security at 
     the border, federal courts in southern California, Arizona, 
     New Mexico and Texas have been overburdened. Carelli [a 
     spokesman for U.S. federal courts] said those five judicial 
     districts, out of 94 nationwide, account for 34 percent of 
     all criminal cases moving through U.S. courts . . . Most 
     immigrants caught crossing illegally are ordered out of the 
     country without prosecution. But that still leaves a growing 
     pile of cases involving illegals who are being prosecuted 
     after being caught multiple times or those accused of other 
     crimes . . . Nationwide, each U.S. judge handles an average 
     of 87 cases a year. But along the southern border, even 
     before Bush's plan moves forward, the average is around 300 
     per judge, Carelli said.

  Mr. President, the U.S. Congress needs to address the overwhelming 
immigration caseload in our southwestern border U.S. district courts. 
The bill I am filing today with Senators Kyl and Cornyn does just that 
by authorizing the nine permanent and two temporary judgeships 
recommended by the 2005 Judicial Conference for the four U.S. districts 
in which the immigration caseload totals more than fifty percent of 
those districts' total criminal caseload.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3773

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

     SECTION 1. ADDITIONAL DISTRICT COURT JUDGESHIPS.

       The President shall appoint, by and with the advice and 
     consent of the Senate, such additional district court judges 
     as are necessary to carry out the 2005 recommendations of the 
     Judicial Conference of the United States for district courts 
     in which the criminal immigration filings totaled more than 
     50 percent of all criminal filings for the 12-month period 
     ending September 30, 2004.
                                 ______
                                 
      By Mr. BOND (for himself, Mr. Lott, Mr. Chambliss, Mr. Stevens, 
        Mr. Cochran, Mr. Burns, Mr. Hatch, Mr. Santorum, Mr. Cornyn, 
        Mr. Domenici, Mr. Bennett, and Mr. Alexander):
  S. 3774. A bill to amend title 18, United States Code, to prohibit 
the unauthorized disclosure of classified information; to the Committee 
on the Judiciary.
  Mr. BOND. Mr. President, I rise to talk about a related area of 
security. The Defense appropriations bill is extremely important, but I 
believe that there is another matter we should be considering. I 
appreciate the courtesy of the managers of the bill for allowing me to 
present this.
  This is legislation that was passed by the Intelligence Committees in 
2000. It had been adopted by unanimous vote, but it was vetoed at the 
time. This bill very simply provides, for the first time, a simple, 
clear statement of penalties for Government employees and contractors 
with access to classified information, who have signed agreements to 
keep it classified, who knowingly and willfully leak America's most 
important secrets. Over the past few years, we have seen unauthorized 
disclosures of classified information at an alarming rate. Each one of 
the leaks gravely increases the threat to our national security and 
makes it easier for our enemies to achieve their murderous and 
destructive plans. Each leak is a window of opportunity for terrorists 
to discover our sources and methods. Each violation of trust guarantees 
chaos and violence in the world.
  Time and time again, we have witnessed leaks that told our enemies 
not only that we were watching them and listening to them but how and 
whom we are cooperating with and how we are getting the information. 
These leaks have threatened to erode the trust and confidence of the 
American people and the members of the intelligence community, as well 
as our allies, built upon years of work. What if during World War II, 
Americans had

[[Page 16773]]

seen a leak of the Enigma Program that allowed us to decipher enemy 
communications and if major media outlets had joined in blowing our 
most sensitive secret?
  Over the past year, there has arisen an apparent absence of fear of 
punishment in regard to arbitrary divulging of classified information. 
These are individuals who took solemn vows to protect our Nation. In 
taking a vow to protect classified information, one should acknowledge 
that being privy to it establishes a solemn trust. I and all of my 
colleagues are under obligations as Senators. And as a member of the 
Intelligence Committee, I have a higher standard to protect classified 
information. Having that access is a privilege and a trust. There are a 
number of stinging examples of how these leaks have compromised 
security. I will not call attention to them because the people who are 
benefiting from knowing the leaks don't need to know more about it. But 
a litany of intelligence officials over the past year have told me how 
much it hurts their efforts.
  The former Director of the CIA, Porter Goss, stated in open session 
that there has been ``very severe'' damage to our national security. He 
repeated ``very severe.'' I asked the same question to current CIA 
Director Michael Hayden in his open confirmation hearing about the 
leaks and he said: We have applied the Darwinian theory to terrorists. 
Unfortunately, we are only catching the dumb ones because the smart 
ones who watch the media understand what we are doing and will escape. 
And many others have repeated that refrain. That was before the leakage 
of our ability to track terrorist financing efforts occurred in papers.
  As I have traveled throughout the world and talked with cooperating 
overseas officials, they have asked me why they should continue to work 
with us when we can't keep secrets. Our intelligence chiefs abroad tell 
me that sources now think twice before speaking with U.S. officers. 
They fear their information leaking. They said: How can I give you this 
information if it might be leaked?
  What they are really worried about is that leaking their information 
will identify them and put themselves and their families at risk. This 
is something which we cannot tolerate if we are to get the intelligence 
we need.
  This is language which has been passed before. It is very simple. It 
just applies to former or retired officers or employees of the United 
States or any person who has authorized access and who has agreed to 
keep it confidential.
  First, let me be clear about a couple of things this legislation does 
not do. It only affects Government employees and contractors who have 
signed a nondisclosure agreement. It doesn't affect the media, 
businesses, or private citizens.
  Second, it only regards information properly and appropriately 
classified, not frivolously or inappropriately classified. If there is 
an overclassification, then I think the courts would easily throw out 
the prosecution. It doesn't cover the new categories of information 
developed since 9/11, like sensitive but unclassified or unclassified 
for official use only. It limits the subject of prosecution to those 
knowingly and willfully disclosing to someone they know is not 
authorized to receive it. It is not a ``gotcha'' tool; it is for 
deliberate leakers.
  Well, a Federal judge has pointed out that there is no one piece of 
legislation that brings together all of our outdated and disparate 
provisions on the law. The judge has stated that ``the merits of the 
law are committed to Congress. If it is not sensible, it ought to be 
changed.'' This is why we are doing this.
  Some of my colleagues said it is an insult that you have to pass a 
bill to protect classified information. One said:

       If they have taken an oath, they don't need the threat of 
     law hanging over them to maintain that oath.

  My answer to that one is, where have you been over the past year? I 
am sorry to inform you that some people need laws to hold them in 
check. More important, they need prosecution under those laws. There is 
nothing like an orange jumpsuit on a deliberate leaker to discourage 
others from going down that path.
  I have heard that some say Attorney General Ashcroft recommended that 
the executive branch not pursue leaks legislation. That is true, but 
not because it wasn't needed. He said that the onus is on the executive 
branch to take care to instill a sense of loyalty in its employees to 
track down leakers and to prevent leakers. He was right. He also said 
that leaks legislation had value.
  I am more than happy to work with my colleagues. I believe it is 
appropriate to have this debate at a time when Osama bin Laden and al-
Zawahiri are warning the United States of future terrorist attacks. It 
is important to provide protection so that our men and women in the 
field in places of active hostility, such as Iraq and Afghanistan, can 
be protected by intelligence that is not compromised.
  I ask unanimous consent to have printed in the Record a letter dated 
31 July from the Association for Intelligence Officers, a group of 
4,500 current and former intelligence military and homeland security 
officers supporting passage of this legislation.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                      Association for Intelligence


                                                     Officers,

                                        McLean, VA, July 31, 2006.
     Hon. Christopher Bond,
     Senate Select Committee on Intelligence,
     U.S. Senate.
       Dear Senator Bond: On behalf of the Association for 
     Intelligence Officers, a 31-year organization of over 4,500 
     current and former intelligence, military and homeland 
     security officers, I write in support of your intention to 
     introduce a bill concerning prohibition of the disclosure of 
     classified information by individuals who sign secrecy 
     agreements. We concur that such unauthorized actions have 
     damaged national security.
       We note that as early as the 2001 fiscal year, the Congress 
     included such provisions in the Intelligence Authorization 
     Act, but the legislation did not prevail over presidential 
     veto. Since that time, no substantive remedy has appeared.
       We understand that the proposed legislation will apply only 
     to government employees and civilian contractors who promised 
     to uphold the secrecy contracts they signed. It will not 
     cover others, such as journalists, nor others not working for 
     the federal government or contractors. It would prohibit only 
     knowing and willful disclosure, so that innocent, 
     inadvertent, or accidental disclosures would not be covered.
       We believe there has been an increasing cascade of damaging 
     disclosures of classified information such that a crisis now 
     exists. With no serious punishments nor enforcement of 
     penalties, we lack any meaningful impediment to this growing 
     willful harm to the national interest. As a result, the leaks 
     grow--essentially sabotaging our own intelligence and 
     military operations and causing the deaths of our troops and 
     intelligence operatives. Our allies, understandably, are 
     losing trust that we can engage in mutual operations and 
     hesitate to share crucial intelligence and battlefield 
     information with us.
       What leakers think is a harmless bit of back channel 
     policymaking has repercussions down the line that constitute 
     treason and should be treated as such.
       We enthusiastically support your efforts. We are ready to 
     provide assistance in whatever manner would prove helpful.
           Very respectfully,
                                                 S. Eugene Poteat,
                                                  President, AFIO.

  Mr. SESSIONS. Mr. President, first, I thank Senator Bond for dealing 
with this important issue. We have indeed reached a point in this 
country where I think there is confusion about the absolute 
responsibility and legal requirement to maintain classified information 
in our Government. We need to be more serious about that. He can speak 
with authority. His son has served in Iraq and is a fine officer. We 
appreciate that. He understands these issues deeply. Again, I thank 
Senator Bond for that.
                                 ______
                                 
      By Mr. DURBIN (for himself, Mr. Coleman, Mr. DeWine, Mr. 
        Feingold, and Mr. Leahy):
  S. 3775. A bill to amend the Foreign Assistance Act of 1961 to assist 
countries in sub-Saharan Africa in the effort to achieve 
internationally recognized goals in the treatment and prevention of 
HIV/AIDS and other major

[[Page 16774]]

diseases and the reduction of maternal and child mortality by improving 
human health care capacity and improving retention of medical health 
professionals in sub-Saharan Africa, and for other purposes; to the 
Committee on Foreign Relations.
  Mr. DURBIN. Mr. President, I ask unanimous consent that the text of 
the bill be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3775

       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 ``African Health Capacity 
     Investment Act of 2006''.

     SEC. 2. DEFINITIONS.

       In this Act, the term ``HIV/AIDS'' has the meaning given 
     such term in section 104A(g) of the Foreign Assistance Act of 
     1961 (22 U.S.C. 2151b-2(g)).

     SEC. 3. FINDINGS.

       Congress makes the following findings:
       (1) The World Health Report, 2003, Shaping the Future, 
     states, ``The most critical issue facing health care systems 
     is the shortage of people who make them work.''.
       (2) The World Health Report, 2006, Working Together for 
     Health, states, ``The unmistakable imperative is to 
     strengthen the workforce so that health systems can tackle 
     crippling diseases and achieve national and global health 
     goals. A strong human infrastructure is fundamental to 
     closing today's gap between health promise and health reality 
     and anticipating the health challenges of the 21st 
     century.''.
       (3) The shortage of health personnel, including doctors, 
     nurses, pharmacists, counselors, paraprofessionals, and 
     trained lay workers is one of the leading obstacles to 
     fighting HIV/AIDS in sub-Saharan Africa.
       (4) The HIV/AIDS pandemic aggravates the shortage of health 
     workers through loss of life and illness among medical staff, 
     unsafe working conditions for medical personnel, and 
     increased workloads for diminished staff, while the shortage 
     of health personnel undermines efforts to prevent and provide 
     care and treatment for those with HIV/AIDS.
       (5) Workforce constraints and inefficient management are 
     limiting factors in the treatment of tuberculosis, which 
     infects over \1/3\ of the global population.
       (6) Over 1,200,000 people die of malaria each year. More 
     than 75 percent of these deaths occur among African children 
     under the age of 5 years old and the vast majority of these 
     deaths are preventable. The Malaria Initiative of President 
     George W. Bush seeks to reduce dramatically the disease 
     burden of malaria through both prevention and treatment. 
     Paraprofessionals can be instrumental in reducing mortality 
     and economic losses associated with malaria and other health 
     problems.
       (7) For a woman in sub-Saharan Africa, the lifetime risk of 
     maternal death is 1 out of 16. In highly developed countries, 
     that risk is 1 out of 2,800. Increasing access to skilled 
     birth attendants is essential to reducing maternal and 
     newborn mortality in sub-Saharan Africa.
       (8) The Second Annual Report to Congress on the progress of 
     the President's Emergency Plan for AIDS Relief identifies the 
     strengthening of essential health care systems through health 
     care networks and infrastructure development as critical to 
     the sustainability of funded assistance by the United States 
     Government and states that ``outside resources for HIV/AIDS 
     and other development efforts must be focused on 
     transformational initiatives that are owned by host 
     nations''. This report further states, ``Alongside efforts to 
     support community capacity-building, enhancing the capacity 
     of health care and other systems is also crucial for 
     sustainability. Among the obstacles to these efforts in many 
     nations are inadequate human resources and capacity, limited 
     institutional capacity, and systemic weaknesses in areas such 
     as: quality assurance; financial management and accounting; 
     health networks and infrastructure; and commodity 
     distribution and control.''.
       (9) Vertical disease control programs represent vital 
     components of United States foreign assistance policy, but 
     human resources for health planning and management often 
     demands a more systematic approach.
       (10) Implementation of capacity-building initiatives to 
     promote more effective human resources management and 
     development may require an extended horizon to produce 
     measurable results, but such efforts are critical to 
     fulfillment of many internationally recognized objectives in 
     global health.
       (11) The November 2005 report of the Working Group on 
     Global Health Partnerships for the High Level Forum on the 
     Health Millennium Development Goals entitled ``Best Practice 
     Principles for Global Health Partnership Activities at 
     Country Level'', raises the concern that the collective 
     impact of various global health programs now risks 
     ``undermining the sustainability of national development 
     plans, distorting national priorities, diverting scarce human 
     resources and/or establishing uncoordinated service delivery 
     structures'' in developing countries. This risk underscores 
     the need to coordinate international donor efforts for these 
     vital programs with one another and with recipient countries.
       (12) The emigration of significant numbers of trained 
     health care professionals from sub-Saharan African countries 
     to the United States and other wealthier countries 
     exacerbates often severe shortages of health care workers, 
     undermines economic development efforts, and undercuts 
     national and international efforts to improve access to 
     essential health services in the region.
       (13) Addressing this problem, commonly referred to as 
     ``brain drain'', will require increased investments in the 
     health sector by sub-Saharan African governments and by 
     international partners seeking to promote economic 
     development and improve health care and mortality outcomes in 
     the region.
       (14) Virtually every country in the world, including the 
     United States, is experiencing a shortage of health workers. 
     The Joint Learning Initiative on Human Resources for Health 
     and Development estimates that the global shortage exceeds 
     4,000,000 workers. Shortages in sub-Saharan Africa, however, 
     are far more acute than in any other region of the world. The 
     World Health Report, 2006, states that ``[t]he exodus of 
     skilled professionals in the midst of so much unmet health 
     need places Africa at the epicentre of the global health 
     workforce crisis.''.
       (15) Ambassador Randall Tobias, now the Director of United 
     States Foreign Assistance and Administrator of the United 
     States Agency for International Development, has stated that 
     there are more Ethiopian trained doctors practicing in 
     Chicago than in Ethiopia.
       (16) According to the United Nations Development Programme, 
     Human Development Report 2003, approximately 3 out of 4 
     countries in sub-Saharan Africa have fewer than 20 physicians 
     per 100,000 people, the minimum ratio recommended by the 
     World Health Organization, and 13 countries have 5 or fewer 
     physicians per 100,000 people.
       (17) Nurses play particularly important roles in sub-
     Saharan African health care systems, but approximately \1/4\ 
     of sub-Saharan African countries have fewer than 50 nurses 
     per 100,000 people or less than \1/2\ the staffing levels 
     recommended by the World Health Organization.
       (18) Paraprofessionals can be trained more quickly than 
     nurses or doctors and are critically needed in sub-Saharan 
     Africa to meet immediate health care needs.
       (19) Imbalances in the distribution of countries' health 
     workforces represents a global problem, but the impact is 
     particularly acute in sub-Saharan Africa.
       (20) In Malawi, for example, more than 95 percent of 
     clinical officers are in urban health facilities, and about 
     25 percent of nurses and 50 percent of physicians are in the 
     4 central hospitals of Malawi. Yet the population of Malawi 
     is estimated to be 87 percent rural.
       (21) In parts of sub-Saharan Africa, such as Kenya, 
     thousands of qualified health professionals are employed 
     outside the health care field or are unemployed despite job 
     openings in the health sector in rural areas because poor 
     working and living conditions, including poor educational 
     opportunities for children, transportation, and salaries, 
     make such openings unattractive to candidates.
       (22) The 2002 National Security Strategy of the United 
     States stated, ``The scale of the public health crisis in 
     poor countries is enormous. In countries afflicted by 
     epidemics and pandemics like HIV/AIDS, malaria, and 
     tuberculosis, growth and development will be threatened until 
     these scourges can be contained. Resources from the developed 
     world are necessary but will be effective only with honest 
     governance, which supports prevention programs and provides 
     effective local infrastructure.''.
       (23) Public health deficiencies in sub-Saharan Africa and 
     other parts of the developing world reduce global capacities 
     to detect and respond to potential crises, such as an avian 
     flu pandemic.
       (24) On September 28, 2005, Secretary of State Condoleezza 
     Rice declared that ``HIV/AIDS is not only a human tragedy of 
     enormous magnitude; it is also a threat to the stability of 
     entire countries and to the entire regions of the world.''.
       (25) Foreign assistance by the United States that expands 
     local capacities, provides commodities or training, or builds 
     on and enhances community-based and national programs and 
     leadership can increase the impact, efficiency, and 
     sustainability of funded efforts by the United States.
       (26) African health care professionals immigrate to the 
     United States for the same set of reasons that have led 
     millions of people to come to this country, including the 
     desire for freedom, for economic opportunity, and for a 
     better life for themselves and their children, and the rights 
     and motivations of these individuals must be respected.
       (27) Helping countries in sub-Saharan Africa increase 
     salaries and benefits of health care professionals, improve 
     working conditions, including the adoption of universal 
     precautions against workplace infection, improve management 
     of health care systems

[[Page 16775]]

     and institutions, increase the capacity of health training 
     institutions, and expand education opportunities will 
     alleviate some of the pressures driving the migration of 
     health care personnel from sub-Saharan Africa.
       (28) While the scope of the problem of dire shortfalls of 
     personnel and inadequacies of infrastructure in the sub-
     Saharan African health systems is immense, effective and 
     targeted interventions to improve working conditions, 
     management, and productivity would yield significant 
     dividends in improved health care.
       (29) Failure to address the shortage of health care 
     professionals and paraprofessionals, and the factors pushing 
     individuals to leave sub-Saharan Africa will undermine the 
     objectives of United States development policy and will 
     subvert opportunities to achieve internationally recognized 
     goals for the treatment and prevention of HIV/AIDS and other 
     diseases, in the reduction of child and maternal mortality, 
     and for economic growth and development in sub-Saharan 
     Africa.

     SEC. 4. SENSE OF CONGRESS.

       It is the sense of Congress that--
       (1) the United States should help sub-Saharan African 
     countries that have not already done so to develop national 
     human resource plans within the context of comprehensive 
     country health plans involving a wide range of stakeholders;
       (2) comprehensive, rather than piecemeal approaches to 
     advance multiple sustainable interventions will better enable 
     countries to plan for the number of health care workers they 
     need, determine whether they need to reorganize their health 
     workforce, integrate workforce planning into an overall 
     strategy to improve health system performance and impact, 
     better budget for health care spending, and improve the 
     delivery of health services in rural and other underserved 
     areas;
       (3) in order to promote systemic, sustainable change, the 
     United States should seek, where possible, to strengthen 
     existing national systems in sub-Saharan African countries to 
     improve national capacities in areas including fiscal 
     management, training, recruiting and retention of health 
     workers, distribution of resources, attention to rural areas, 
     and education;
       (4) because foreign-funded efforts to fight HIV/AIDS and 
     other diseases may also draw health personnel away from the 
     public sector in sub-Saharan African countries, the policies 
     and programs of the United States should, where practicable, 
     seek to work with national and community-based health 
     structures and seek to promote the general welfare and 
     enhance infrastructures beyond the scope of a single disease 
     or condition;
       (5) paraprofessionals and community-level health workers 
     can play a key role in prevention, care, and treatment 
     services, and in the more equitable and effective 
     distribution of health resources, and should be integrated 
     into national health systems;
       (6) given the current personnel shortages in sub-Saharan 
     Africa, paraprofessionals represent a critical potential 
     workforce in efforts to reduce the burdens of malaria, 
     tuberculosis, HIV/AIDS, and other deadly and debilitating 
     diseases;
       (7) it is critically important that the governments of sub-
     Saharan African countries increase their own investments in 
     education and health care;
       (8) international financial institutions have an important 
     role to play in the achievement of internationally agreed 
     upon health goals, and in helping countries strike the 
     appropriate balance in encouraging effective public 
     investments in the health and education sectors, particularly 
     as foreign assistance in these areas scales up, and promoting 
     macroeconomic stability;
       (9) public-private partnerships are needed to promote 
     creative contracts, investments in sub-Saharan African 
     educational systems, codes of conduct related to recruiting, 
     and other mechanisms to alleviate the adverse impacts on sub-
     Saharan African countries caused by the migration of health 
     professionals;
       (10) colleges and universities of the United States, as 
     well as other members of the private sector, can play a 
     significant role in promoting training in medicine and public 
     health in sub-Saharan Africa by establishing or supporting 
     in-country programs in sub-Saharan Africa through twinning 
     programs with educational institutions in sub-Saharan Africa 
     or through other in-country mechanisms;
       (11) given the substantial numbers of African immigrants to 
     the United States working in the health sector, the United 
     States should enact and implement measures to permit 
     qualified aliens and their family members that are legally 
     present in the United States to work temporarily as health 
     care professionals in developing countries or in other 
     emergency situations, as in S. 2611, of the 109th Congress, 
     as passed by the Senate on May 25, 2006;
       (12) the President, acting through the United States 
     Permanent Representative to the United Nations, should 
     exercise the voice and vote of the United States--
       (A) to ameliorate the adverse impact on less developed 
     countries of the migration of health personnel;
       (B) to promote voluntary codes of conduct for recruiters of 
     health personnel; and
       (C) to promote respect for voluntary agreements in which 
     individuals, in exchange for individual educational 
     assistance, have agreed either to work in the health field in 
     their home countries for a given period of time or to repay 
     such assistance;
       (13) the United States, like countries in other parts of 
     the world, is experiencing a shortage of medical personnel in 
     many occupational specialties, and the shortage is 
     particularly acute in rural and other underserved areas of 
     the country; and
       (14) the United States should expand training opportunities 
     for health personnel, expand incentive programs such as 
     student loan forgiveness for Americans willing to work in 
     underserved areas, and take other steps to increase the 
     number of health personnel in the United States.

     SEC. 5. ASSISTANCE TO INCREASE HUMAN CAPACITY IN THE HEALTH 
                   SECTOR IN SUB-SAHARAN AFRICA.

       Chapter 1 of part I of the Foreign Assistance Act of 1961 
     (22 U.S.C. 2151 et seq.) is amended by adding at the end the 
     following new section:

     ``SEC. 135. ASSISTANCE TO INCREASE HUMAN CAPACITY IN THE 
                   HEALTH SECTOR IN SUB-SAHARAN AFRICA.

       ``(a) Assistance.--
       ``(1) Authority.--The President is authorized to provide 
     assistance, including providing assistance through 
     international or nongovernmental organizations, for programs 
     in sub-Saharan Africa to improve human health care capacity.
       ``(2) Types of assistance.--Such programs should include 
     assistance--
       ``(A) to provide financial and technical assistance to sub-
     Saharan African countries in developing and implementing new 
     or strengthened comprehensive national health workforce 
     plans;
       ``(B) to build and improve national and local capacities 
     and sustainable health systems management in sub-Saharan 
     African countries, including financial, strategic, and 
     technical assistance for--
       ``(i) fiscal and health personnel management;
       ``(ii) health worker recruitment systems;
       ``(iii) the creation or improvement of computerized health 
     workforce databases and other human resource information 
     systems;
       ``(iv) implementation of measures to reduce corruption in 
     the health sector; and
       ``(v) monitoring, evaluation, and quality assurance in the 
     health field, including the utilization of national and 
     district-level mapping of health care systems to determine 
     capacity to deliver health services;
       ``(C) to train and retain sufficient numbers of health 
     workers, including paraprofessionals, to provide essential 
     health services in sub-Saharan African countries, including 
     financing, strategic technical assistance for--
       ``(i) health worker safety and health care, including HIV/
     AIDS prevention and off-site testing and treatment programs 
     for health workers;
       ``(ii) increased capacity for training health professionals 
     and paraprofessionals in such subjects as human resources 
     planning and management, health program management, and 
     quality improvement;
       ``(iii) expanded access to secondary level math and science 
     education;
       ``(iv) expanded capacity for nursing and medical schools in 
     sub-Saharan Africa, with particular attention to incentives 
     or mechanisms to encourage graduates to work in the health 
     sector in their country of residence;
       ``(v) incentives and policies to increase retention, 
     including salary incentives;
       ``(vi) modern quality improvement processes and practices;
       ``(vii) continuing education, distance education, and 
     career development opportunities for health workers;
       ``(viii) mechanisms to promote productivity within existing 
     and expanding health workforces; and
       ``(ix) achievement of minimum infrastructure requirements 
     for health facilities, such as access to clean water;
       ``(D) to support sub-Saharan African countries with 
     financing, technical support, and personnel, including 
     paraprofessionals and community-based caregivers, to better 
     meet the health needs of rural and other underserved 
     populations by providing incentives to serve in these areas, 
     and to more equitably distribute health professionals and 
     paraprofessionals;
       ``(E) to support efforts to improve public health 
     capacities in sub-Saharan Africa through education, 
     leadership development, and other mechanisms;
       ``(F) to provide technical assistance, equipment, training, 
     and supplies to assist in the improvement of health 
     infrastructure in sub-Saharan Africa;
       ``(G) to promote efforts to improve systematically human 
     resource management and development as a critical health and 
     development issue in coordination with specific disease 
     control programs for sub-Saharan Africa; and
       ``(H) to establish a global clearinghouse or similar 
     mechanism for knowledge sharing regarding human resources for 
     health, in consultation, if helpful, with the Global Health 
     Workforce Alliance.
       ``(3) Monitoring and evaluation.--
       ``(A) In general.--The President shall establish a 
     monitoring and evaluation system

[[Page 16776]]

     to measure the effectiveness of assistance by the United 
     States to improve human health care capacity in sub-Saharan 
     Africa in order to maximize the sustainable development 
     impact of assistance authorized under this section and 
     pursuant to the strategy required under subsection (b).
       ``(B) Requirements.--The monitoring and evaluation system 
     shall--
       ``(i) establish performance goals for assistance provided 
     under this section;
       ``(ii) establish performance indicators to be used in 
     measuring or assessing the achievement of performance goals;
       ``(iii) provide a basis for recommendations for adjustments 
     to the assistance to enhance the impact of the assistance; 
     and
       ``(iv) to the extent feasible, utilize and support national 
     monitoring and evaluation systems, with the objective of 
     improved data collection without the imposition of 
     unnecessary new burdens.
       ``(b) Strategy of the United States.--
       ``(1) Requirement for strategy.--Not later than 180 days 
     after the date of enactment of this Act, the President shall 
     develop and transmit to the appropriate congressional 
     committees a strategy for coordinating, implementing, and 
     monitoring assistance programs for human health care capacity 
     in sub-Saharan Africa.
       ``(2) Content.--The strategy required by paragraph (1) 
     shall include--
       ``(A) a description of a coordinated strategy, including 
     coordination among agencies and departments of the Federal 
     Government with other bilateral and multilateral donors, to 
     provide the assistance authorized in subsection (a);
       ``(B) a description of a coordinated strategy to consult 
     with sub-Saharan African countries and the African Union on 
     how best to advance the goals of this Act; and
       ``(C) an analysis of how international financial 
     institutions can most effectively assist countries in their 
     efforts to expand and better direct public spending in the 
     health and education sectors in tandem with the anticipated 
     scale up of international assistance to combat HIV/AIDS and 
     other health challenges, while simultaneously helping these 
     countries maintain prudent fiscal balance.
       ``(3) Focus of analysis.--It is suggested that the analysis 
     described in paragraph (2)(C) focus on 2 or 3 selected 
     countries in sub-Saharan Africa, including, if practical, 1 
     focus country as designated under the President's Emergency 
     Plan for AIDS Relief (authorized by the United States 
     Leadership Against Global HIV/AIDS, Tuberculosis, and Malaria 
     Act of 2003 (Public Law 108-25)) and 1 country without such a 
     designation.
       ``(4) Consultation.--The President is encouraged to develop 
     the strategy required under paragraph (1) in consultation 
     with the Secretary of State, the Administrator for the United 
     States Agency for International Development, including 
     employees of its field missions, the Global HIV/AIDS 
     Coordinator, the Chief Executive Officer of the Millennium 
     Challenge Corporation, the Secretary of the Treasury, the 
     Director of the Bureau of Citizenship and Immigration 
     Services, the Director of the Centers for Disease Control and 
     Prevention, and other relevant agencies to ensure 
     coordination within the Federal Government.
       ``(5) Coordination.--
       ``(A) Development of strategy.--To ensure coordination with 
     national strategies and objectives and other international 
     efforts, the President should develop the strategy described 
     in paragraph (1) by consulting appropriate officials of the 
     United States Government and by coordinating with the 
     following:
       ``(i) Other donors.
       ``(ii) Implementers.
       ``(iii) International agencies.
       ``(iv) Nongovernmental organizations working to increase 
     human health capacity in sub-Saharan Africa.
       ``(v) The World Bank.
       ``(vi) The International Monetary Fund.
       ``(vii) The Global Fund to Fight AIDS, Tuberculosis, and 
     Malaria.
       ``(viii) The World Health Organization.
       ``(ix) The International Labour Organization.
       ``(x) The United Nations Development Programme.
       ``(xi) The United Nations Programme on HIV/AIDS.
       ``(xii) The European Union.
       ``(xiii) The African Union.
       ``(B) Assessment and compilation.--The President should 
     make the assessments and compilations required by subsection 
     (a)(3)(B)(v), in coordination with the entities listed in 
     subparagraph (A).
       ``(c) Report.--
       ``(1) In general.--Not later than 1 year after the date on 
     which the President submits the strategy required in 
     subsection (b), the President shall submit to the appropriate 
     congressional committees a report on the implementation of 
     this section.
       ``(2) Assessment of mechanisms for knowledge sharing.--The 
     report described in paragraph (1) shall be accompanied by a 
     document assessing best practices and other mechanisms for 
     knowledge sharing about human resources for health and 
     capacity building efforts to be shared with governments of 
     developing countries and others seeking to promote 
     improvements in human resources for health and capacity 
     building.
       ``(d) Definitions.--In this section:
       ``(1) Appropriate congressional committees.--The term 
     `appropriate congressional committees' means the Committee on 
     Foreign Relations and the Committee on Appropriations of the 
     Senate and the Committee on International Relations and the 
     Committee on Appropriations of the House of Representatives.
       ``(2) Brain drain.--The term `brain drain' means the 
     emigration of a significant proportion of a country's 
     professionals working in the health field to wealthier 
     countries, with a resulting loss of personnel and often a 
     loss in investment in education and training for the 
     countries experiencing the emigration.
       ``(3) Health professional.--The term `health professional' 
     means a person whose occupation or training helps to 
     identify, prevent, or treat illness or disability.
       ``(4) HIV/AIDS.--The term `HIV/AIDS' has the meaning given 
     such term in section 104A(g) of the Foreign Assistance Act of 
     1961 (22 U.S.C. 2151b-2(g)).
       ``(e) Authorization of Appropriations.--
       ``(1) In general.--There are authorized to be appropriated 
     to the President to carry out the provisions of this 
     section--
       ``(A) $100,000,000 for fiscal year 2007;
       ``(B) $150,000,000 for fiscal year 2008; and
       ``(C) $200,000,000 for fiscal year 2009.
       ``(2) Availability of funds.--Amounts made available under 
     paragraph (1) are authorized to remain available until 
     expended and are in addition to amounts otherwise made 
     available for the purpose of carrying out this section.''.
                                 ______
                                 
      By Mr. FEINGOLD:
  S. 3776. A bill to ensure the provision of high-quality health care 
coverage for uninsured individuals through State health care 
initiatives that expand coverage and access and improve quality and 
efficiency in the health care system; to the Committee on Health, 
Education, Labor, and Pensions.
  Mr. FEINGOLD. Mr. President, I rise today to speak about a crisis 
facing our country, a crisis that directly affects the lives of 46 
million people in the United States, and that indirectly affects many 
more. The crisis is the lack of universal health insurance in America, 
and its effects are rippling through our families, our communities, and 
our economy. It is the No. 1 issue that I hear about in Wisconsin, and 
it is the No. 1 issue for tens of millions of Americans. Nevertheless, 
the issue has been largely ignored in the Halls of Congress. We sit 
idle, locked in a stalemate, refusing to give this life-threatening 
problem its due attention. We need a way to break that deadlock, and 
today I am introducing a bill that will do just that--the State-Based 
Health Care Reform Act.
  I believe that health care is a fundamental right, and every American 
should have guaranteed health care coverage. My bill seeks to move us 
toward that goal in a way that I hope will be acceptable to many of my 
colleagues.
  Every day, all over our Nation, Americans suffer from medical 
conditions that cause them pain and even change they way they lead 
their lives. Every one of us has either experienced this personally or 
through a family member suffering from cancer, Alzheimer's, diabetes, 
genetic disorders, mental illness or some other condition. The disease 
takes its toll on both individuals and families, as trips to the 
hospital for treatments such as chemotherapy test the strength of the 
person and the family affected. This is an incredibly difficult 
situation for anyone. But for the uninsured and underinsured, the 
suffering goes beyond physical discomfort. These 46 million Americans 
bear the additional burden of wondering where the next dollar for their 
health care bills will come from; worries of going into debt; worries 
of going bankrupt because of health care needs. When illness strikes 
families, the last thing they should have to think about is money, but 
I know that for many in our country, this is a persistent burden that 
causes stress and hopelessness.
  It is difficult to do justice to the magnitude of the uninsurance 
problem, but I want to share a few astounding statistics. Forty-seven 
percent of the uninsured avoided seeking care in 2003 due to the cost. 
Thirty-five percent needed care but did not get it. Thirty-seven 
percent did not fill a prescription because of cost. The uninsured are 
seven times more likely to seek care in an emergency room. They are 
less likely to receive preventative care because

[[Page 16777]]

they cannot afford to see the doctor, and they are more likely to die 
as a result. Each year, at least 18,000 people die prematurely in this 
country because of uninsurance. If the uninsured had access to 
continuous health coverage, a reduction in mortality of 5 percent to 15 
percent could be achieved.
  Even for those Americans who currently have health insurance through 
their employer, the risk of becoming uninsured is very real. Large 
businesses are finding themselves less competitive in the global market 
because of skyrocketing health care costs. Small businesses are finding 
it difficult to offer insurance to employees while staying competitive 
in their own communities. Our health care system has failed to keep 
costs in check, and there is simply no way we can expect businesses to 
keep up. More and more, employers offer sub-par benefits, or no 
benefits at all. Employers cannot be the sole provider of health care 
when these costs are rising faster than inflation.
  I travel to each of Wisconsin's 72 counties every year to hold 
townhall meetings. Almost every year, the No. 1 issue raised at these 
listening sessions is the same--health care. The failure of our health 
care system brings people to these meetings in droves. These people 
used to think government involvement was a terrible idea, but not 
anymore. Now they come armed with their frustration, their anger, and 
their desperation, and they tell me that their businesses and their 
lives are being destroyed by health care costs, and they want the 
government to step in.
  Our country can do better, and it will.
  Last year, I was pleased to be joined by the Senator from South 
Carolina, Mr. Graham, in introducing legislation that requires Congress 
to act on health care reform. It requires Congress to take up and 
debate universal health care bills within the first 90 days of the 
session following enactment of the bill. This bill does not prejudge 
what particular health care reform measure should be debated--it simply 
requires Congress to act.
  Today, I am here to build on the proposal from last year. I am 
introducing the State-Based Health Care Reform Act. In short, this bill 
establishes a pilot project to provide States with the resources needed 
to implement universal health care reform. The bill does not dictate 
what kind of reform the States should implement; it just provides an 
incentive for action, provided the States meet certain minimum coverage 
and low-income requirements.
  Over the years I have heard many different proposals for how we 
should change the health care system in this country. Some propose 
using tax incentives as a way to expand access to health care. Others 
think the best approach is to expand public programs. Some feel a 
national single payer health care system is the only way to go. I have 
my own preferences, but I don't think we can ignore any of these 
proposals. We need to consider all of these as we address our broken 
health care system.
  As a former State legislator, I come to this debate appreciating the 
role that States are playing in coming up with some very innovative 
solutions to the health care problem. We are already seeing States move 
ahead of the Federal Government on covering the uninsured. 
Massachusetts recently passed into law a plan to require health 
insurance for all residents, and State legislators in my home State of 
Wisconsin, as well as Vermont, Maine, and California, are working to 
expand health insurance coverage in their States. The Federal 
Government should be encouraging these innovative initiatives, and my 
bill provides the mechanism for this goal to be realized.
  This legislation harnesses the talent and ingenuity of Americans to 
come up with new solutions. This approach takes advantage of America's 
greatest resources--the mind power and creativity of the American 
people--to move our country toward the goal of a working health care 
system with universal coverage. With help from the Federal Government, 
States will be able to try new ways of covering all their residents, 
and our political logjam around health care will begin to loosen.
  Under my proposal, States can be creative in the State resources they 
use to expand health care coverage. For example, a State can use 
personal or employer mandates for coverage, use State tax incentives, 
create a single-payer system or even join with neighboring States to 
offer a regional health care plan. The proposals are subject only to 
the approval of the newly created Health Care Reform Task Force, which 
will be composed of health care experts, consumers, and representatives 
from groups affected by health care reform. This task force will be 
responsible for choosing viable State projects and ensuring that the 
projects are effective. The Task Force will also help the States 
develop projects, and will continue a dialog with the States in order 
to facilitate a good relationship between the State and Federal 
Governments.
  The task force is also charged with making sure that the State plans 
meet certain minimal requirements. First, the State plans must include 
specific target dates for decreasing the number of uninsured, and must 
also identify a set of minimum benefits for every covered individual. 
These benefits must be comparable to health insurance offered to 
Federal employees. Second, the State plans must include a mechanism to 
guarantee that the insurance is affordable. Americans should not go 
broke trying to keep healthy, and health care reform should ensure that 
individual costs are manageable. The State-Based Health Care Reform Act 
bases affordability on income.
  Another provision in this legislation requires that the States 
contribute to paying for their new health care programs. The Federal 
Government will provide matching funds based on enhanced FMAP--the same 
standard used for SCHIP--and will then provide an additional 5 percent. 
States that can afford to provide more are encouraged to, but in order 
to ensure the financial viability of the bill and to ensure State buy-
in, this matching requirement provides a starting point. Other than 
these requirements, the States largely have flexibility to design a 
plan that works best for their respective residents. The possibilities 
for reform are wide open.
  One of the main criticisms of Federal Government spending on health 
care is that it is expensive and increases the deficit. My legislation 
is fully offset, ensuring that it will not increase the deficit. The 
bill doesn't avoid making the tough budget choices that need to be made 
if we are going to pay for health care reform.
  One of the offsets in the bill was proposed by the Congressional 
Budget Office: an increase in the flat rebate paid by drug 
manufacturers for Medicaid prescription drugs. Currently, Medicaid 
recoups a portion of its drug spending through a rebate paid by the 
manufacturer. The savings mechanism would set a flat rebate, and 
provide funding for the States' health care reform projects.
  Additional funding for the bill comes from the President's fiscal 
year 2007 budget proposal to extend the authority of the Federal 
Communications Commission to auction the radio spectrum and the 
authority of Customs and Border Protection to collect multiple 
different conveyance and passenger user fees through fiscal year 2016. 
My bill proposes similar extensions of these established authorities. 
Also, my bill proposes to both simplify and reduce the federal subsidy 
of airline passenger screening costs by replacing the current variable 
fee, which is capped at five dollars per one-way trip, with a flat five 
dollar fee. This proposal is similar to one in the President's fiscal 
year 2007 budget and would decrease federal subsidies to about thirty 
percent of passenger security costs, without reducing aviation security 
spending.
  I also pay for this bill with an offset modeled on legislation 
introduced in the House by my good friend and fellow Wisconsinite Tom 
Petri and in the Senate by the senior Senator from Massachusetts that 
seeks to save money by encouraging higher education institutions to 
shift from private lenders to the direct loan program, which is most 
cost-effective for

[[Page 16778]]

taxpayers. Currently, the Federal Government subsidizes private lenders 
for the loans they issue to students and this offset would end the 
current taxpayer-funded subsidies while increasing financial aid to 
students.
  We can say that it is time to move toward universal coverage, but it 
is empty rhetoric without a feasible plan. I believe that this is the 
way to make universal coverage work in this country. Universal coverage 
doesn't mean that we have to copy a system already in place in another 
country. We can harness our Nation's creativity and entrepreneurial 
spirit to design a system that is uniquely American. Universal coverage 
doesn't have to be defined by what's been attempted in the past. What 
universal coverage does mean is providing a solution for a broken 
system where millions are uninsured, and where businesses and Americans 
are struggling under the burden of health care costs.
  It has been over 10 years since the last serious debate over health 
care reform was killed by special interests and the soft money 
contributions they used to corrupt the legislative process. The 
legislative landscape is now much different. Soft money can no longer 
be used to set the agenda, and businesses and workers are crying out as 
never before for Congress to do something about the country's health 
care crisis.
  We are fortunate to live in a country that has been abundantly 
blessed with democracy and wealth, and yet, there are those in our 
society whose daily health struggles overshadow these blessings. That 
is an injustice, and it is one we can and must address. Martin Luther 
King, Jr. said, ``Of all the forms of inequality, injustice in health 
care is the most shocking and inhumane.'' It is long past time for 
Congress to heed these words and end this terrible inequality. I urge 
my colleagues to support the State-Based Health Care Reform Act.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3776

       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 ``State-Based Health Care 
     Reform Act''.

     SEC. 2. FINDINGS.

       Congress makes the following findings:
       (1) Health care remains one of the most important domestic 
     issues for Americans.
       (2) According to the Census Bureau, 45,800,000 Americans 
     were uninsured in 2004. Over 8,000,000 of these individuals 
     were children. The number of uninsured has increased by 
     6,000,000 since 2000.
       (3) According to the Commonwealth Fund, many of the 
     uninsured are employed, and an increasing number are from 
     middle-income families:
       (A) Two in five working-age Americans with annual incomes 
     between $20,000 and $40,000 were uninsured for at least part 
     of 2005. In 2001, just over one-quarter of those with 
     moderate incomes were uninsured.
       (B) Of the estimated 48,000,000 American adults who spent 
     any time uninsured in 2005, two-thirds were in families where 
     at least one person was working full time.
       (4) The uninsured face serious financial problems, and 
     often have to choose between medical care and other basic 
     necessities. According to the Commonwealth Fund, more than 
     half of uninsured adults reported medical debt or problems 
     paying bills. Of those, nearly half used up all their savings 
     to pay their bills. Two of five were unable to pay for basic 
     necessities like food, heat, or rent because of medical 
     bills.
       (5) Health outcomes for the uninsured are worse than health 
     outcomes for those who are covered. According to the 
     Institute of Medicine, the number of excess deaths among 
     uninsured adults ages 25 to 64 is estimated at around 18,000 
     a year. Fifty-nine percent of uninsured adults who had a 
     chronic illness, such as diabetes or asthma, did not fill a 
     prescription or skipped their medications because they could 
     not afford them.
       (6) The cost of providing care to the uninsured weighs 
     heavily on the United States economy. The United States 
     spends twice as much as any other industrialized nation on 
     health care, and more than the United Kingdom's entire gross 
     domestic product. According to the Kaiser Family Foundation, 
     $124,600,000,000 was spent on care provided to individuals 
     who were uninsured for all or part of 2004. Despite this 
     spending, the United States ranks second to last among 
     industrialized countries in infant mortality rates.

     SEC. 3. PURPOSE.

       It is the purpose of this Act to establish a program to 
     award grants to States for the establishment of State-based 
     projects to--
       (1) increase health care coverage for uninsured individuals 
     in selected States within the 5-year period beginning on the 
     date of enactment of this Act;
       (2) ensure high-quality health care coverage that provides 
     adequate access to providers, services, and benefits;
       (3) improve the efficiency of health care spending and 
     lower the cost of health care for the participating State; 
     and
       (4) encourage universal health care coverage within States.

                     TITLE I--HEALTH CARE COVERAGE

     SEC. 101. STATE-BASED HEALTH CARE COVERAGE PROGRAM.

       (a) Applications by States, Multi-State Regions, Local 
     Governments, and Tribes.--
       (1) State application.--A State, in consultation with local 
     governments, Indian tribes, and Indian organizations involved 
     in the provision of health care (referred to in this Act as a 
     ``State''), may apply for a State health care reform grant 
     for the entire State (or for regions of two or more States) 
     under paragraph (2).
       (2) Submission of application.--In accordance with this 
     section, each State desiring to implement a State health care 
     reform program shall submit an application to the Health Care 
     Reform Task Force established under subsection (b) (referred 
     to in this section as the ``Task Force'') for approval.
       (3) Local government and other applications.--
       (A) In general.--Where a State fails to submit an 
     application under this section, a unit of local government of 
     such State, or a consortium of such units of local 
     governments, may submit an application directly to the Task 
     Force for programs or projects under this section. Such an 
     application shall be subject to the requirements of this 
     section.
       (B) Other applications.--Subject to such additional 
     regulations as the Secretary may prescribe, a unit of local 
     government, Indian tribe, or Indian health organization may 
     submit an application under this section, whether or not the 
     State submits such an application, if such unit, tribe, or 
     organization can demonstrate unique demographic needs or a 
     significant population size that warrants a substate program 
     under this subsection.
       (b) Health Care Reform Task Force.--
       (1) Establishment.--Not later than 180 days after the date 
     of the enactment of this Act, the Secretary shall establish a 
     Health Care Reform Task Force in accordance with this 
     subsection.
       (2) Membership.--
       (A) In general.--The Task Force shall be comprised of not 
     less than 20 members to be appointed by the Comptroller 
     General in accordance with subparagraph (B) and the 
     Secretary.
       (B) Appointed members.--With respect to the members 
     appointed by the Comptroller General under subparagraph (A)--
       (i) such members shall include consumers of health services 
     who represent individuals who have not had health insurance 
     coverage during the 2-year period prior to the appointment 
     and who have had a chronic illness and are disabled;
       (ii) such members shall include individuals--

       (I) with expertise in the financing of, and paying for, 
     benefits and access to care;
       (II) representing business and labor; and
       (III) who are health care providers;

       (iii) such members shall include individuals with expertise 
     and experience in State health policy, State government, and 
     local government;
       (iv) such members shall have a broad geographic 
     representation and be balanced between urban and rural areas; 
     and
       (v) such members shall not include elected officials or 
     paid employees or representatives of associations or advocacy 
     organizations involved in the health care system.
       (3) General duties.--The Task Force shall--
       (A) formally approve the application of a State for a grant 
     under this section and the administration of a reform program 
     within the State;
       (B) establish minimum performance measures with respect to 
     coverage, quality, and cost of State programs, as described 
     under subsection (c)(1);
       (C) conduct a thorough review of the grant application from 
     a State and carry on a dialogue with such State applicants 
     concerning possible modifications and adjustments;
       (D) be responsible for monitoring the status and progress 
     achieved under programs and projects granted under this 
     section; and
       (E) report to the public concerning progress made by States 
     with respect to the performance measures and goals 
     established under this Act, the periodic progress of the 
     State relative to its State performance measures and goals, 
     and the State program application procedures, by region and 
     State jurisdiction.
       (4) Period of appointment; representation requirements; 
     vacancies.--Members shall be appointed for the life of the 
     Task Force. In appointing members under paragraph (1)(A), the 
     Comptroller General shall ensure the representation of urban 
     and rural

[[Page 16779]]

     areas and an appropriate geographic distribution of such 
     members. Any vacancy on the Task Force shall not affect its 
     powers, but shall be filled within a reasonable period of 
     time and in the same manner as the original appointment.
       (5) Chairperson, meetings.--
       (A) Chairperson.--The Task Force shall select a Chairperson 
     from among its members.
       (B) Quorum.--A majority of the members of the Task Force 
     shall constitute a quorum, but a lesser number of members may 
     hold hearings.
       (C) Meetings.--Not later than 30 days after the date on 
     which all members of the Task Force have been appointed, the 
     Task Force shall hold its first meeting. The Task Force shall 
     meet at the call of the Chairperson.
       (6) Powers of the task force.--
       (A) Negotiations with states.--The Task Force may conduct 
     detailed discussions and negotiations with States submitting 
     applications under this section, either individually or in 
     groups, to facilitate a final set of recommendations for 
     purposes of subsection (c)(4)(B). Such negotiations shall be 
     conducted in a public forum.
       (B) Subcommittees.--The Task Force may establish such 
     subcommittees as the Task Force determines are necessary to 
     increase the efficiency of the Task Force.
       (C) Hearings.--The Task Force may hold hearings, so long as 
     the Task Force determines such meetings to be necessary in 
     order to carry out the purposes of this Act, sit and act at 
     such times and places, take such testimony, and receive such 
     evidence as the Task Force considers advisable to carry out 
     the purposes of this subsection.
       (D) Annual meeting.--In addition to other meetings the Task 
     Force may hold, the Task Force shall hold an annual meeting 
     with the participating States under this section for the 
     purpose of having States report progress toward the purposes 
     in section 3 and for an exchange of information.
       (E) Information.--The Task Force may obtain information 
     directly from any Federal department or agency as the Task 
     Force considers necessary to carry out the provisions of this 
     subsection. Upon request of the Chairperson of the Task 
     Force, the head of such department or agency shall furnish 
     such information to the Task Force.
       (F) Contracting.--The Task Force may enter into contracts 
     with qualified independent organizations (such as Mathematica 
     or the Institute of Medicine) to obtain necessary information 
     for the development of the performance standards, reporting 
     requirements, financing mechanisms, or any other matters 
     determined by the Task Force to be appropriate and 
     reasonable.
       (G) Postal services.--The Task Force may use the United 
     States mails in the same manner and under the same conditions 
     as other departments and agencies of the Federal Government.
       (7) Personnel matters.--
       (A) Compensation.--Each member of the Task Force who is not 
     an officer or employee of the Federal Government shall be 
     compensated at a rate equal to the daily equivalent of the 
     annual rate of basic pay prescribed for level IV of the 
     Executive Schedule under section 5315 of title 5, United 
     States Code, for each day (including travel time) during 
     which such member is engaged in the performance of the duties 
     of the Task Force. All members of the Task Force who are 
     officers or employees of the United States shall serve 
     without compensation in addition to that received for their 
     services as officers or employees of the United States.
       (B) Travel expenses.--The members of the Task Force shall 
     be allowed travel expenses, including per diem in lieu of 
     subsistence, at rates authorized for employees of agencies 
     under subchapter I of chapter 57 of title 5, United States 
     Code, while away from their homes or regular places of 
     business in the performance of services for the Task Force.
       (C) Staff.--The Chairperson of the Task Force may, without 
     regard to the civil service laws and regulations, appoint and 
     terminate personnel as may be necessary to enable the Task 
     Force to perform its duties.
       (D) Detail of government employees.--Any Federal Government 
     employee may be detailed to the Task Force without 
     reimbursement, and such detail shall be without interruption 
     or loss of civil service status or privilege.
       (E) Temporary and intermittent services.--The Chairperson 
     of the Task Force may procure temporary and intermittent 
     services under section 3109(b) of title 5, United States 
     Code, at rates for individuals which do not exceed the daily 
     equivalent of the annual rate of basic pay prescribed for 
     level V of the Executive Schedule under section 5316 of such 
     title.
       (8) Funding.--For the purpose of carrying out this 
     subsection, there are authorized to be appropriated 
     $4,000,000 for fiscal year 2007 and each fiscal year 
     thereafter.
       (c) State Plan.--
       (1) In general.--A State that seeks to receive a grant to 
     operate a program under this section shall prepare and submit 
     to the Task Force, as part of the application under 
     subsection (a), a State health care plan that--
       (A) designates the lead State entity that will be 
     responsible for administering the State program;
       (B) contains a list of the minimum benefits that will be 
     provided to all individuals covered under the State program, 
     which shall, at a minimum, provide for coverage that is 
     comparable to the coverage provided for benefits under any of 
     the plans offered under the Federal Employees Health Benefits 
     Program under chapter 89 of title 5, United States Code or 
     the minimum benefits required under the program under title 
     XXI of the Social Security Act (42 U.S.C. 1397aa et seq.);
       (C) includes specific target dates for decreasing the 
     number of uninsured individuals in the State; and
       (D) otherwise complies with this subsection.
       (2) Coverage.--With respect to coverage for uninsured 
     individuals in the State, the State plan shall--
       (A) provide and describe the manner in which the State will 
     ensure that an increased number of such individuals residing 
     within the State will have expanded access to health care 
     coverage with a specific 5-year target for reduction in the 
     number of uninsured individuals through either private or 
     public program expansion, or both, such description to 
     include the manner in which the State will ensure expanded 
     access to health care coverage for low-income individuals 
     within the 5-year target period;
       (B) provide for improvements in the availability of 
     appropriate health care services that will increase access to 
     care in urban, rural, and frontier areas of the State with 
     medically underserved populations or where there is an 
     inadequate supply of health care providers; and
       (C) describe the minimum benefits package that will be 
     provided to every beneficiary, including information on 
     affordability for beneficiaries.
       (3) Effectiveness and efficiency.--The State plan shall 
     include provisions to improve the effectiveness and 
     efficiency of health care in the State, including provisions 
     to attempt to reduce the overall health care costs within the 
     State.
       (4) Costs.--
       (A) In general.--With respect to the costs of health care 
     provided under the program, the State plan shall--
       (i) describe the public and private sector financing to be 
     provided for the State health program;
       (ii) estimate the amount of Federal, State, and local 
     expenditures, as well as the costs to business and 
     individuals under the State health program;
       (iii) describe how the State plan will ensure the financial 
     solvency of the State health program; and
       (iv) contain assurances that the State will comply with the 
     premium and cost sharing limitations described in 
     subparagraph (B).
       (B) Premium and cost sharing limitations.--
       (i) Premiums.--In providing health care coverage under a 
     State program under this Act, the State shall ensure that--

       (I) with respect to an individual whose family income is at 
     or below 100 percent of the poverty line, the State program 
     shall not require--

       (aa) the payment of premiums for such coverage; or
       (bb) the payment of cost sharing for such coverage in an 
     amount that exceeds .5 percent of the family's income for the 
     year involved;

       (II) with respect to an individual whose family income is 
     greater than 100 percent, but at or below 200 percent, of the 
     poverty line, the State program shall not require--

       (aa) the payment of premiums for such coverage in excess of 
     20 percent of the average cost of providing benefits to an 
     individual or family or 3 percent of the amount of the 
     family's income for the year involved; or
       (bb) the payment of cost sharing for such coverage in an 
     amount that, together with the premium amount, does not 
     exceed 5 percent of the family's income for the year 
     involved; and

       (III) with respect to an individual whose family income is 
     greater than 200 percent, but at or below 300 percent, of the 
     poverty line, the State program shall not require--

       (aa) the payment of premiums for such coverage in excess of 
     20 percent of the average cost of providing benefits to an 
     individual or family or 5 percent of the amount of the 
     family's income for the year involved; or
       (bb) the payment of cost sharing for such coverage in an 
     amount that, together with the premium amount, does not 
     exceed 7 percent of the family's income for the year 
     involved.
       (ii) Definition.--For purposes of this subparagraph, the 
     term ``poverty line'' has the meaning given such term in 
     section 2110(c)(5) of the Social Security Act (42 U.S.C. 
     1397jj(c)(5)).
       (5) Protection for lower income individuals.--The State 
     plan may only vary premiums, deductibles, coinsurance, and 
     other cost sharing under the plan based on the family income 
     of the family involved in a manner that does not favor 
     individuals from families with higher income over individuals 
     from families with lower income.
       (d) Review; Determination; and Project Period.--

[[Page 16780]]

       (1) Initial review.--With respect to a State application 
     for a grant under subsection (a), the Secretary and the Task 
     Force shall, not later than 90 days after receipt of such 
     application, complete an initial review of such State 
     application, an analysis of the scope of the proposal, and a 
     determination of whether additional information is needed 
     from the State. The Task Force shall advise the State within 
     such 90-day period of the need to submit additional 
     information.
       (2) Final determination.--Not later than 90 days after 
     completion of the initial review under paragraph (1), the 
     Task Force shall determine whether to approve such 
     application. Such application may be approved only if \2/3\ 
     of the members of the Task Force vote to approve such 
     application.
       (3) Program or project period.--A State program or project 
     may be approved for a period of not to exceed 5 years and may 
     be extended for subsequent 5-year periods upon approval by 
     the Task Force and the Secretary, based upon achievement of 
     targets, except that a shorter period may be requested by a 
     State and granted by the Secretary.
       (e) Required Congressional Action.--It is the sense of the 
     Senate that, not later than 45 days after receiving the 
     report submitted under subsection (g)(2), each committee to 
     which such report is submitted should hold at least 1 hearing 
     concerning such report and the recommendations contained in 
     such report.
       (f) Funding.--
       (1) In general.--The Secretary shall provide a grant to a 
     State that has an application approved under subsection 
     (d)(2) to enable such State to carry out the State health 
     program under the grant.
       (2) Amount of grant.--The amount of a grant provided to a 
     State under paragraph (1) shall be determined based upon the 
     recommendations of the Task Force, subject to the amount 
     appropriated under subsection (k).
       (3) Matching requirement.--To be eligible to receive a 
     grant under paragraph (1), a State shall provide assurances 
     to the Secretary that the State shall contribute to the costs 
     of carrying out activities under the grant an amount equal to 
     not less than the product of--
       (A) the amount of the grant; and
       (B) the sum of the enhanced FMAP for the State (as defined 
     in section 2105(b) of the Social Security Act (42 U.S.C. 
     1397ee(b))) and 5 percent.
       (4) Maintenance of effort.--A State, in utilizing the 
     proceeds of a grant received under paragraph (1), shall 
     maintain the expenditures of the State for health care 
     coverage purposes for the support of direct health care 
     delivery at a level equal to not less than the level of such 
     expenditures maintained by the State for the fiscal year 
     preceding the fiscal year for which the grant is received.
       (g) Reports.--
       (1) By states.--Each State that has received a grant under 
     subsection (f)(1) shall submit to the Task Force an annual 
     report for the period representing the respective State's 
     fiscal year, that shall contain a description of the results, 
     with respect to health care coverage, quality, and costs, of 
     the State program.
       (2) By task force.--At the end of the 5-year period 
     beginning on the date on which the Secretary awards the first 
     grant under paragraph (1), the Task Force established under 
     subsection (b) shall prepare and submit to the appropriate 
     committees of Congress, a report on the progress made by 
     States receiving grants under paragraph (1) in meeting the 
     goals of expanded coverage, improved quality, and cost 
     containment through performance measures established during 
     the 5-year period of the grant. Such report shall contain--
       (A) the recommendation of the Task Force concerning any 
     future action that Congress should take concerning health 
     care reform, including whether or not to extend the program 
     established under this subsection;
       (B) an evaluation of the effectiveness of State health care 
     coverage reforms in--
       (i) expanding health care coverage for State residents;
       (ii) improving the quality of health care provided in the 
     States; and
       (iii) reducing or containing health care costs in the 
     States;
       (C) recommendations regarding the advisability of 
     increasing Federal financial assistance for State ongoing or 
     future health program initiatives, including the amount and 
     source of such assistance; and
       (D) recommendations concerning whether any particular State 
     program should serve as a model for implementation as a 
     national health care reform program.
       (h) Protections for Federal Programs.--
       (1) In general.--Nothing in this Act, or in section 1115 of 
     the Social Security Act (42 U.S.C. 1315) shall be construed 
     as authorizing the Secretary, the Task Force, a State, or any 
     other person or entity to alter or affect in any way the 
     provisions of titles XIX and XXI of such Act (42 U.S.C. 1396 
     et seq. and 1397 et seq.) or the regulations implementing 
     such titles.
       (2) Maintenance of effort.--No payment may be made under 
     this section if the State adopts criteria for benefits, 
     income, and resource standards and methodologies for purposes 
     of determining an individual's eligibility for medical 
     assistance under the State plan under title XIX that are more 
     restrictive than those applied as of the date of enactment of 
     this Act.
       (i) Miscellaneous Provisions.--
       (1) Application of certain requirements.--
       (A) Restriction on application of preexisting condition 
     exclusions.--
       (i) In general.--Subject to subparagraph (B), a State shall 
     not permit the imposition of any preexisting condition 
     exclusion for covered benefits under a program or project 
     under this section.
       (ii) Group health plans and group health insurance 
     coverage.--If the State program or project provides for 
     benefits through payment for, or a contract with, a group 
     health plan or group health insurance coverage, the program 
     or project may permit the imposition of a preexisting 
     condition exclusion but only insofar and to the extent that 
     such exclusion is permitted under the applicable provisions 
     of part 7 of subtitle B of title I of the Employee Retirement 
     Income Security Act of 1974 and title XXVII of the Public 
     Health Service Act.
       (B) Compliance with other requirements.--Coverage offered 
     under the program or project shall comply with the 
     requirements of subpart 2 of part A of title XXVII of the 
     Public Health Service Act insofar as such requirements apply 
     with respect to a health insurance issuer that offers group 
     health insurance coverage.
       (2) Prevention of duplicative payments.--
       (A) Other health plans.--No payment shall be made to a 
     State under this section for expenditures for health 
     assistance provided for an individual to the extent that a 
     private insurer (as defined by the Secretary by regulation 
     and including a group health plan (as defined in section 
     607(1) of the Employee Retirement Income Security Act of 
     1974), a service benefit plan, and a health maintenance 
     organization) would have been obligated to provide such 
     assistance but for a provision of its insurance contract 
     which has the effect of limiting or excluding such obligation 
     because the individual is eligible for or is provided health 
     assistance under the plan.
       (B) Other federal governmental programs.--Except as 
     provided in any other provision of law, no payment shall be 
     made to a State under this section for expenditures for 
     health assistance provided for an individual to the extent 
     that payment has been made or can reasonably be expected to 
     be made promptly (as determined in accordance with 
     regulations) under any other federally operated or financed 
     health care insurance program, other than an insurance 
     program operated or financed by the Indian Health Service, as 
     identified by the Secretary. For purposes of this paragraph, 
     rules similar to the rules for overpayments under section 
     1903(d)(2) of the Social Security Act shall apply.
       (3) Application of certain general provisions.--The 
     following sections of the Social Security Act shall apply to 
     States under this section in the same manner as they apply to 
     a State under such title XIX:
       (A) Title xix provisions.--
       (i) Section 1902(a)(4)(C) (relating to conflict of interest 
     standards).
       (ii) Paragraphs (2), (16), and (17) of section 1903(i) 
     (relating to limitations on payment).
       (iii) Section 1903(w) (relating to limitations on provider 
     taxes and donations).
       (iv) Section 1920A (relating to presumptive eligibility for 
     children).
       (B) Title xi provisions.--
       (i) Section 1116 (relating to administrative and judicial 
     review), but only insofar as consistent with this title.
       (ii) Section 1124 (relating to disclosure of ownership and 
     related information).
       (iii) Section 1126 (relating to disclosure of information 
     about certain convicted individuals).
       (iv) Section 1128A (relating to civil monetary penalties).
       (v) Section 1128B(d) (relating to criminal penalties for 
     certain additional charges).
       (vi) Section 1132 (relating to periods within which claims 
     must be filed).
       (4) Relation to other laws.--
       (A) HIPAA.--Health benefits coverage provided under a State 
     program or project under this section shall be treated as 
     creditable coverage for purposes of part 7 of subtitle B of 
     title I of the Employee Retirement Income Security Act of 
     1974, title XXVII of the Public Health Service Act, and 
     subtitle K of the Internal Revenue Code of 1986.
       (B) ERISA.--Nothing in this section shall be construed as 
     affecting or modifying section 514 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1144) with respect to 
     a group health plan (as defined in section 2791(a)(1) of the 
     Public Health Service Act (42 U.S.C. 300gg-91(a)(1))).
       (j) Authorizations.--
       (1) In general.--There are appropriated in each of fiscal 
     years 2007 through 2016 to carry out this Act, an amount 
     equal to the amount of savings to the Federal Government in 
     each such fiscal year as a result of the enactment of the 
     provisions of title II.
       (2) Use of funds.--Amounts appropriated for a fiscal year 
     under paragraph (1) and not

[[Page 16781]]

     expended may be used in subsequent fiscal years to carry out 
     this section.
       (3) Limitation.--Notwithstanding any other provision of 
     this Act, the total amount of funds appropriated to carry out 
     this Act through fiscal year 2016 shall not exceed 
     $32,000,000,000.

                           TITLE II--OFFSETS

     SEC. 201. INCREASE IN REBATES FOR COVERED OUTPATIENT DRUGS.

       Section 1927(c)(1)(B)(i) of the Social Security Act (42 
     U.S.C. 1396r-8(c)(1)(B)(i)) is amended--
       (1) in subclause (IV), by striking ``and'' after the 
     semicolon;
       (2) in subclause (V)--
       (A) by inserting ``and before January 1, 2007,'' after 
     ``1995,''; and
       (B) by striking the period and inserting ``; and''; and
       (3) by adding at the end the following:

       ``(VI) after December 31, 2006, is 20 percent.''.

     SEC. 202. STUDENT AID REWARD PROGRAM.

       Part G of title IV of the Higher Education Act of 1965 is 
     amended by inserting after section 489 (20 U.S.C. 1096) the 
     end the following:

     ``SEC. 489A. STUDENT AID REWARD PROGRAM.

       ``(a) Program Authorized.--The Secretary shall carry out a 
     Student Aid Reward Program to encourage institutions of 
     higher education to participate in the student loan program 
     under this title that is most cost-effective for taxpayers.
       ``(b) Program Requirements.--In carrying out the Student 
     Aid Reward Program, the Secretary shall--
       ``(1) provide to each institution of higher education 
     participating in the student loan program under this title 
     that is most cost-effective for taxpayers a Student Aid 
     Reward Payment, in an amount determined in accordance with 
     subsection (c), to encourage the institution to participate 
     in that student loan program;
       ``(2) require each institution of higher education 
     receiving a payment under this section to provide student 
     loans under that student loan program for a period of 5 years 
     from the date the payment is made;
       ``(3) where appropriate, require that funds paid to 
     institutions of higher education under this section be used 
     to award students a supplement to such students' Pell Grants 
     under subpart 1 of part A;
       ``(4) permit such funds to also be used to award lower and 
     middle income graduate students need-based grants; and
       ``(5) encourage all institutions of higher education to 
     participate in the Student Aid Reward Program.
       ``(c) Amount.--The amount of a Student Aid Reward Payment 
     under this section shall be not less than 50 percent, and not 
     more than 75 percent, of the savings to the Federal 
     Government generated by the institution's participation in 
     the student loan program under this title that is most cost-
     effective for taxpayers instead of the institution's 
     participation in the student loan program not cost-effective 
     for taxpayers.
       ``(d) Trigger To Ensure Cost Neutrality.--
       ``(1) Limit to ensure cost neutrality.--Notwithstanding 
     subsection (c), the Secretary shall not distribute Student 
     Aid Reward Payments under the Student Aid Reward Program 
     that, in the aggregate, exceed the Federal savings resulting 
     from implementation of the Student Aid Reward Program.
       ``(2) Federal savings.--In calculating Federal savings, as 
     used in paragraph (1), the Secretary shall determine Federal 
     savings on loans made to students at institutions of higher 
     education that participate the student loan program under 
     this title that is most cost-effective for taxpayers and 
     that, on the date of enactment of the Student Aid Reward 
     Program, participated in the student loan program that is not 
     the most cost-effective for taxpayers, resulting from the 
     difference of--
       ``(A) the Federal cost of loan volume made under the 
     student loan program under this title that is most cost-
     effective for taxpayers; and
       ``(B) the Federal cost of an equivalent type and amount of 
     loan volume made, insured, or guaranteed under the student 
     loan program under this title that is not the most cost-
     effective for taxpayers.
       ``(3) Distribution rules.--If the Federal savings 
     determined under paragraph (2) is not sufficient to 
     distribute full Student Aid Reward Payments under the Student 
     Aid Reward Program, the Secretary shall--
       ``(A) first make Student Aid Reward Payments to those 
     institutions of higher education that participated in the 
     student loan program under this title that is not the most 
     cost-effective for taxpayers on the date of enactment of the 
     Student Aid Reward Program; and
       ``(B) with any remaining Federal savings after making 
     Payments under subparagraph (A), make Student Aid Reward 
     Payments to the institutions of higher education not 
     described in subparagraph (A) on a pro-rata basis.
       ``(4) Distribution to students.--Any institution of higher 
     education that receives a Student Aid Reward Payment under 
     this section--
       ``(A) shall distribute, where appropriate, part or all of 
     such payment among the students of such institution who are 
     Pell Grant recipients by awarding such students a 
     supplemental grant; and
       ``(B) may distribute part of such payment as a supplemental 
     grant to graduate students in financial need.
       ``(5) Estimates, adjustments, and carry over.--
       ``(A) Estimates and adjustments.--The Secretary may make 
     Student Aid Reward Payments to institutions of higher 
     education on the basis of estimates, using the best data 
     available at the beginning of an academic/fiscal year. If the 
     Secretary determines thereafter that loan program costs for 
     that academic/fiscal year were different than such estimate, 
     the Secretary shall adjust (reduce or increase) subsequent 
     Student Aid Reward Payments rewards paid to such institutions 
     of higher education to reflect such difference.
       ``(B) Carry over.--Any institution of higher education that 
     receives a reduced Student Aid Reward Payment under paragraph 
     (3)(B), shall remain eligible for the unpaid portion of such 
     institution's financial reward payment, as well as any 
     additional financial reward payments for which the 
     institution is otherwise eligible, in subsequent academic or 
     fiscal years.
       ``(e) Definition.--For purposes of this section--
       ``(1) the student loan program under this title that is 
     most cost-effective for taxpayers is the loan program under 
     part B or D of this title that has the lowest overall cost to 
     the Federal Government (including administrative costs) for 
     the loans authorized by such parts; and
       ``(2) the student loan program under this title that is not 
     most cost-effective for taxpayers is the loan program under 
     part B or D of this title that does not have the lowest 
     overall cost to the Federal Government (including 
     administrative costs) for the loans authorized by such 
     parts.''.

     SEC. 203. AVIATION SECURITY SERVICE PASSENGER FEES.

       Section 44940 of title 49, United States Code, is amended--
       (1) in subsection (a)(1), by inserting ``in an amount equal 
     to $5.00 per one-way trip'' after ``uniform fee'';
       (2) by striking subsection (c); and
       (3) in subsection (d)--
       (A) in paragraph (2), by striking ``subsection (d)'' each 
     place it appears and inserting ``this subsection''; and
       (B) in paragraph (3), by striking ``in accordance with 
     paragraph (1)'' and inserting ``under subsection (a)(2)''.

     SEC. 204. EXTENSION OF FCC SPECTRUM AUCTION AUTHORITY.

       Section 309(j)(11) of the Communications Act of 1934 (47 
     U.S.C. 309(j)(11)) is amended by striking ``2011'' and 
     inserting ``2016''.

     SEC. 205. EXTENSION OF FEES FOR CERTAIN CUSTOMS SERVICES.

       Section 13031(j)(3)(A) and (B) of the Consolidated Omnibus 
     Budget Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)(A) and 
     (B)) is amended by striking ``2014'' each place it appears 
     and inserting ``2016''.
                                 ______
                                 
      By Mr. KERRY:
  S. 3777. A bill to amend the Internal Revenue Code of 1986 to ensure 
a fairer and simpler method of taxing controlled foreign corporations 
of United States shareholders, to treat certain foreign corporations 
managed and controlled in the United States as domestic corporations, 
to codify the economic substance doctrine, and to eliminate the top 
corporate income tax rate, and for other purposes; to the Committee on 
Finance.
  Mr. KERRY. Mr. President, today I am introducing the Export Products 
Not Jobs Act of 2006. Tomorrow, the Senate Finance Committee will hold 
a hearing to tackle the issue of tax reform and will hear from the 
chairman and vice chairman of the President's Advisory Panel on Federal 
Tax Reform. The panel's report took a broad look at our current tax law 
and made numerous recommendations. I agree with some of the 
recommendations and have concerns about others, but believe that the 
report provides a good starting place for a thorough discussion of tax 
reform.
  In 1994, the IRS estimated that a family that itemized their 
deductions and had some interest and capital gains would spend 11\1/2\ 
hours preparing their Federal income tax return. This estimate has 
increased to 19 hours and 45 minutes in 2004. It is time for Congress 
to pass bipartisan tax legislation in the style of Tax Reform Act of 
1986, which greatly simplified Tax Code. And our tax reform should be 
based upon the following three principles: fairness, simplicity, and 
opportunity for economic growth.
  Our Tax Code is extremely complicated. Citizens and businesses 
struggle to comply with ru1es governing:

[[Page 16782]]

taxation of business income, capital gains, income phase-outs, 
extenders, the myriad savings vehicles, recordkeeping for itemized 
deductions, the alternative minimum tax, AMT, the earned-income tax 
credit, EITC, and taxation of foreign business income. I believe that 
our international tax system needs to be simplified and reformed to 
encourage businesses to remain in the United States. And today, I am 
introducing legislation that I hope will be fully considered as we 
begin our discussions on tax reform.
  Presently, the complexities of our international tax system actually 
encourage U.S. corporations to invest overseas. Current tax laws allow 
companies to defer paying U.S. taxes on income earned by their foreign 
subsidiaries, which provides a substantial tax break for companies that 
move investment and jobs overseas. Today, under U.S. tax law, a company 
that is trying to decide where to locate production or services--either 
in the United States or in a foreign low-tax haven--is actually given a 
substantial tax incentive not only to move jobs overseas but to 
reinvest profits permanently, as opposed to bringing the profits back 
to re-invest in the United States.
  Recent press articles have revealed examples of companies taking 
advantage of this perverse incentive in our Tax Code. For instance, 
some companies have taken advantage of this initiative by opening 
subsidiaries to serve markets throughout Europe. Much of the profit 
earned by these subsidiaries will stay in Ireland and the companies 
will therefore avoid paying U.S. taxes. Other companies have announced 
the expansion of jobs in India. This reflects a continued pattern among 
some U.S. multinational companies of shifting software development and 
call centers to India, and this trend is starting to expand to include 
the shifting of critical functions like design and research and 
development to India as well. Some companies are even outsourcing the 
preparation of U.S. tax returns.
  The Export Products Not Jobs Act of 2006 would put an to end to these 
practices by eliminating tax breaks that encourage companies to move 
jobs overseas and by using the savings to create jobs in the United 
States by repealing the top corporate tax rate. This legislation ends 
tax breaks that encourage companies to move jobs by: (1) eliminating 
the ability of companies to defer paying U.S. taxes on foreign income; 
(2) closing abusive corporate tax loopholes; and (3) repealing the top 
corporate rate. It removes the incentive to shift jobs overseas by 
eliminating deferral so that companies pay taxes on their international 
income as they earn it, rather than being allowed to defer taxes.
  Last month, the Ways and Means Subcommittee on Revenue held a hearing 
on international tax laws. Stephen Shay, a former Reagan Treasury 
official, testified that our tax rules ``provide incentives to locate 
business activity outside the United States.'' Furthermore, he 
suggested that taxation of U.S. shareholders under an expansion of 
Subpart F would be a ``substantial improvement'' over our current 
system. The Export Products Not Jobs Act of 2006 does just that.
  Our current tax system punishes U.S. companies that choose to create 
and maintain jobs in the United States. These companies pay higher 
taxes and suffer a competitive disadvantage with a company that chooses 
to move jobs to a foreign tax haven. There is no reason why our Tax 
Code should provide an incentive that encourages investment and job 
creation overseas. Under my legislation, companies would be taxed the 
same whether they invest abroad or at home; they will be taxed on their 
foreign subsidiary profits just like they are taxed on their domestic 
profits.
  This legislation reflects the most sweeping simplification of 
international taxes in over 40 years. Our economy has changed in the 
last 40 years and our tax laws need to be updated to keep pace. Our 
current global economy was not even envisioned when existing law was 
written.
  The Export Products Not Jobs Act of 2006 that I am introducing today 
will not hinder our global competitiveness. Companies will be able to 
continue to defer income they earn when they locate production in a 
foreign country that serves that foreign country's markets. For 
example, if a U.S. company wants to open a hotel in Bermuda or a car 
factory in India to sell cars, foreign income can still be deferred. 
But if a company wants to open a call center in India to answer calls 
from outside India or relocate abroad to sell cars back to the United 
States or Canada, the company must pay taxes just like call centers and 
auto manufacturers located in the United States.
  Currently, American companies allocate their revenue not in search of 
the highest return, but in search of lower taxes. Eliminating deferral 
will improve the efficiency of the economy by making taxes neutral so 
that they do not encourage companies to overinvest abroad solely for 
tax reasons.
  The Congressional Research Service stated in a 2003 report that, 
``[a]ccording to traditional economic theory, deferral thus reduces 
economic welfare by encouraging firms to undertake overseas investments 
that are less productive--before taxes are considered--than alternative 
investments in the United States.'' Additionally, a 2000 Department of 
Treasury study on deferral stated, ``[a]mong all of the options 
considered, ending deferral would also be likely to have the most 
positive long-term effect on economic efficiency and welfare because it 
would do the most to eliminate tax considerations from decisions 
regarding the location of investment.''
  The revenue raised from the repeal of deferral and closing corporate 
loopholes would be used to repeal the top corporate tax rate of 35 
percent. The tax differential between U. S. corporate rates and foreign 
corporate rates has grown over the last two decades and the repeal of 
the top corporate rate is a start in narrowing this gap.
  The Export Products Not Jobs Act of 2006 would promote equity among 
U.S. taxpayers by ensuring that corporations could not eliminate or 
substantially reduce taxation of foreign income by separately 
incorporating their foreign operations. This legislation will eliminate 
the tax incentives to encourage U.S. companies to invest abroad and 
reward those companies that have chosen to invest in the United States. 
I urge my colleagues to join me in this effort, and ask for unanimous 
consent that the full text of the bill be printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 3777

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

     SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

       (a) Short Title.--This Act may be cited as the ``Export 
     Products Not Jobs Act''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.

             TITLE I--FOREIGN TAX REFORM AND SIMPLIFICATION

     SEC. 101. REFORM AND SIMPLIFICATION OF SUBPART F.

       (a) In General.--Subpart F of part III of subchapter N of 
     chapter 1 (relating to controlled foreign corporations) is 
     amended by striking sections 952, 953, and 954 and inserting 
     the following:

     ``SEC. 952. SUBPART F INCOME DEFINED.

       ``(a) In General.--For purposes of this subpart, except as 
     provided in this section, the term `subpart F income' means 
     the gross income of the controlled foreign corporation.
       ``(b) Exceptions for Certain Types of Income.--Subpart F 
     income shall not include--
       ``(1) the active home country income (as defined in section 
     953) of the controlled foreign corporation for the taxable 
     year, or
       ``(2) any item of income for the taxable year from sources 
     within the United States which is effectively connected with 
     the conduct by the controlled foreign corporation of a trade 
     or business within the United States unless such item is 
     exempt from taxation (or is subject to a reduced rate of tax) 
     pursuant to a treaty obligation of the United States.
     For purposes of paragraph (2), income described in paragraph 
     (2) or (3) of section 921(d) shall be treated as derived from 
     sources within the United States and any exemption (or 
     reduction) with respect to the tax imposed by section 884 
     shall not be taken into account.

[[Page 16783]]

       ``(c) Limitation Based on Earnings and Profits.--
       ``(1) In general.--For purposes of subsection (a), the 
     subpart F income of any controlled foreign corporation for 
     any taxable year shall not exceed the earnings and profits of 
     such corporation for such taxable year.
       ``(2) Recharacterization in subsequent taxable years.--If 
     the subpart F income of any controlled foreign corporation 
     for any taxable year was reduced by reason of paragraph (1), 
     any excess of the earnings and profits of such corporation 
     for any subsequent taxable year over the subpart F income of 
     such foreign corporation for such taxable year shall be 
     recharacterized as subpart F income under rules similar to 
     the rules applicable under section 904(f)(5).
       ``(3) Special rule for determining earnings and profits.--
     For purposes of this subsection, earnings and profits of any 
     controlled foreign corporation shall be determined without 
     regard to paragraphs (4), (5), and (6) of section 312(n). 
     Under regulations, the preceding sentence shall not apply to 
     the extent it would increase earnings and profits by an 
     amount which was previously distributed by the controlled 
     foreign corporation.
       ``(d) De Minimis Exception.--If the subpart F income of a 
     controlled foreign corporation for any taxable year 
     (determined without regard to this subsection and section 
     954(a)) is less than the lesser of--
       ``(1) 5 percent of gross income, or
       ``(2) $1,000,000,

     the subpart F income of such corporation for such taxable 
     year shall be treated as being equal to zero.
       ``(e) Special Rules Relating to Boycotts, Bribes, and 
     Certain Foreign Countries.--
       ``(1) In general.--Subpart F income of a controlled foreign 
     corporation for any taxable year (determined without regard 
     to this subsection) shall be increased by the sum of--
       ``(A) the product of--
       ``(i) the gross income of the corporation reduced by its 
     subpart F income (as so determined), and
       ``(ii) the international boycott factor (as determined 
     under section 999),
       ``(B) the sum of the amounts of any illegal bribes, 
     kickbacks, or other payments (within the meaning of section 
     162(c)) paid by or on behalf of the corporation during the 
     taxable year of the corporation directly or indirectly to an 
     official, employee, or agent in fact of a government, and
       ``(C) the gross income of such corporation which is derived 
     from any foreign country during any period during which 
     section 901(j) applies to such foreign country and which is 
     not otherwise treated as subpart F income (as so determined).
       ``(2) Special rule for illegal payments.--The payments 
     referred to in paragraph (1)(B) are payments which would be 
     unlawful under the Foreign Corrupt Practices Act of 1977 if 
     the payor were a United States person.
       ``(3) Income derived from foreign country.--The Secretary 
     shall prescribe such regulations as may be necessary or 
     appropriate to carry out the purposes of paragraph (1)(C), 
     including regulations which treat income paid through 1 or 
     more entities as derived from a foreign country to which 
     section 901(j) applies if such income was, without regard to 
     such entities, derived from such country.

     ``SEC. 953. ACTIVE HOME COUNTRY INCOME.

       ``(a) In General.--For purposes of section 952(b), the term 
     `active home country income' means, with respect to any 
     controlled foreign corporation, income derived from the 
     active and regular conduct of 1 or more trades or businesses 
     within the home country of such corporation which 
     constitutes--
       ``(1) qualified property income, or
       ``(2) qualified services income.
       ``(b) Qualified Property Income.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified property income' 
     means income derived in connection with--
       ``(A) the manufacture, production, growth, or extraction 
     (in whole or in substantial part)of any personal property 
     within the home country of the controlled foreign 
     corporation, or
       ``(B) the resale by the controlled foreign corporation 
     within its home country of personal property manufactured, 
     produced, grown, or extracted (in whole or in substantial 
     part) within that home country.
       ``(2) Property must be used or consumed in home country.--
     Paragraph (1) shall only apply to income if the personal 
     property is sold for use or consumption within the home 
     country.
       ``(c) Qualified Services Income.--For purposes of this 
     section--
       ``(1) In general.--The term `qualified services income' 
     means income (other than qualified property income) derived 
     in connection with the providing of services in transactions 
     with customers which, at the time the services are provided, 
     are located in the home country of such corporation.
       ``(2) Services must be used in home country.--Paragraph (1) 
     shall only apply to income if the services--
       ``(A) are used or consumed in the home country of the 
     controlled foreign corporation, or
       ``(B) are used in the active conduct of a trade or business 
     by the recipient and substantially all of the activities in 
     connection with the trade or business are conducted by the 
     recipient in such home country.
       ``(3) Special rule for insurance income.--If income of a 
     controlled foreign corporation--
       ``(A) is attributable to the issuing (or reinsuring) of an 
     insurance or annuity contract, and
       ``(B) would (subject to the modifications under section 
     954(c)(2)(B)) be taxed under subchapter L of this chapter if 
     such income were the income of a domestic corporation,
     such income shall be treated as qualified services income 
     only if the contract covers only risks in connection with 
     property in, liability arising out of activity in, or lives 
     or health of residents of, the home country of such 
     corporation.
       ``(4) Anti-abuse rule.--For purposes of this subsection, 
     there shall be disregarded any item of income of a controlled 
     foreign corporation derived in connection with any trade or 
     business if, in the conduct of the trade or business, the 
     corporation is not engaged in regular and continuous 
     transactions with customers which are not related persons.
       ``(d) Home Country.--For purposes of this section, the term 
     `home country' means, with respect to a controlled foreign 
     corporation, the country in which such corporation is created 
     or organized.

     ``SEC. 954. OTHER RULES AND DEFINITIONS RELATING TO SUBPART F 
                   INCOME.

       ``(a) Deductions To Be Taken Into Account.--For purposes of 
     determining the subpart F income of a controlled foreign 
     corporation for any taxable year, gross income, and any 
     category of income described in subsection (b) or (c) of 
     section 953, shall be reduced by deductions (including taxes) 
     properly allocable to such income or category. The Secretary 
     shall prescribe regulations for the application of this 
     subsection.
       ``(b) Election by Controlled Foreign Corporation To Be 
     Treated as Domestic Corporation.--
       ``(1) In general.--If--
       ``(A) a foreign corporation is a controlled foreign 
     corporation which makes an election to have this subsection 
     apply and waives all benefits to such corporation granted by 
     the United States under any treaty, and
       ``(B) such foreign corporation meets such requirements as 
     the Secretary shall prescribe to ensure that the taxes 
     imposed by this chapter on such foreign corporation are paid,

     such corporation shall be treated as a domestic corporation 
     for purposes of this title.
       ``(2) Period during which election is in effect.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     an election under paragraph (1) shall apply to the taxable 
     year for which made and all subsequent taxable years unless 
     revoked with the consent of the Secretary.
       ``(B) Termination.--If a corporation which made an election 
     under paragraph (1) for any taxable year fails to meet the 
     requirements of subparagraph (B) of paragraph (1) for any 
     subsequent taxable year, such election shall not apply to 
     such subsequent taxable year and all succeeding taxable 
     years.
       ``(3) Treatment of losses.--If any corporation treated as a 
     domestic corporation under this subsection is treated as a 
     member of an affiliated group for purposes of chapter 6 
     (relating to consolidated returns), any loss of such 
     corporation shall be treated as a dual consolidated loss for 
     purposes of section 1503(d) without regard to paragraph 
     (2)(B) thereof.
       ``(4) Effect of election.--
       ``(A) In general.--For purposes of section 367, any foreign 
     corporation making an election under paragraph (1) shall be 
     treated as transferring (as of the 1st day of the 1st taxable 
     year to which such election applies) all of its assets to a 
     domestic corporation in connection with an exchange to which 
     section 354 applies.
       ``(B) Exception for pre-2007 earnings and profit.--
       ``(i) In general.--Earnings and profits of the foreign 
     corporation accumulated in taxable years beginning before 
     January 1, 2007, shall not be included in the gross income of 
     the persons holding stock in such corporation by reason of 
     subparagraph (A).
       ``(ii) Treatment of distributions.--For purposes of this 
     title, any distribution made by a corporation to which an 
     election under paragraph (1) applies out of earnings and 
     profits accumulated in taxable years beginning before January 
     1, 2007, shall be treated as a distribution made by a foreign 
     corporation.
       ``(iii) Certain rules to continue to apply to pre-2007 
     earnings.--The provisions specified in clause (iv) shall be 
     applied without regard to paragraph (1), except that, in the 
     case of a corporation to which an election under paragraph 
     (1) applies, only earnings and profits accumulated in taxable 
     years beginning before January 1, 2007, shall be taken into 
     account.
       ``(iv) Specified provisions.--The provisions specified in 
     this clause are:

       ``(I) Section 1248 (relating to gain from certain sales or 
     exchanges of stock in certain foreign corporations).

[[Page 16784]]

       ``(II) Subpart F of part III of subchapter N to the extent 
     such subpart relates to earnings invested in United States 
     property or amounts referred to in clause (ii) or (iii) of 
     section 951(a)(1)(A).

       ``(5) Effect of termination.--For purposes of section 367, 
     if--
       ``(A) an election is made by a corporation under paragraph 
     (1) for any taxable year, and
       ``(B) such election ceases to apply for any subsequent 
     taxable year,

     such corporation shall be treated as a domestic corporation 
     transferring (as of the 1st day of such subsequent taxable 
     year) all of its property to a foreign corporation in 
     connection with an exchange to which section 354 applies.
       ``(c) Special Rule for Certain Captive Insurance 
     Companies.--
       ``(1) In general.--Solely for purposes of applying this 
     subpart to related person insurance income--
       ``(A) the term `United States shareholder' means, with 
     respect to any foreign corporation, a United States person 
     (as defined in section 957(c)) who owns (within the meaning 
     of section 958(a)) any stock of the foreign corporation,
       ``(B) the term `controlled foreign corporation' has the 
     meaning given to such term by section 957(a) determined by 
     substituting `25 percent or more' for `more than 50 percent', 
     and
       ``(C) the pro rata share referred to in section 
     951(a)(1)(A)(i) shall be determined under paragraph (5) of 
     this subsection.
       ``(2) Related person insurance income.--For purposes of 
     this subsection--
       ``(A) In general.--The term `related person insurance 
     income' means any income which--
       ``(i) is attributable to a policy of insurance or 
     reinsurance with respect to which the person (directly or 
     indirectly) insured is a United States shareholder in the 
     foreign corporation or a related person to such a 
     shareholder, and
       ``(ii) would (subject to the modifications provided by 
     subparagraph (B)) be taxed under subchapter L of this chapter 
     if such income were the income of a domestic insurance 
     company.
       ``(B) Special rules.--For purposes of subparagraph (A)--
       ``(i) The following provisions of subchapter L shall not 
     apply:

       ``(I) The small life insurance company deduction.
       ``(II) Section 805(a)(5) (relating to operations loss 
     deduction).
       ``(III) Section 832(c)(5) (relating to certain capital 
     losses).

       ``(ii) The items referred to in--

       ``(I) section 803(a)(1) (relating to gross amount of 
     premiums and other considerations),
       ``(II) section 803(a)(2) (relating to net decrease in 
     reserves),
       ``(III) section 805(a)(2) (relating to net increase in 
     reserves), and
       ``(IV) section 832(b)(4) (relating to premiums earned on 
     insurance contracts),

     shall be taken into account only to the extent they are in 
     respect of any reinsurance or the issuing of any insurance or 
     annuity contract described in subparagraph (A).
       ``(iii) Reserves for any insurance or annuity contract 
     shall be determined in the same manner as if the controlled 
     foreign corporation were subject to tax under subchapter L, 
     except that in applying such subchapter--

       ``(I) the interest rate determined for the functional 
     currency of the corporation and which, except as provided by 
     the Secretary, is calculated in the same manner as the 
     Federal mid-term rate under section 1274(d), shall be 
     substituted for the applicable Federal interest rate,
       ``(II) the highest assumed interest rate permitted to be 
     used in determining foreign statement reserves shall be 
     substituted for the prevailing State assumed interest rate, 
     and
       ``(III) tables for mortality and morbidity which reasonably 
     reflect the current mortality and morbidity risks in the 
     corporation's home country shall be substituted for the 
     mortality and morbidity tables otherwise used for such 
     subchapter.

       ``(iv) All items of income, expenses, losses, and 
     deductions shall be properly allocated or apportioned under 
     regulations prescribed by the Secretary.
       ``(3) Exception for corporations not held by insureds.--
     Paragraph (1) shall not apply to any foreign corporation if 
     at all times during the taxable year of such foreign 
     corporation--
       ``(A) less than 20 percent of the total combined voting 
     power of all classes of stock of such corporation entitled to 
     vote, and
       ``(B) less than 20 percent of the total value of such 
     corporation,

     is owned (directly or indirectly under the principles of 
     section 883(c)(4)) by persons who are (directly or 
     indirectly) insured under any policy of insurance or 
     reinsurance issued by such corporation or who are related 
     persons to any such person.
       ``(4) Treatment of mutual insurance companies.--In the case 
     of a mutual insurance company--
       ``(A) this subsection shall apply,
       ``(B) policyholders of such company shall be treated as 
     shareholders, and
       ``(C) appropriate adjustments in the application of this 
     subpart shall be made under regulations prescribed by the 
     Secretary.
       ``(5) Determination of pro rata share.--
       ``(A) In general.--The pro rata share determined under this 
     paragraph for any United States shareholder is the lesser 
     of--
       ``(i) the amount which would be determined under paragraph 
     (2) of section 951(a) if--

       ``(I) only related person insurance income were taken into 
     account,
       ``(II) stock owned (within the meaning of section 958(a)) 
     by United States shareholders on the last day of the taxable 
     year were the only stock in the foreign corporation, and
       ``(III) only distributions received by United States 
     shareholders were taken into account under subparagraph (B) 
     of such paragraph (2), or

       ``(ii) the amount which would be determined under paragraph 
     (2) of section 951(a) if the entire earnings and profits of 
     the foreign corporation for the taxable year were subpart F 
     income.
       ``(B) Coordination with other provisions.--The Secretary 
     shall prescribe regulations providing for such modifications 
     to the provisions of this subpart as may be necessary or 
     appropriate by reason of subparagraph (A).
       ``(6) Related person.--For purposes of this subsection--
       ``(A) In general.--Except as provided in subparagraph (B), 
     the term `related person' has the meaning given such term by 
     subsection (d)(3).
       ``(B) Treatment of certain liability insurance policies.--
     In the case of any policy of insurance covering liability 
     arising from services performed as a director, officer, or 
     employee of a corporation or as a partner or employee of a 
     partnership, the person performing such services and the 
     entity for which such services are performed shall be treated 
     as related persons.
       ``(7) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary to carry out the purposes of 
     this subsection, including--
       ``(A) regulations preventing the avoidance of this 
     subsection through cross insurance arrangements or otherwise, 
     and
       ``(B) regulations which may provide that a person will not 
     be treated as a United States shareholder under paragraph (1) 
     with respect to any foreign corporation if neither such 
     person (nor any related person to such person) is (directly 
     or indirectly) insured under any policy of insurance or 
     reinsurance issued by such foreign corporation.
       ``(d) Other Definitions and Rules.--For purposes of this 
     section--
       ``(1) Treatment of branches.--If--
       ``(A) a controlled foreign corporation carries on 
     activities through a branch or similar establishment with a 
     home country other than the home country of such corporation, 
     and
       ``(B) the carrying on of such activities in such manner has 
     substantially the same effect as if such branch or similar 
     establishment were a wholly owned subsidiary of such 
     corporation,

     this subpart shall, under regulations prescribed by the 
     Secretary, be applied as if such branch or other 
     establishment were a wholly owned subsidiary of such 
     corporation.
       ``(2) Home country.--For purposes of paragraph (1)--
       ``(A) In general.--The term `home country' has the meaning 
     given such term by section 953(d).
       ``(B) Branch.--In the case of a branch or similar 
     establishment, the term `home country' means the foreign 
     country in which--
       ``(i) the principal place of business of the branch or 
     similar establishment is located, and
       ``(ii) separate books and accounts are maintained.
       ``(3) Related person defined.--For purposes of this 
     section, a person is a related person with respect to a 
     controlled foreign corporation, if--
       ``(A) such person is an individual, corporation, 
     partnership, trust, or estate which controls, or is 
     controlled by, the controlled foreign corporation, or
       ``(B) such person is a corporation, partnership, trust, or 
     estate which is controlled by the same person or persons 
     which control the controlled foreign corporation.

     For purposes of the preceding sentence, control means, with 
     respect to a corporation, the ownership, directly or 
     indirectly, of stock possessing more than 50 percent of the 
     total voting power of all classes of stock entitled to vote 
     or of the total value of stock of such corporation. In the 
     case of a partnership, trust, or estate, control means the 
     ownership, directly or indirectly, of more than 50 percent 
     (by value) of the beneficial interests in such partnership, 
     trust, or estate. For purposes of this paragraph, rules 
     similar to the rules of section 958 shall apply.''.
       (b) Conforming Amendment.--The table of sections for 
     subpart F of part III of subchapter N of chapter 1 is amended 
     by striking the items relating to sections 953 and 954 and 
     inserting:

``Sec. 953. Active home country income.
``Sec. 954. Other rules and definitions relating to subpart F 
              income.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable

[[Page 16785]]

     years of controlled foreign corporations beginning after 
     December 31, 2006, and taxable years of United States 
     shareholders with or within which such taxable years of such 
     corporations end.

     SEC. 102. TREATMENT OF FOREIGN CORPORATIONS MANAGED AND 
                   CONTROLLED IN THE UNITED STATES AS DOMESTIC 
                   CORPORATIONS.

       (a) In General.--Section 7701(a)(4) of the Internal Revenue 
     Code of 1986 (defining domestic) is amended to read as 
     follows:
       ``(4) Domestic.--
       ``(A) In general.--The term `domestic' means, when applied 
     to a corporation or partnership, a corporation or partnership 
     which is created or organized in the United States or under 
     the law of the United States or of any State unless, in the 
     case of a partnership, the Secretary provides otherwise by 
     regulations.
       ``(B) Income tax exception for publicly-traded corporations 
     managed and controlled in the united states.--Notwithstanding 
     subparagraph (A), in the case of a corporation the stock of 
     which is regularly traded on an established securities 
     market, if--
       ``(i) the corporation would not otherwise be treated as a 
     domestic corporation for purposes of this title, but
       ``(ii) the management and control of the corporation occurs 
     primarily within the United States,

     then, solely for purposes of chapter 1 (and any other 
     provision of this title relating to chapter 1), the 
     corporation shall be treated as a domestic corporation.
       ``(C) Management and control.--For purposes of this 
     paragraph, the management and control of a corporation shall 
     be treated as primarily occurring within the United States if 
     substantially all of the executive officers and senior 
     management of the corporation who exercise day-to-day 
     responsibility for making decisions involving strategic, 
     financial, and operational policies of the corporation are 
     primarily located within the United States. The Secretary may 
     by regulations include other individuals not described in the 
     preceding sentence in the determination of whether the 
     management and control of the corporation occurs primarily 
     within the United States if such other individuals exercise 
     the day-to day responsibilities described in the preceding 
     sentence.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning on or after the date 
     which is 2 years after the date of the enactment of this Act.

                 TITLE II--ECONOMIC SUBSTANCE DOCTRINE

     SEC. 201. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.

       (a) In General.--Section 7701 is amended by redesignating 
     subsection (o) as subsection (p) and by inserting after 
     subsection (n) the following new subsection:
       ``(o) Clarification of Economic Substance Doctrine; Etc.--
       ``(1) General rules.--
       ``(A) In general.--In any case in which a court determines 
     that the economic substance doctrine is relevant for purposes 
     of this title to a transaction (or series of transactions), 
     such transaction (or series of transactions) shall have 
     economic substance only if the requirements of this paragraph 
     are met.
       ``(B) Definition of economic substance.--For purposes of 
     subparagraph (A)--
       ``(i) In general.--A transaction has economic substance 
     only if--

       ``(I) the transaction changes in a meaningful way (apart 
     from Federal tax effects) the taxpayer's economic position, 
     and
       ``(II) the taxpayer has a substantial nontax purpose for 
     entering into such transaction and the transaction is a 
     reasonable means of accomplishing such purpose.

     In applying subclause (II), a purpose of achieving a 
     financial accounting benefit shall not be taken into account 
     in determining whether a transaction has a substantial nontax 
     purpose if the origin of such financial accounting benefit is 
     a reduction of income tax.
       ``(ii) Special rule where taxpayer relies on profit 
     potential.--A transaction shall not be treated as having 
     economic substance by reason of having a potential for profit 
     unless--

       ``(I) the present value of the reasonably expected pre-tax 
     profit from the transaction is substantial in relation to the 
     present value of the expected net tax benefits that would be 
     allowed if the transaction were respected, and
       ``(II) the reasonably expected pre-tax profit from the 
     transaction exceeds a risk-free rate of return.

       ``(C) Treatment of fees and foreign taxes.--Fees and other 
     transaction expenses and foreign taxes shall be taken into 
     account as expenses in determining pre-tax profit under 
     subparagraph (B)(ii).
       ``(2) Special rules for transactions with tax-indifferent 
     parties.--
       ``(A) Special rules for financing transactions.--The form 
     of a transaction which is in substance the borrowing of money 
     or the acquisition of financial capital directly or 
     indirectly from a tax-indifferent party shall not be 
     respected if the present value of the deductions to be 
     claimed with respect to the transaction is substantially in 
     excess of the present value of the anticipated economic 
     returns of the person lending the money or providing the 
     financial capital. A public offering shall be treated as a 
     borrowing, or an acquisition of financial capital, from a 
     tax-indifferent party if it is reasonably expected that at 
     least 50 percent of the offering will be placed with tax-
     indifferent parties.
       ``(B) Artificial income shifting and basis adjustments.--
     The form of a transaction with a tax-indifferent party shall 
     not be respected if--
       ``(i) it results in an allocation of income or gain to the 
     tax-indifferent party in excess of such party's economic 
     income or gain, or
       ``(ii) it results in a basis adjustment or shifting of 
     basis on account of overstating the income or gain of the 
     tax-indifferent party.
       ``(3) Definitions and special rules.--For purposes of this 
     subsection--
       ``(A) Economic substance doctrine.--The term `economic 
     substance doctrine' means the common law doctrine under which 
     tax benefits under subtitle A with respect to a transaction 
     are not allowable if the transaction does not have economic 
     substance or lacks a business purpose.
       ``(B) Tax-indifferent party.--The term `tax-indifferent 
     party' means any person or entity not subject to tax imposed 
     by subtitle A. A person shall be treated as a tax-indifferent 
     party with respect to a transaction if the items taken into 
     account with respect to the transaction have no substantial 
     impact on such person's liability under subtitle A.
       ``(C) Exception for personal transactions of individuals.--
     In the case of an individual, this subsection shall apply 
     only to transactions entered into in connection with a trade 
     or business or an activity engaged in for the production of 
     income.
       ``(D) Treatment of lessors.--In applying paragraph 
     (1)(B)(ii) to the lessor of tangible property subject to a 
     lease--
       ``(i) the expected net tax benefits with respect to the 
     leased property shall not include the benefits of--

       ``(I) depreciation,
       ``(II) any tax credit, or
       ``(III) any other deduction as provided in guidance by the 
     Secretary, and

       ``(ii) subclause (II) of paragraph (1)(B)(ii) shall be 
     disregarded in determining whether any of such benefits are 
     allowable.
       ``(4) Other common law doctrines not affected.--Except as 
     specifically provided in this subsection, the provisions of 
     this subsection shall not be construed as altering or 
     supplanting any other rule of law, and the requirements of 
     this subsection shall be construed as being in addition to 
     any such other rule of law.
       ``(5) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this subsection. Such regulations may include 
     exemptions from the application of this subsection.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to transactions entered into after the date of 
     the enactment of this Act.

     SEC. 202. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO 
                   TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

       (a) In General.--Subchapter A of chapter 68 is amended by 
     inserting after section 6662A the following new section:

     ``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO 
                   TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

       ``(a) Imposition of Penalty.--If a taxpayer has an 
     noneconomic substance transaction understatement for any 
     taxable year, there shall be added to the tax an amount equal 
     to 40 percent of the amount of such understatement.
       ``(b) Reduction of Penalty for Disclosed Transactions.--
     Subsection (a) shall be applied by substituting `20 percent' 
     for `40 percent' with respect to the portion of any 
     noneconomic substance transaction understatement with respect 
     to which the relevant facts affecting the tax treatment of 
     the item are adequately disclosed in the return or a 
     statement attached to the return.
       ``(c) Noneconomic Substance Transaction Understatement.--
     For purposes of this section--
       ``(1) In general.--The term `noneconomic substance 
     transaction understatement' means any amount which would be 
     an understatement under section 6662A(b)(1) if section 6662A 
     were applied by taking into account items attributable to 
     noneconomic substance transactions rather than items to which 
     section 6662A would apply without regard to this paragraph.
       ``(2) Noneconomic substance transaction.--The term 
     `noneconomic substance transaction' means any transaction 
     if--
       ``(A) there is a lack of economic substance (within the 
     meaning of section 7701(o)(1)) for the transaction giving 
     rise to the claimed benefit or the transaction was not 
     respected under section 7701(o)(2), or
       ``(B) the transaction fails to meet the requirements of any 
     similar rule of law.
       ``(d) Rules Applicable to Compromise of Penalty.--
       ``(1) In general.--If the 1st letter of proposed deficiency 
     which allows the taxpayer

[[Page 16786]]

     an opportunity for administrative review in the Internal 
     Revenue Service Office of Appeals has been sent with respect 
     to a penalty to which this section applies, only the 
     Commissioner of Internal Revenue may compromise all or any 
     portion of such penalty.
       ``(2) Applicable rules.--The rules of paragraphs (2) and 
     (3) of section 6707A(d) shall apply for purposes of paragraph 
     (1).
       ``(e) Coordination With Other Penalties.--Except as 
     otherwise provided in this part, the penalty imposed by this 
     section shall be in addition to any other penalty imposed by 
     this title.
       ``(f) Cross References.--

  ``(1) For coordination of penalty with understatements under section 
              6662 and other special rules, see section 6662A(e)
  ``(2) For reporting of penalty imposed under this section to the 
              Securities and Exchange Commission, see section 
              6707A(e).''.

       (b) Coordination With Other Understatements and 
     Penalties.--
       (1) The second sentence of section 6662(d)(2)(A) is amended 
     by inserting ``and without regard to items with respect to 
     which a penalty is imposed by section 6662B'' before the 
     period at the end.
       (2) Subsection (e) of section 6662A is amended--
       (A) in paragraph (1), by inserting ``and noneconomic 
     substance transaction understatements'' after ``reportable 
     transaction understatements'' both places it appears,
       (B) in paragraph (2)(A), by inserting ``and a noneconomic 
     substance transaction understatement'' after ``reportable 
     transaction understatement'',
       (C) in paragraph (2)(B), by inserting ``6662B or'' before 
     ``6663'',
       (D) in paragraph (2)(C)(i), by inserting ``or section 
     6662B'' before the period at the end,
       (E) in paragraph (2)(C)(ii), by inserting ``and section 
     6662B'' after ``This section'',
       (F) in paragraph (3), by inserting ``or noneconomic 
     substance transaction understatement'' after ``reportable 
     transaction understatement'', and
       (G) by adding at the end the following new paragraph:
       ``(4) Noneconomic substance transaction understatement.--
     For purposes of this subsection, the term `noneconomic 
     substance transaction understatement' has the meaning given 
     such term by section 6662B(c).''.
       (3) Subsection (e) of section 6707A is amended--
       (A) by striking ``or'' at the end of subparagraph (B), and
       (B) by striking subparagraph (C) and inserting the 
     following new subparagraphs:
       ``(C) is required to pay a penalty under section 6662B with 
     respect to any noneconomic substance transaction, or
       ``(D) is required to pay a penalty under section 6662(h) 
     with respect to any transaction and would (but for section 
     6662A(e)(2)(C)) have been subject to penalty under section 
     6662A at a rate prescribed under section 6662A(c) or under 
     section 6662B,''.
       (c) Clerical Amendment.--The table of sections for part II 
     of subchapter A of chapter 68 is amended by inserting after 
     the item relating to section 6662A the following new item:

``Sec. 6662B. Penalty for understatements attributable to transactions 
              lacking economic substance, etc.''
       (d) Effective Date.--The amendments made by this section 
     shall apply to transactions entered into after the date of 
     the enactment of this Act.

     SEC. 203. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS 
                   ATTRIBUTABLE TO NONECONOMIC SUBSTANCE 
                   TRANSACTIONS.

       (a) In General.--Section 163(m) (relating to interest on 
     unpaid taxes attributable to nondisclosed reportable 
     transactions) is amended--
       (1) by striking ``attributable'' and all that follows and 
     inserting the following: ``attributable to--
       ``(1) the portion of any reportable transaction 
     understatement (as defined in section 6662A(b)) with respect 
     to which the requirement of section 6664(d)(2)(A) is not met, 
     or
       ``(2) any noneconomic substance transaction understatement 
     (as defined in section 6662B(c)).'', and
       (2) by inserting ``AND NONECONOMIC SUBSTANCE TRANSACTIONS'' 
     in the heading thereof after ``TRANSACTIONS''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to transactions after the date of the enactment 
     of this Act in taxable years ending after such date.

  TITLE III--ELIMINATION OF HIGHEST CORPORATE MARGINAL INCOME TAX RATE

     SEC. 301. ELIMINATION OF HIGHEST CORPORATE MARGINAL INCOME 
                   TAX RATE.

       (a) In General.--Section 11(b)(1) (relating to amount of 
     tax imposed on corporations) is amended by striking 
     subparagraphs (C) and (D) and inserting the following new 
     subparagraph:
       ``(C) 34 percent of so much of the taxable income as 
     exceeds $75,000.''.
       (b) Certain Personal Service Corporations.--Section 
     11(b)(2) is amended by striking ``35 percent'' and inserting 
     ``34 percent''.
       (c) Conforming Amendments.--
       (1) Section 11(b)(1) is amended by striking the last 
     sentence.
       (2) Section 1201(a) is amended--
       (A) by striking ``35 percent'' each place it appears and 
     inserting ``34 percent'', and
       (B) by striking ``last 2 sentences'' and inserting ``last 
     sentence''.
       (3) Paragraphs (1) and (2) of section 1445(e) are each 
     amended by striking ``35 percent'' and inserting ``34 
     percent''.
       (4) Section 1561(a) is amended by striking ``last 2 
     sentences'' and inserting ``last sentence''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.
                                 ______
                                 
      By Ms. SNOWE:
  S. 3778. An original bill to reauthorize and improve the Small 
Business Act and the Small Business Act of 1958, and for other 
purposes; from the Committee on Small Business and Entrepreneurship; 
placed on the calendar.
  Ms. SNOWE. Mr. President, as chair of the Senate Committee on Small 
Business and Entrepreneurship, I rise today to introduce a bill, The 
Small Business Reauthorization and Improvements Act of 2006, that was 
reported by the committee on a vote of 18 to 0.
  I strongly believe we must do everything possible to sustain 
prosperity and job creation throughout Maine and the United States. To 
achieve that goal, I have long fought to expand the reach of Small 
Business Administration programs that have helped millions of aspiring 
entrepreneurs and existing small businesses.
  Today is a pivotal time for the SBA. A new Administrator, Steven C. 
Preston, has been sworn in, and I have held hearings on the 
reauthorization of the agency's programs that are set to expire 
September 30, 2006. The reauthorization and funding of SBA programs is 
vital to the continued growth of the economy and the small business 
community. My goal is for the process to conclude with a renewed SBA 
that is completely dedicated to fostering small business ownership and 
job creation in America.
  The SBA's fundamental purpose is to ``aid, counsel, assist, and 
protect the interests of small-business concerns.'' The methods for 
carrying out this congressional mandate include a wide array of 
financial, procurement, management, and technical assistance programs 
tailored to encourage small business growth and expansion. As the 
economy continues to grow, it is essential that Congress affirms long-
term stability in the programs the SBA provides to the small business 
community. The American economy needs a strong and vibrant SBA because 
small businesses represent 99 percent of all employers, create nearly 
75 percent of all net new jobs, and employ 51 percent of the private-
sector workforce.
  There is no doubt that SBA's technical assistance programs have 
demonstrated impressive growth. During fiscal year 2005, the SBA 
provided 56,739 small businesses with technical assistance. That was an 
astounding 46.4 percent increase from the 38,754 small businesses 
assisted in fiscal year 2004.
  If there is truth in numbers, the SBA has numerous ``truths'' it can 
and should tout. Its record of achievement for fiscal year 2005 alone 
includes:
  Counseling 1.5 million entrepreneurs through the agency's Small 
Business Development Centers, Business Information Centers, SCORE and 
Women's Business Centers;
  approving over 89,000 business loans through the 7(a) and 504 lending 
programs;
  funding 74,307 7(a) program loans to small businesses for a total of 
more than $l4 billion; and
  a doubling of small business lending since 2001, with nearly a third 
of SBA-backed loans being made to minority-owned small businesses.
  Despite a drastically declining share of the Federal budget, the data 
clearly indicate that the SBA's programs have created or retained a 
significant number of jobs over the last several years. Between fiscal 
year 1999 and fiscal year 2004, the SBA's Offices of Advocacy and 
Legislative Affairs report that the SBA's lending and technical 
assistance programs enabled participating small businesses to create or 
retain 4.4 million new jobs. In addition, the SBA's programs have 
helped to create or retain more jobs during each passing

[[Page 16787]]

year. In fiscal year 2004, the SBA's programs created or retained 51.2 
percent more jobs than they did in fiscal 1999.
  Our goal is to build on these tremendous successes. The building 
blocks for a successful reauthorization are a bipartisan bill: The 
Small Business Reauthorization and Improvements Act. It is cosponsored 
by Ranking Member Kerry, Senator Vitter, Senator Landrieu, Senator 
Cantwell, Senator Lieberman and Senator Isakson. This legislation will:
  Reform the SBA's largest small business financing program, the 
section 7(a) loan program, which provided almost $15 billion in loans 
to small businesses last year, by increasing the maximum size of a loan 
from $2 million to $3 million.
  Require the SBA to implement a more efficient test for loan 
eligibility that measures businesses' revenues, rather than merely 
their number of employees.
  Establish a national preferred lender program to increase small 
businesses' access to capital by reducing duplicative administrative 
burdens on small business loans.
  Restructure the Small Business Investment Company Program, an 
innovative public-private venture capital partnership that has provided 
more than $25 billion in financing to small businesses.
  Expand the SBA's capability to assist disaster victims by allowing 
private lenders to make loans at lower interest rates.
  Increase Federal authority to prosecute, suspend, and debar large 
corporations which obtain government contracts by misrepresenting 
themselves as small businesses.
  Create a stronger system of SBA size standards to ensure that Federal 
agencies respect SBA decisions on whether a company that receives a 
government contract is truly a small business.
  Address the small business health insurance crisis by creating a 
competitive pilot grant program for Small Business Development Centers, 
SBDCs, to provide counseling and resources to small businesses about 
health insurance options in their geographic areas.
  The legislation also rejects new loan fees. I strongly oppose SBA's 
proposal to increase fees for these programs. The fees would be charged 
against every loan that is greater than $1 million. In the 7(a) 
program, this is 3 percent of loans; in the 504 program, it is 15 
percent of loans; and in the SBIC program it's 100 percent of the 
loans. A fee increase is not the way to balance the budget and it 
remains wholly unacceptable, to put it mildly.
  Increasing fees charged to small businesses end up hurting--not 
helping our Nation's small businesses. When we consider that the SBA's 
budget represents less than 3/100ths of a percent of the total Federal 
budget, is this really the place for the administration to find 
additional savings? Congress must always strive to ensure that all 
small businesses are able to access SBA's financing programs without 
additional penalties.
  In 2005, SBA programs disbursed recordbreaking totals of loans to 
small businesses, both in the number of loans and total dollar value 
provided to small businesses. During the last fiscal year, the SBA 
guaranteed over $24 billion in loans and venture capital for small 
businesses, the highest level of capital ever provided. This included 
over $1 million in 90 loans to Mainers through the Microloan program, 
which is an inexpensive program the Bush administration has targeted 
for elimination.
  The SBA's programs demonstrate how Congress can play a positive role 
in enhancing private-sector financing for start-up companies. Since 
1953, nearly 20 million small business owners have received direct or 
indirect help from one of the SBA's lending or technical assistance 
programs, making the agency one of the government's most cost-effective 
instruments for economic development.
  SBA loan and investment programs have produced success story after 
success story, which include assisting the founders of Intel, Staples, 
and Federal Express, as well as thousands of other successful 
businesses. This bill will build upon these past successes and make the 
SBA even more effective.
  The American economy needs a strong and vibrant Small Business 
Administration. This committee is here to help improve the SBA in any 
way possible to ensure the success of tomorrow's entrepreneurs. Of 
course, the agency has been subjected to criticism, including my own. 
We can move beyond criticism and find solutions to the problems that 
have plagued the SBA and transform it into an agency that is led with 
the same dedication to excellence found in the entrepreneurs it serves. 
The Small Business Reauthorization And Improvements Act will help us 
achieve that goal.
  Mr. KERRY. Mr. President, I rise today as ranking Democrat on the 
Committee on Small Business and Entrepreneurship, in support of a 
bipartisan bill being reported out of our committee, the Small Business 
Reauthorization and Improvements Act of 2006. This bill, which 
originated in our committee and which is the product of many Senators' 
work, was voted out unanimously, 18 to 0. While there are no official 
cosponsors of the legislation because it is an original bill being 
reported out of committee, I would have been pleased to be added as an 
original cosponsor, and Senators Landrieu, Cantwell, Lieberman and 
Vitter also asked to be added as cosponsors. I would like to thank my 
colleague from Maine, Senator Snowe, for making this a bipartisan 
process. This is the fourth Small Business reauthorization bill I have 
worked on, having been a member of the committee for 21 years. Our 
committee has the reputation for working across party lines to put what 
is important for small businesses first, and I appreciate that the 
Chair and her staff have worked with us on reauthorization with that 
goal in mind. The result is a comprehensive approach to reauthorizing 
the SBA for the next 3 years that includes not Republican or Democratic 
priorities but instead the priorities of America's small businesses.
  This reauthorization could not have came at a more opportune time to 
tackle some of the issues that are eating away at our small business 
programs and at the core mission of the SBA--which is to foster small 
business growth and bridge the gaps left by the private sector.
  One of the most important things we are here to do today is to 
address the shortcomings and failures of the SBA's disaster loan 
program. Nearly a year has passed since Hurricanes Katrina, Rita and 
Wilma battered the gulf coast, and in that year I have visited New 
Orleans on three occasions. I can tell you that many of the streets are 
still covered in debris, and that many of the region's small businesses 
are barely keeping their doors open. The SBA needs to be prepared to 
handle an emergency of this magnitude. Thanks in large part to the hard 
work of Senator Landrieu and her dedicated staff, this bill provides 
the tools to respond swiftly and effectively following future large 
scale disasters.
  Through federally guaranteed bridge loans, States can offer small 
businesses short-term access to capital so that they can remain open 
while they wait for other sources of assistance to come through. We 
provide the President with the authority to declare a new category of 
disaster--a catastrophic national disaster--which triggers nationwide 
economic injury disaster loans for businesses located outside the 
immediate geographic disaster area. And we improve the way SBA and FEMA 
coordinate disaster assistance. A greater importance needs to be placed 
on serving the victims, by making the process of applying for and 
receiving Federal assistance as painless and user friendly as possible. 
That is why we give the SBA the authority to work with private lenders 
to get disaster loans out quickly--an idea that members of our 
committee tried to get SBA to embrace last year. This will only work if 
we can ensure that these loans do not come at a high cost to disaster 
victims. We are hopeful that our approach will keep interest rates 
down.
  This bill also addresses the effects that the energy crisis is having 
on America's small businesses. Gas prices are once again approaching 
record highs, and for the small businesses that

[[Page 16788]]

depend on fuel to put food on the table, rising prices mean more than 
having to decide whether or not to drive to work. Included in the bill 
is the bipartisan Small Business Energy Emergency Relief Act, a bill 
which has passed the Senate before, which provides low-interest loans 
to small businesses dependent on fuel. The loans are triggered when oil 
prices increase significantly over the average price from the previous 
two years. This proposal is complemented by Chair Snowe's 7(a) express 
loans for small businesses that are willing to invest in renewable 
energy solutions.
  In looking at our core programs, this bill makes a strong statement 
about the need for the SBA to fill the lending gap in our minority 
communities. It is unacceptable that since 2001, while numbers of 7(a) 
loans have gone up for African Americans, the actual dollars loaned 
have remained stagnant. In the Microloan program, African Americans 
received 28 percent of the total number of microloans made in 2001 as 
compared to only 21 percent of the total number of loans made in 2005. 
Native Americans went from 2 percent of the total number of microloans 
made in 2001 to less than 1 percent--a mere .93 percent--in 2005. If 
this trend continues--Native Americans alone will be completely cut out 
of the Microloan program. The stagnant lending in these communities 
represents a failure of this administration to expand access to capital 
to our underserved communities, communities where conventional lending 
is not meeting the need.
  The bill provides an incredible framework for the SBA to reverse this 
trend. It creates an Office of Minority Small Business Development at 
the SBA, similar to offices devoted to business development of veterans 
and women and rural areas, and, it creates a grant program to develop a 
cross campus curriculum at Historically Black Colleges and 
Universities, Tribal Colleges, and Hispanic-Serving Institutions to 
encourage minority students in a wide range of fields to consider 
entrepreneurship. There is much to be done to bridge the wealth gap in 
minority communities and this is one approach worth pursuing. Finally, 
the bill incorporates legislation from my colleague, Senator Johnson, 
to provide financial assistance to tribal governments, tribal colleges, 
Native Hawaiian organizations, and Alaska Native corporations to create 
Native American business centers.
  One of the keys to ensuring access to capital is making sure that 
SBA-backed financing remains affordable to the small business 
community. As we all know, the administration insisted on eliminating 
all funding for 7(a) loans and shifting the cost to borrowers and 
lenders by imposing higher fees. The President's budget reveals that 
borrowers and lenders already pay too much in fees, generating more 
than $800 million in overpayments since 1992 because the government 
routinely overestimates the amount of fees needed to cover the cost of 
the program. This bill seeks to address overpayments by requiring the 
SBA to lower fees if borrowers and lenders pay more than is necessary 
to cover the program costs or if the Congress appropriates money for 
the program.
  The bill also reauthorizes the PRIME program through 2009 and 
includes a provision that Senator Bingaman and I worked closely to 
develop that will expand PRIME with a separate $2 million authorization 
to provide technical assistance and counseling to disadvantaged Native 
American small business owners. The bill also includes technical yet 
important changes in the Microloan program such as making loans to 
persons with disabilities as one of the statutorily enumerated 
``purposes'' of the Microloan program and changing the average smaller 
loan size in the Microloan program from $7,500 to $10,000.
  In reauthorizing one of our other core programs, SBA's 504 loan 
program, I am pleased that we were able to come up with a bipartisan 
approach to preserving the local economic development focus of the 
program. The ability of our certified development companies, CDCs, to 
expand operations into multiple States, in conjunction with the growing 
demand for 504 loans, required that we put in place accountability 
measures. The 504 program was not created for CDCs to expand operations 
and simply create revenue from one state to another. CDCs are more than 
lenders and should not act like for-profit banks. This bill allows CDC 
board members to serve on another CDC board, but institutes safeguards 
to prevent control of multiple boards.
  The bill also incorporates legislation I have introduced to create a 
Child Care Lending Pilot Program to expand the availability of 
affordable, quality childcare in this country by using the 504 loan 
program to spur the establishment and expansion of childcare providers. 
Right now only for-profit childcare businesses are eligible for 504 
loans, yet in some States a majority of affordable childcare is 
delivered through nonprofit providers and in the neediest communities 
nonprofits are often the only provider.
  I am pleased that our bill reauthorizes the Women's Business Centers 
and makes permanent the Women's Business Center Sustainability Pilot 
Program through the creation of 3-year ``renewal'' grants for centers 
with sustainability grants, and 4-year ``initial'' grants for new 
centers across the country. We should not be abandoning our existing 
centers--many of which leverage Federal dollars to do excellent work in 
our communities--to run and create new ones. Senator Snowe and I have 
been fighting for this for a long time, since I first introduced 
legislation in 1999: It is time we get this adopted. Our bill also 
reauthorizes Small Business Development Centers and builds on this 
excellent resource by creating a pilot program to provide regulatory 
assistance to small businesses, in addition to the role SBDCs play in 
the minority entrepreneurship initiative.
  One area of our bill which does not deal with reauthorizing SBA 
programs is just as critical to small businesses--Federal contracting. 
Earlier this month, we heard the new SBA inspector general Eric Thorson 
testify about the largest impediments to small businesses receiving 
their fair share of prime and subcontracting opportunities. He 
explained how many of the problems in applying and enforcing small 
business contracting statutes are simply due to contracting officer 
error. Contracting officers do not know or do not care about small 
business requirements, and small businesses suffer the consequences. 
This bill seeks to do something about the disregard that is shown to 
small businesses with respect to federal procurement policy.
  Procurement center representatives, or PCRs, are responsible for 
advocating on behalf of small businesses in cases affecting Federal 
contracting, such as the bundling or consolidation of contracts. 
Unfortunately, there are not enough of them to effectively get the job 
done. By requiring the SBA to assign no fewer than one PCR per major 
procurement center, this bill takes steps to limit the incidence of 
contractor error referred to by Mr. Thorson. We can no longer tolerate 
the level of neglect that is currently the norm. It is time for the SBA 
to staff up and fulfill its responsibility as a watchdog for small 
businesses.
  In addition to mandating adequate staffing levels, this bill takes 
many significant steps to enforce subcontracting and bundling laws 
already on the books. Firms bidding for small business contracts are 
required to certify annually as small businesses so we do not have 
large businesses taking small business contracts, and large prime 
contractors are required to certify that subcontracting goals will be 
met. If subcontractors are not paid on a timely basis, Federal agencies 
are permitted to withhold payments and to pay subcontractors directly. 
We must stop fraudulent misrepresentation by large firms, and require 
the administration to start looking out for the interests of small 
firms that want to do business with the Federal Government.
  The time has also come to implement the women's procurement program. 
The administration has postponed implementing a women's procurement 
program that became law 6 years ago. This bill tells SBA to get it done 
within 90 days. It also makes clear that

[[Page 16789]]

America's service disabled veteran small businesses deserve the same 
advantages as other subgroups with respect to sole source contracting. 
Our veterans are returning from Iraq and Afghanistan, and we owe it to 
them to give them every opportunity at fulfilling the dream of 
entrepreneurship.
  Another program sorely needing our attention: The 8(a) program was 
created to assist socially and economically disadvantaged small 
businesses, but the financial threshold for inclusion in the program is 
out dated and too restrictive. This bill allows for an inflationary 
adjustment to be made so that businesses that belong in this program 
aren't being shut out.
  Finally, let me say a few words about SBIR, the Small Business 
Innovation Research Program. The Small Business Committee had a hearing 
on SBIR earlier this month, and at that time, I made clear my concern 
that we were being premature in going ahead with reauthorizing SBIR 
when the program's authorization doesn't expire until 2008. There is a 
$5 million National Academy of Sciences study due to come out at the 
end of this year that I am certain will give us much to consider. Yet, 
this bill does reauthorize SBIR, making it permanent, and it includes 
some strong provisions to protect SBIR companies' intellectual property 
and to reign in excessively large awards--which are a particular 
problem at NIH. While SBIR Phase IIs are supposed to be $750,000, NIH 
Phase II are often larger. One Phase II award reportedly equalled $6 
million. While the firms getting these large awards may be doing 
important work, we need to keep in mind that if one firm receives $6 
million, there are many firms that are not getting Phase IIs at all. 
That is why I am glad that we have adopted Senator Bayh's proposal to 
increase the overall share of SBIR funds from 2.5 percent to 5 percent 
of Federal research budgets, so that more small businesses will have a 
chance to compete in this program. I also support several provisions in 
the bill to encourage commercialization, one of the biggest challenges 
facing the program.
  There is one provision in this bill that was added during our 
committee markup which concerns me, a provision which gives Federal 
agencies the option to direct 25 percent of SBIR funds to firms which 
are majority backed by venture capital investment. The firms which will 
benefit from this provision are primarily biotechnology firms and no 
one disagrees that they are doing critical work and should receive 
Federal support. I am committed to finding a way to help biotechnology 
firms but I am concerned that this set-aside may crowd out small firms 
that are not blessed with venture capital. SBIR is the only Federal 
research and development program devoted to small business and it has 
been universally praised for fostering innovative technologies and 
lifesaving therapies and medical devices that may never attract the 
support of venture capital firms. SBIR serves as seed funding for the 
companies that are willing to take on these research and development 
projects. It is important to retain the integrity of this program, and 
I look forward to working with my colleagues to find a way to strike a 
balance so that we can continue to support cutting edge research that 
is at so early a stage it has yet to attract the private sector.
  Mr. President, before I close, I want to note that while this bill is 
truly bipartisan, so was our last reauthorization bill back in 2003, S. 
1375. However, the reauthorization bill that was finally adopted back 
in 2004, was a notably partisan product, attached to an omnibus 
appropriations bill, with almost all Democratic provisions dropped. I 
urge the Senate to maintain today's spirit of bipartisanship as we move 
forward, so that the final reauthorization bill truly reflects all of 
our efforts.

                          ____________________