[Senate Report 105-86]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 180
105th Congress                                                   Report
                                 SENATE

 1st Session                                                     105-86
_______________________________________________________________________


 
                 ARTS AND HUMANITIES AMENDMENTS OF 1997


                                _______
                                

              September 24, 1997.--Oordered to be printed

_______________________________________________________________________


    Mr. Jeffords, from the Committee on Labor and Human Resources, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                         [To accompany S. 1020]

    The Committee on Labor and Human Resources, to which was 
referred the bill (S. 1020) to amend the National Foundation on 
the Arts and Humanities Act of 1965 and the Arts and Artifacts 
Indemnity Act to improve and extend the Acts, and for other 
purposes, having considered the same, reports favorably thereon 
with an amendment in the nature of a substitute and recommends 
that the bill as amended do pass.

                                CONTENTS

                                                                   Page
  I. Introduction.....................................................2
 II. Purpose and summary of the bill..................................2
III. Background and committee action..................................4
 IV. Legislative history..............................................5
  V. Committee views..................................................7
 VI. Cost estimate...................................................17
VII. Application of law to legislative branch........................20
VIII.Regulatory impact statement.....................................21

 IX. Section-by-section analysis.....................................21
  X. Minority views..................................................34

                 arts and humanities amendments of 1997

I. Introduction

    Last reauthorized in 1990, the authority for the National 
Foundation on the Arts and Humanities Act expired in 1993. The 
Labor and Human Resources Committee passed the ``Arts, 
Humanities and Museum Amendments of 1995,'' legislation 
reauthorizing the National Endowment for the Arts, the National 
Endowment for the Humanities and the Institute for Museum and 
Library Services on July 19, 1995. No further action on this 
legislation occurred during the 104th Congress.
    S. 1020, ``the Arts and Humanities Amendments of 1997,'' 
provides an authorization for the National Endowment for the 
Arts, the National Endowment for the Humanities and the Arts 
and Artifacts Indemnity Act. The legislation balances the 
Federal and State roles in supporting arts and humanities 
projects for the people of this Nation. This legislation makes 
significant changes to the current law while maintaining the 
Federal Government's commitment to support of increasing access 
of all Americans to our Nation's cultural heritage.

II. Purpose and summary of the bill

    The bill extends the Federal commitment to the arts and 
humanities while at the same time making significant 
improvement in areas which have been of concern to the general 
public and the United States Congress. Those areas include 
changes to reduce the Federal bureaucracy, increase 
accountability and share greater responsibility with the 
States.
    Toward these ends the bill provides for a five-year 
reauthorization of the National Foundation on the Arts and 
Humanities Act of 1965 and reaffirms the government's 
commitment to, and interest in, supporting arts and humanities 
projects throughout the Nation. It is the view of the committee 
that the agencies do provide valuable services to the people of 
the Nation and should be maintained. While S. 1020 does 
reaffirm the importance of government leadership, it includes 
substantial and significant change in order to improve both the 
National Endowment for the Arts (NEA) and the National 
Endowment for the Humanities (NEH). The legislation reduces 
bureaucracy by merging administrative functions, capping 
administrative costs, and shrinking the National Councils. 
S.1020 includes provisions to further increase accountability 
by prohibiting subgranting and non-specific seasonal support, 
and limiting grants to individuals. In addition, the bill 
maintains the strong language related to prohibitions on 
funding obscenity and the strict sanctions against funding 
obscenity included during the 1990 reauthorization. S. 1020 
increases the percentage of funds allotted to the State arts 
and humanities councils. Finally, S. 1020 includes language 
throughout the bill giving priority consideration to programs 
which reach underserved communities or support programs in arts 
education. The committee believes that the Federal dollars 
authorized in this bill are well spent when targeted at 
programs designed to bring the arts to those who are not 
traditionally or historically exposed to the arts.
    Title I authorizes the establishment of the National 
Foundation on the Arts and Humanities; provides one 
authorization of appropriations for each of the two Agencies, 
outlines specific provisions regarding joint administration and 
division of funds, calls for a study of the feasibility of 
creating a true endowment that would provide supplemental 
funding and places a limit on administrative costs. The bill 
authorizes $105 million for the NEA in fiscal year 1998 and 
such sums as necessary in fiscal years 1999 through 2002. The 
NEH is authorzied at a level of $175 million for fiscal year 
1998 and such sums as necessary in fiscal years 1999 through 
2002.
    The legislation includes a new provision which directs that 
all funds appropriated above the fiscal year 1997 level of 
$99.494 million be directed toward activities which provide 
instruction in the arts by integrating and incorporating the 
arts in the teaching of English, math, science, foreign 
languages, civics and government, economics, history, and 
geography or for courses in the arts through school programs. 
Such programs will be subject to evaluation.
    Four grant programs are established for the NEA: 
Partnership grants (40 percent of authorized funds); National 
Significance grants (40 percent of authorized funds); Direct 
grants (10 percent of authorized funds); and Arts Education and 
Underserved Communities grants (10 percent of authorized 
funds). The role of the advisory panels has been modified 
substantially both in terms of structure, responsibility and 
representation. The number of members serving on the National 
Council on the Arts has decreased from 26 to 20 individuals 
with limitations placed on reappointment. The practices of 
subgranting and providing seasonal support grants have been 
prohibited. Individuals will be eligible for only two grants in 
a lifetime and no group, except for State agencies and regional 
groups will be eligible for more than three grants a year. In 
addition, fellowships to individuals will be limited to 
literature fellowships, National Heritage fellowships or Jazz 
Masters fellowships. A provision for recapturing funds from 
financially successful grants has been incorporated in the 
legislation.
    Three grant programs are established at the NEH and 
important administrative changes have been adopted. The grant 
programs include: Partnership (30 percent of authorized funds); 
National Significance (35 percent of authorized funds); and 
Research and Scholarship (35 percent of authorized funds). The 
number of members on the National Council on the Humanities has 
been reduced from 26 to 20 with limitations placed on 
reappointment. A provision for the recapture of funds from 
financially successful grants has been included in the 
legislation.
    Finally, title III amends the Arts and Artifacts Indemnity 
Act and expands its scope to include indemnification for 
exhibitions originating in the United States and touring the 
United States, in addition to the current practice of providing 
indemnification as part of an exchange of a domestic exhibition 
traveling abroad or for foreign exhibitions touring the United 
States.

III. Background and committee action

    A hearing was held by the Labor and Human Resources 
Committee on April 29, 1997 entitled ``Reauthorization of the 
National Endowment for the Arts and National Endowment for the 
Humanities: A Focus on Education.'' Testimony was received by 
the Chairperson of the National Endowment for the Humanities, 
Hon. Sheldon Hackney and Chairperson of the National Endowment 
for the Arts, Hon. Jane Alexander. Other witnesses included: 
Dr. Edward Ayers, Professor of History at the University of 
Virginia, Charlottesville, Virginia; Mr. Jeff Hooper, Producing 
Artistic Director of Mad River Theater Works, West Liberty, 
Ohio; Ms. Alicia B. Dandridge, sixth grade teacher at the Marie 
Reed Learning Center accompanied by former students Juanita 
Beasely and Kessia Cruz, Washington, DC; and Dr. Victor 
Swenson, Executive Director of the Vermont Council on the 
Humanities, Morrisville, Vermont.
    On June 15, 1997, Senator Jeffords, (on behalf of himself 
and Senators Kennedy and Chafee) introduced S. 1020, ``the Arts 
and Humanities Amendments of 1997,'' a bill to reauthorize the 
National Foundation on the Arts and Humanities Act of 1965 and 
for other purposes. Senator Reed was later added as a co-
sponsor.
    On July 23, 1997, the Labor and Human Resources Committee 
met to consider S. 1020. An amendment was offered by Senator 
Susan Collins of Maine which would ensure priority 
consideration for applicants proposing arts education 
activities. The amendment was adopted by a voice vote.
    Senator Judd Gregg of New Hampshire offered an amendment to 
increase the percentage of funds available to State arts 
agencies from 40 percent to 60 percent by reducing the national 
significance grants from 40 percent to 25 percent and the 
direct grants from 10 percent to 5 percent. The amendment was 
defeated by a roll call vote of 9 nays to 9 ayes. The vote on 
the amendment was as follows:
        AYES                          NAYS
Mr. Coats                           Mr. Jeffords
Mr. Gregg                           Mr. Kennedy
Mr. Frist                           Mr. Dodd
Mr. DeWine                          Mr. Harkin
Mr. Enzi                            Ms. Mikulski
Mr. Hutchinson                      Mr. Bingaman
Ms. Collins                         Mr. Wellstone
Mr. Warner                          Mrs. Murray
Mr. McConnell                       Mr. Reed
    The committee then accepted three amendments offered by 
Senator John Warner of Virginia by voice vote. The first 
amendment offered by Senator Warner reduced the authorization 
level for the NEA from $175 million to $105 million. Senator 
Wellstone asked to be recorded in the negative. Senator 
Warner's second amendment capped the administrative expense of 
the NEA and NEH to 17 percent of appropriated funds in fiscal 
year 1998 and 12 percent of appropriated funds in fiscal years 
1999 through 2002. The third amendment offered by Senator 
Warner provided that no more than 10 percent of the total 
number of advisory panel members be from any one State.
    Senator Mike Enzi of Wyoming then offered an amendment to 
change the minimum basic State allocation from $200,000 to the 
greater of $200,000 or 1 percent of State partnership grant 
funds. This amendment was adopted by voice vote.
    The committee then accepted an amendment offered by Senator 
Tim Hutchinson of Arkansaswhich requires that the NEA provide 
applicants for grants with a copy of the Financial Management Guide for 
Non-profit Institutions published by the Office of the Inspector 
General. The amendment was adopted by voice vote.
    Chairman Jeffords of Vermont then offered an amendment to 
clarify the recapture provisions in the NEA and HEH sections of 
the legislation and a provision allowing the NEH to require 
higher matches than the 3:1 required for certain activities. 
This amendment was adopted by voice vote.
    The committee then voted for final passage of the bill in 
the nature of a substitute to S. 1020 which was adopted by a 
vote of 14 yeas and 4 nays. The vote was recorded as follows:
        YEAS                          NAYS
Mr. Jeffords                        Mr. Coats
Mr. Gregg                           Mr. Frist
Mr. DeWine                          Mr. Enzi
Ms. Collins                         Mr. Hutchinson
Mr. Warner
Mr. McConnell
Mr. Kennedy
Mr. Dodd
Mr. Harkin
Ms. Mikulski
Mr. Bingaman
Mr. Wellstone
Mrs. Murray
Mr. Reed

IV. Legislative history

    The National Foundation on the Arts and the Humanities was 
established in 1965 by Public Law 89-209, the National 
Foundation on the Arts and the Humanities Act. Although this 
was landmark legislation, it was not the first attempt to 
establish an arts foundation. As early as the 1950's bills were 
introduced to establish a national arts agency. In 1963, 
Special Consultant on the Arts to President Kennedy, August 
Heckscher, submitted his report on ``The Arts and the National 
Government'' that recommended an arts foundation. The original 
Act of 1965 was preceded by the National Arts and Cultural 
Development Act of 1964 (Public Law 88-579), which established 
a National Council on the Arts. When the National Foundation on 
the Arts and the Humanities Act became law in 1965, the 
National Council on the Arts was transferred to the National 
Endowment for the Arts. The National Foundation on the Arts and 
Humanities currently is composed of the NEA (and its National 
Council on the Arts), NEH (and its National Council on the 
Humanities), the Federal Council on the Arts and Humanities 
(that administers the Arts and Artifacts Indemnity Act), and 
the IMLS (and its National Museum Services Board).
    The National Foundation on the Arts and the Humanities Act 
was subsequently amended in 1967 by Public Law 90-83; in 1968 
by Public Law 90-348; in 1970 by Public Law 91-346; in 1973 by 
Public Law 93-133; in 1976 by Public Law 94-462 and Public Law 
94-555; in 1980 by Public Law 96-496; in 1984 by Public Law 98-
306; in 1985 by Public Law 99-194; in 1986 by Public Law 99-
362; in 1987 by Public Law 100-202; in 1989 by Public Law 101-
121; in 1990 by Public Law 101-512; in 1993 by Public Law 103-
171; and, in 1994 by public Law 103-382. Among the public laws 
just cited, reauthorizations occurred in 1968, 1970, 1973, 
1976, 1980, 1985, and 1990.
    The Arts and Artifacts Indemnity Act, ``an Act to provide 
indemnities for exhibitions of artistic and humanistic 
endeavors,'' was enacted in 1975 as Public Law 94-158 and 
amended by Public Law 99-194 and Public Law 101-512. The 
Federal Council on the Arts and Humanities was given authority 
to make indemnity agreements against loss or damage to art 
objects and artifacts for international art exhibitions.
            The Arts, Humanities, and Museums Amendments of 1990
    The last reauthorization of the National Foundation on the 
Arts and the Humanities Act of 1965 was enacted as part of the 
Department of the Interior and Related Agencies Appropriations 
Act of 1991, (H.R. 5769) Public Law 101-512. On September 12, 
1990, this committee reported S. 2724 (S. Rept. 101-472) with 
an amendment in the nature of a substitute that would have 
reauthorized NEA, NEH, and IMS for 5 years. On October 11, 
1990, the House passed H.R. 4825, the Arts, Humanities, and 
Museums Amendments of 1990. On October 15, 1990, the House 
passed the appropriations measure (H.R. 5769) with the text of 
H.R. 4825 attached, providing a 3 year reauthorization of NEA, 
NEH, and IMS. On October 24, the Senate passed the 
appropriations measure including the text of H.R. 4825. 
Language was inserted to clarify the definition of 
``obscenity.'' On October 27, 1990, both House and Senate 
agreed to the Conference report on H.R. 5769. On November 5, 
1990, H.R. 5769 was signed into law as Public Law 101-512.
    Public Law 101-512 extended the authority for NEA, NEH, 
IMS, and the Arts and Artifacts Indemnity Act through fiscal 
year 1993. Among its major provisions, it increased the State 
allotment from 20 percent to 27.5 percent of NEA program funds 
in fiscal year 1993. In addition, an allotment of up to 7.5 
percent of programs funds in fiscal year 1993 was targeted to 
arts access programs in rural and inner-city areas. With regard 
to controversial grants, the Act defined ``determined to be 
obscene'' as meaning deemed ``in the final judgment of a court 
of record'' to be obscene. In the event that a project was 
determined to be obscene by the courts, the Chair required 
repayment under terms deemed appropriate. In the ``Declaration 
of Purpose,'' Public Law 101-512 added that the arts must be 
``sensitive to the nature of public sponsorship.'' The law 
contained new language on the panel system, requiring wide 
geographic, ethnic and minority representation, and the use of 
lay individuals knowledgeable about the arts, but not 
associated with an arts profession or arts organizations.
            Committee activity in the 103rd Congress
    In the 103rd Congress, Senators Pell and Jeffords 
introduced S. 1218 (July 14, 1993), the Arts Humanities and 
Museums Amendment of 1993, a two-year extension for the NEA, 
NEH, and IMS. This committee reported S. 1218 (S. Rept. 103-
186) on November 12, 1993, with an amendment in the nature of a 
substitute. A similar bill (H.R. 2351) was passed by the house 
on October 14, 1993. An amendment requiring comparability of 
State arts spending became part of both bills. This amendment 
withheld increases in a State's allotment of NEA funds if the 
State decreased its own funding for the arts below the average 
level of the 3 most recent years and if the rate of reduction 
exceeded the rate of all the State's general fund reductions. 
No further action was taken.
            Committee activity in the 104th Congress
    In the 104rd Congress, Senators Jeffords, Kassebaum, 
Kennedy, Pell, Dodd, and Simpson introduced S. 856 (May 25, 
1995), the Arts Humanities and Museums Amendments of 1997, a 4 
year extension for the NEA, NEH, and the Institute for Museum 
and Library Services (IMLS). This committee reported a 
substitute to S. 856 (S. Rept. 104-135) on July 19, 1995, with 
amendment by a vote of 12-4. Title II, the Museum and Library 
Services Act, was offered as an amendment to S. 143, the 
Workforce Development Act, which passed the Senate on October 
11, 1995. The provisions relating to the IMLS, as agreed to 
during the House/Senate conference on H.R. 1617 and S. 143, 
were passed as part of H.R. 3610, the Omnibus Consolidated 
Appropriations Act of 1997 on September 28, 1996.

V. Committee views

    The committee had the opportunity to propose questions and 
comments on the full range of issues relating to the 
authorization of the NEA and NEH directly to the Chairpersons 
of both agencies during the hearing held on April 29, 1997. 
Discussion and debate at the hearing related to the continued 
existence of the NEA and the NEH, the value and importance of 
Federal support for culture, the Federal financial commitment, 
education programs supported by the endowments and finally, how 
the Agencies could be more responsive to the public who they 
were created to serve. In addition, Senators heard testimony 
from individuals who were directly involved in administering 
education programs which incorporate the arts and humanities in 
the learning process.
    Building upon efforts made during the 104th Congress, S. 
1020 addresses those legitimate concerns about issues such as 
public access to arts and humanities, appropriate use of funds, 
the State role, and the general responsiveness of the agencies 
to the needs of the American public. S. 1020 makes significant 
changes to current law and provides a fundamental re-evaluation 
of the structure and purpose of the agencies with the goal of 
providing solutions to problems confronting each agency. It was 
the consensus of the committee that implementation of 
significant change was necessary in order to improve the 
direction and operation of each agency. The bill assures 
greater accountability to the American people and inspires 
greater confidence in the knowledge that both the National 
Endowment for the Art and the National Endowment for the 
Humanities exist to serve all Americans by making arts and 
humanities more accessible.
    The bill provides for a five-year authorization for the 
National Endowment for the Arts, the National Endowment for the 
Humanities, and the Arts and Artifacts Indemnity Act. The 
committee maintains that there is a role for the Federal 
Government in supporting our cultural heritage as well as a 
distinctly national purpose in the existence of these agencies 
which cannot be pursued by devolving funds to the States. The 
intent of this bill is to strike a balance between State and 
Federal leadership with the goal of ensuring that the arts and 
humanities are available to all persons of the Nation. Priority 
language is included throughout the bill to encourage greater 
access to the arts in underserved communities as well as to 
place an emphasis on arts education.
    The committee feels strongly that one of the main missions 
of the National Endowment for the Arts must be to facilitate 
access to the arts in historically underserved communities. 
Since the United States continues to face budgetary 
constraints, it is important that, whenever possible, the NEA 
direct its resources where they will make the most difference 
in people's lives--by funding projects of artistic excellence 
and artistic merit that otherwise would not take place because 
they serve populations that face poverty or geographic 
isolation. NEA must also place greater emphasis on arts 
education and other arts-related services to children, 
especially those children from underserved communities or 
populations.
    The committee recommends that arts in education activities 
by given priority in all National Endowment for the Arts grants 
programs. It is the intent of the committee that priority be 
given to projects that broaden and deepen education 
experiences, understanding and appreciation of our heritage and 
culture for student in pre-K-12, and for American of all ages. 
The goal of lifelong learning in the arts means a special focus 
not only on the systematic integration of the arts into the 
pre-K-12 and post-secondary curriculum, but also on projects to 
extend appreciation for and awareness of art forms and to make 
the arts available to those Americans who lack adequate 
opportunities to participate in the arts. Arts education--from 
curriculum-based arts instruction to artists residencies in 
schools and senior centers, museum and symphony outreach 
programs to rural touring performances and exhibitions, master 
classes and apprenticeship programs in the folk and traditional 
arts and innovative uses of technology to improve teaching and 
learning in the arts--gives all Americans opportunities to 
experience the arts, as learners, as makers, and as audience 
members. The committee understands that the participation of 
viable arts organizations like museums, orchestras, and theater 
companies is an important component in introducing the arts to 
the lives of individuals across the pre-K-12 and life-long 
learning spectrum, and believes the Endowment should continue 
to support the creative mission of this institutions.
    Much of the purpose section is maintained from current law, 
though additional emphasis is placed on the need to respect the 
public trust when using public monies. The purposes have been 
clarified to reinforce the concept of partnership between 
public and private entities and to emphasize the importance of 
Federal support for the arts and humanities. Further, the 
purpose section states, ``Federal funding for the arts and 
humanities must be sensitive to the nature of public support 
and the need to use public funding in a manner that recognizes 
the responsibility of the Federal Government to the public 
good'' and that such funding ``serves the purposes defined by 
Congress and are subject to the conditions that traditionally 
govern the use of public money.'' Underlying all the changed 
incorporated into this legislation is the singularly important 
notion which asserts that the National Endowment for the Arts, 
like other departments or agencies of the Federal Government, 
exists to provide an important service to all people of this 
Nation and in doing so, must comply with rules and judgments 
governing public support as well as make appropriate decisions 
in providing these services.
    The bill includes specific language which prohibits the use 
of Federal funds for the purposes of lobbying or for providing 
general membership services for groups. The legislation does 
notprohibit membership service organizations from applying for 
and receiving funds from the NEA for projects or activities which 
benefit a broader public interest beyond the narrow purpose of the 
membership group. This provision prohibiting the use of funds for 
lobbying or general membership services is included in an effort to 
maximize funding available for projects that serve the public broadly 
and to further delineate appropriate uses of Federal funds.
    The legislation directs the NEA and NEH to jointly 
undertake some administrative functions with the intent of 
having the Agencies reduce the amount of funds used for 
administration as well as avoid duplication of functions which 
clearly could be consolidated. It is the committee's intent to 
point to the Inspector General, provision of facilities and 
space, records management, contracting, procurement, printing, 
and provision of mail and library services as suggested areas 
for consolidation yet, those functions listed in the 
legislation should not be interpreted as an exhaustive list. 
The committee recognizes the need to control administrative 
expenses to ensure that the maximum amount of appropriated 
funds are used for grantmaking activities. To this end, the 
committee urges the NEA and NEH to explore further 
consolidation and merge common functions, including accounting, 
personnel and administrative support services.
    The committee took further action on administrative costs 
by placing a 17-percent cap on funds available for 
administration of the NEA and NEH in fiscal year 1998 and 12-
percent cap in fiscal years 1999-2002. Contributions from each 
Agency's administrative budget for the President's Committee on 
the Arts and Humanities may not exceed $100,000. This, too, 
represents an effort to reduce administrative costs and ensure 
that as much money as possible is available for program support 
through grant making. All actions taken relating to 
administrative spending are an effort by the committee to 
reduce bureaucracy and ensure that funds appropriated to the 
Agencies are used for grant making.
    The legislation provides the agencies with authority to 
solicit funds in addition to the authority they already have to 
accept donations, bequests and devises. This provision mirrors 
the language which was adopted by the Senate Interior 
Appropriations subcommittee as part of the fiscal year 1998 
appropriations bill. The committee believes that it is 
appropriate to provide the Agency with the ability, 
particularly in light of recent program reductions and 
discussions within Congress to establish a supplemental 
endowment fund. In providing this authority, the committee want 
to make clear it recognition that private resources can only 
enhance but not replace private funding. The committee also 
recognizes that arts and humanities organizations depend upon 
the private sector in a variety of ways for funding. The 
committee wishes to be assured that the endowments seek new 
sources of funding and avoid fundraising activities that divert 
and/or supplant tradition sources of support for the arts and 
humanities. Funds that are raised by the Endowments as well as 
funds that are donated or bequeathed to the Endowments shall be 
deposited in an interest bearing account to the credit of the 
appropriate endowment. Restricted donations may be used for the 
purposes those benefactors define. Only \1/2\ of the 
accumulated interest may be used for the grantmaking purposes 
defined under the Act. Remaining funds will be maintained in 
the interest bearing account and the accumulation of those 
funds will be a small first step in creating a true endowment 
which could supplement the annual Federal appropriations.
    The committee limits the amount of funds to be spend on 
official reception and representation costs. In fiscal year 
1998, not more than $100,000 from funds donated, bequeathed or 
devised to the NEA or NEH may be used for official reception 
and representation and the expenditure shall not exceed $50,000 
for the remaining fiscal years. The Jefferson Lecture in the 
Humanities is exempt from this limit.
    The legislation sets that authorization of appropriations 
level for the NEA at $105 million for fiscal year 1998 and such 
sums as necessary for fiscal year 1999 through 2002. It sets 
the authorization of appropriations level for NEH at $175 
million for fiscal year 1998 and such sums as necessary for 
fiscal years 1999 through 2002.
    In addition, the legislation makes any new monies above the 
fiscal year 1997 level of $99.494 million appropriated to the 
NEA available for arts education activities which provide 
instruction in the arts by integrating and incorporating the 
arts in the teaching of English, math, science, foreign 
languages, civics and government, economics, history and 
geography or for courses in the arts through school programs. 
The committee believes that the NEA can make a significant 
difference in the area of arts education by targeting new 
monies toward this purpose. Students of the arts outperform 
their non-arts peers. College Board studies from 1995 show that 
those who had studied the arts 4 or more years scored 59 points 
higher in the verbal and 44 points higher in the math portions 
of the SAT compared with students with no course work or 
experience in the arts.
    It is the committee's intent to encourage the broadest 
range of groups to apply for project support with these new 
monies available for arts education. The committee is aware of 
the unique resources and innovative educational programs that 
cultural groups have developed over the last several years. 
Many of these programs have included partnerships with local 
and State school systems to both supplement and complement 
education in the schools. It is the committee's intent that 
this wide range of programs continues to flourish, and that the 
NEA continue its important role of leveraging public and 
private resources to support them. These educational programs 
in and through the arts include a variety of programs both in 
schools and throughout the community, including but not limited 
to curricular and extra-curricular arts instruction for youth; 
summer and afterschool programs; early childhood learning 
through arts programs; and intergenerational and parent/child 
arts programs with the focus on arts instruction for youth. It 
is the committee's intent that programs that provide youth not 
only with quality arts instruction but also with safe havens, 
apprenticeship/job skills, and a means to engage in more 
significant interaction within their communities are also 
eligible for funding under this category.
    The legislation calls on the chairs of the NEA and NEH to 
study the feasibility of creating a true endowment that would 
provide supplemental funding to the agencies. The chairs shall 
jointly conduct this study or complete it by contract and that 
in so doing they consult with experts in various fields to 
examine innovative ways of funding a true endowment.
    The committee explored several of these options at its 
hearings during the 104th Congress including private 
fundraising, government support for an endowment and using a 
copyright extension to generate new revenues for such a trust. 
It became clear that, while the creation of a true endowment 
was desirable, there was little information on the capacity of 
different sources to fund the endowment.
    This study will explore this question as well as others 
regarding the amount of revenue necessary to fund the trust 
fund, what kind of revenue could be generated from different 
sources, and how the endowment could be administered. It is the 
committee's intent that the scope of the study should not be 
limited to the list the committee included, but should also 
include other innovative funding ideas as appropriate. In 
addition, the study may include an impact assessment of the 
private fundraising activities of the endowments on the arts 
and humanities communities.
    In completing the study, the committee has instructed that 
certain experts be consulted including persons with expertise 
in the arts, humanities, business, charitable giving and 
copyright industries as well as other appropriate Federal 
agencies. It is particularly important that, as the copyright 
option is explored, persons with expertise in this area, 
including the Register of Copyrights and other government 
officials, be included. Experts in the copyright industries are 
essential to provide insight on the economic effects any 
proposal involving U.S. copyrights will have on our domestic 
copyright system or on our position in international trade 
negotiations. Beyond the requirements of the provision, it is 
the committee's intent that experts in other areas be consulted 
as appropriate to ensure a comprehensive study. The chairs of 
the NEA and NEH shall report on their study to Congress within 
one year of the passage of this legislation.
    Significant structural changes made by the committee are 
intended to streamline the agencies and provide a clear outline 
as to how the Endowments should distribute grant funds. The 
committee has provided a framework which directs the NEA to 
ensure that the arts continue to be available to communities 
through increased support to States for local endeavors, 
support to nationally significant projects which have broad 
appeal and reach a wide audience, support to groups for smaller 
scale projects of the highest artistic excellence and artistic 
merit and finally, support for arts education and outreach to 
underserved communities.
    Partnerships grants are a redesignation of the basic State 
grant, yet a greater percentage of grant funds made available 
to the NEA shall be reserved for this purpose. The formula is 
modified from current law with each State agency receiving a 
minimum State allotment which is the greater of either $200,000 
or 1% of the funds available for partnership. Additional funds 
will be distributed based on the formula from current law. 
Partnership grants will be made to State arts agencies to 
establish local arts activities with the emphasis on local 
involvement and participation. The reservation for Partnership 
grants is 40 percent of authorized funds, representing a 12.5 
increase to the State agencies from current law. The 
committee's intent in increasing the State share of funds is to 
sustain and enhance the expansion of the arts in local 
communities and make certain that States have funds necessary 
to support projects of high artistic caliber within the 
community. In addition, it is the committee's hope that States 
will give consideration to programs designed to bring the arts 
to those populations that have not been traditionally or 
historically been exposed to the arts.
    National Significance grants are designed to be a category 
of grants that will reach a wide national audience. National 
Significance grants represent 40 percent of authorized funds. 
Funds will be available for projects, productions and workshops 
that have significant merit, encourage professional excellence 
or increase the access of the people of the United States, as 
well as those which provide support for projects that will 
serve as models for arts education. Priority consideration 
shall be given to projects, productions or workshops that 
increase access to the public of the United States, especially 
underserved communities, to culture and the arts, including 
access by touring, by regional or national dissemination, or by 
geographic dispersion, and to arts education. The goal of this 
priority language is to further assure that the needs of 
underserved communities will be fully considered and that 
institutions and organizations give special consideration to 
arts education programs which do have an extraordinary positive 
effect on the young people of this Nation. The committee's 
intent in creating this category of grants and including the 
priority consideration is to emphasize the importance of 
providing support for activities of recognized quality and that 
have a national significance and that will be widely available 
to the public. Funds available in this category will ensure 
that the rich artistic heritage of any one State is available 
to people throughout the Nation due to the emphasis on touring 
and dissemination. These grants that reach across State lines 
are only possible through grants made at the national level. 
These grants will ensure an exchange and a sharing of our 
cultural heritage, increase our interaction as an American 
community, and encourage partnership among and between States 
through touring.
    Within this category, matching requirements have been 
increased from current law which requires a 1:1 or 3:1 private 
dollar to public dollar match to a 3:1 or a 5:1 ratio. A group 
must match at a 5:1 ratio if the group's annual budget is over 
$3,000,000. The increased matching requirement will help to 
encourage greater participation by the private sector in 
support of cultural projects. Ten percent of funds for this 
grant category may be matched with a 1:1 ratio. Those groups 
eligible for the smaller match are those groups whose projects, 
productions or workshops have been determined by the 
Chairperson to be of national significance and because of their 
smaller size or smaller scale of the project, are unable to 
meet the higher matching conditions required in this section. 
National Significance grants may be made in the following 
disciplines: dance, design, literature, folk arts, media, 
museums, music, theater or visual arts.
    Direct grants represent a smaller category of grant funds 
designed to increase accessibility of the arts in communities. 
Direct grants make up 10 percent of the authorized funds. This 
is the only category of grants where individuals are eligible 
to apply, and only for fellowships in literature, National 
Heritage fellowships or Jazz Masters fellowships. Grants made 
in this category must be broadly representative of the cultural 
heritage of the United States and the Chairperson should ensure 
that grants are awarded to assure geographic representation of 
works of the highest artistic excellence and artistic merit. 
Federal share requirements call for a dollar for dollar match 
from non-Federal sources. The Chairperson may make available up 
to twenty percent of the funds in this category for 
distribution requiring no match from non-Federal sources, only 
after review by the National Council. The Chairperson must give 
priority in this category to projects, productions or workshops 
which will be widely disseminated after completion and to 
projects, productions or workshops concerning arts education in 
an effort to provide opportunity for broad participation in 
such activities. The committee intends for grants within this 
category to be made available, on a competitive basis--based on 
artistic excellence and merit--for smaller scale projects, 
productions or workshops which might not yet have national 
impact.
    Action taken by the committee in limiting fellowships to 
only those for literature, National Heritage Awards or Jazz 
Masters is a result of the committee's concerns over a few 
grants that the committee believes do not meet the high 
standards of artistic excellence and artistic merit. The 
committee recognizes that a great many of the grants to 
individuals have been for projects ofsuperior merit and worth, 
yet the few dubious examples have forced the committee to take action 
to provide assurances that the Endowment will exercise good judgement 
consistent with the use of public monies.
    Finally, Arts Education and Underserved Communities grants, 
representing 10 percent of authorized funds, shall be made to 
State arts agencies or other local or regional groups for 
activities in arts education or for broadening public access to 
the arts in underserved areas. Funds provided in this category 
must be matched dollar for dollar by non-Federal sources. The 
National Endowment for the Arts has provided critical support 
in the areas of arts education and service to underserved 
communities. Since the 1990 authorization the NEA has provided 
leadership in this area, and without this important Federal 
contribution many schools and institutions would be unable to 
support arts education programs which are of great significance 
in enriching the educational opportunities of school aged 
children in this Nation. The committee intends for arts 
education and outreach to underserved communities to continue 
to be a central component of the programs supported by the NEA 
and has, therefore, included a category specifically dedicated 
to such activities. Current law provides the authority for arts 
education programs and the committee, in including an arts 
education and underserved communities category as part of the 
reauthorization, seeks to restate the value of this program. In 
addition, while the committee has made clear that a specific 
percentage of funds be spent on such activities, it is clear 
from both the priority language included throughout the bill 
that such outreach initiatives should also be a fundamental 
concern and concentration of the Agency in each of the grant 
categories.
    The committee has included language which prohibits 
seasonal support and subgranting, eliminating the possibility 
of groups receiving funding for projects, productions or 
workshops which have not been approved in the review process 
specified in statute. Both subgranting and seasonal support are 
practices which have resulted in projects receiving funds that 
have not been specifically approved by the Chairperson or the 
Council. Eliminating these practices will reduce the 
possibility of misuse of Federal funds. The committee strongly 
believes the practices of subgranting and seasonal support 
undermine overall confidence in the general good works of the 
Agency. Eliminating subgranting and seasonal support places the 
control and responsibility of funding decisions with the NEA 
and ensures that it will be directly accountable for the grants 
that are made.
    The grant making process is three tiered, yet it has often 
been criticized for relying almost exclusively on the 
recommendations of the advisory panels. In order to address 
this criticism, the committee has redesigned the process in 
order to distinguish the separate roles of the advisory panels, 
the National Council and the Chairperson. In including changes, 
the committee seeks to shift greater responsibility to the 
National Council on the Arts whose membership is appointed by 
the President with the advice and consent of the Senate, and is 
accountable to the American public, and also increase the 
decision making responsibility of the Chairperson.
    Therefore, advisory panels have reduced authority in which 
they are able to recommend only general ranges of financial 
assistance. This represents a change from the current practice 
of advisory panels recommending specific grant amounts. In 
addition, advisory panels must recommend more applicants for 
grants than funding available. Service on advisory panels has 
been limited to 5 non-consecutive years and provides that no 
more than 10 percent of the total number of advisory panel 
members be from one State. The number of laypersons per 
advisory panel has been increased to two. The lay persons, for 
purposes of advisory panel membership, shall not include 
individuals who have previously engaged in the arts as a 
profession, administered arts programs or served as an employee 
of an arts or artists' organization. Panelists who are 
employees of an organization with a pending application or who 
have direct or indirect financial interest in a pending 
application must recuse themselves from panel deliberation 
until a final decision by the Chairperson on a grant has been 
made. These changes represent an effort to increase the 
turnover on the panels, move away from charges of conflict of 
interest, and encourage greater input from lay individuals who 
represent local communities throughout the country.
    The committee has made significant changes to the National 
Council of the Arts in hopes of improving its function. The 
reduction in the membership of the National Council of the Arts 
will further reduce the bureaucracy at the Agency. In addition, 
the smaller membership will allow for more rigorous and 
meaningful discussion and decision making. National Council 
members may make a recommendation for the specific amount of 
funding for a grant award but shall recommend more applicants 
for grants than funding available. Members will not be eligible 
for re-appointment unless they have served less than three 
years on a previous term. Again, such limits on service are 
intended to increase the breadth of representation on the 
National Council and increase the decision making 
responsibility. More clearly delineating the role of the 
Council will provide further safeguards against charges of 
``rubber stamping'' recommendations of the advisory panels.
    The bill maintains the strict provisions relating to 
sanctions and repayment for direct or indirect recipients of 
funding who have failed to satisfy the purposes for which a 
grant was made. The committee would encourage the Agency to 
continue in its effort to provide sufficient follow up in this 
area and fully enforce this provision of the legislation.
    Additional limits are in place to reinforce the notion that 
a grant from the NEA should not be a guaranteed supplemental 
income for either an individual or a group. Individuals are 
limited to 2 grants and groups are limited to 3 grants in a 
year, exempting only States and regional groups. Agreements for 
administrative costs--cooperative agreements--are exempt.
    The legislation includes a provision whereby funds may be 
``recaptured'' from financially successful grants at both the 
National Endowment for the Arts and the National Endowment for 
the Humanities. The committee recognizes the enormous 
contribution that the agencies make in nurturing and supporting 
projects of original work that often become commercial 
successes and believes that a portion of the profits from a 
successful project should be repaid to the agencies.
    In incorporating a similar structure and parallel approach 
for the National Endowment for the Humanities, the committee 
seeks to improve the Agency and make it more responsive to the 
public. The committee, in establishing the three grant 
categories, intends to set funding priorities for the Agency so 
that it may provide support for those projects which benefit 
the public and advance and preserve the humanities.
    Partnership Grants, representing 30 percent of appropriated 
funds, will be made to State humanities councils to support, 
promote and foster humanities studies and programs that serve 
thelocal community. The 30 percent reservation for State block 
grants represents an increase of 10 percent from current law. Teacher 
training services in the humanities for elementary and secondary 
education are shifted to the State level from the national level. In 
making this change, the committee recognizes the benefit in having the 
local community determine the best method for teaching training in the 
humanities and expects increased participation in these valuable 
programs to result. Funds to State humanities councils will be 
distributed by a formula which has been maintained from current law. 
All funds in this grant category must by matched on a dollar for dollar 
basis. The committee strongly believes that the balance between State 
and national programs is appropriate. At current funding levels for 
NEH, it is the committee's intent that the State council's funding be 
continued at a level which is not less than the fiscal year 1997 level.
    National Significance grants represent 35 percent of 
appropriated funds and shall be used to support programs which 
increase public participation and education in the humanities. 
It is the intent of the committee that programs funded through 
National Significance grants have a national audience and be of 
national significance. Both groups and individuals are eligible 
for these grants and the total of all funds awarded in this 
category must be matched dollar for dollar. Grant awards for 
endowment building or capital projects require a higher match 
of three non-Federal dollars to every Federal dollar awarded. 
It is the intent of the committee that National Significance 
grants include projects in museums and historical 
organizations, endowment building, projects in libraries and 
archives, public humanities projects, technology activities and 
teacher training in the humanities. Eligibility has been opened 
to State humanities councils, allowing them to compete for 
grants in this category in recognition of the extraordinary 
success many of them have had in developing innovative 
humanities programs. Generally, the creation of this grant 
category recognizes and reinforces the important impact that 
the NEH has on strengthening knowledge about our American 
culture. The benefits of such projects cross State lines and 
make a vital difference in the lives of all people in this 
Nation. Therefore, these projects are an important priority to 
be pursued at the national level.
    Research and Scholarship Grants, representing 35 percent of 
appropriated funds, shall be made to groups or individuals to 
encourage the development and dissemination of significant 
scholarship in the humanities. In recognition of the important 
contribution of the NEH in encouraging study and scholarship in 
the humanities, the committee has made projects in the area of 
research and scholarship a priority for the Agency. Research 
and Scholarship grants are intended to support activities which 
may include fellowships for college and university faculty and 
independent scholars, dissertation grants, summer stipends, 
scholarly publications, reference materials, basic research, 
institutional programs, and finally, grants for preservation. 
The total costs of all activities funded in this category must 
be matched on a dollar for dollar basis, non-Federal to Federal 
funds. As with National Significance grants, State humanities 
councils will be eligible to compete for grants in the Research 
and Scholarship category, in recognition of the important 
contributions of State humanities councils. Again, as many of 
the endeavors of the NEH fundamentally benefit our Nation and 
our national history, the committee believes that research and 
scholarship activities should be maintained at the national 
level. Preservation projects and research and scholarship 
projects extend beyond the boundaries of one State and can only 
be sufficiently supported by a strong national program. This 
strong national commitment is a focus of S. 1020 and the 
committee maintains that the NEH should continue to have the 
capacity to make contributions in supporting and preserving the 
works of scholars and historians as well as stimulating new 
scholarship in the humanities.
    The same determinations made with reference to the National 
Council on the Arts apply to the decisions made by the 
committee to reduce the National Council on the Humanities. The 
smaller membership both reduces the bureaucracy at the Agency 
and allows for more meaningful discussion and decision making. 
Members will not be eligible for re-appointment unless they 
have served less than three years on a previous term. Again, 
such limits on service are intended to increase the breadth of 
representation on the National Council and increase the 
Council's decision making responsibility.
    The bill maintains the strict provisions relating to 
sanctions and repayment for direct or indirect recipients of 
funding who have failed to satisfy the purpose for which a 
grant was made. The committee would encourage the Agency to 
continue in its effort to provide sufficient follow up in this 
area and fully enforce this provision of the legislation.
            Title III--Arts and Artifacts Indemnity Act
    Since its creation, the Arts and Artifacts Indemnity Act, 
at little cost to the Federal Government, has provided the 
insurance needed to bring acclaimed international exhibitions 
to communities throughout the United States. It has permitted 
millions of Americans to benefit from touring exhibitions which 
might otherwise be unavailable to them. The legislation 
broadens the scope of the Arts and Artifacts Indemnity Act 
allowing exhibitions originating in the United States and 
touring the United States to be eligible for indemnification. 
With the extension of indemnification to United States 
exhibitions touring throughout our Nation, this program will 
make American exhibitions even more widely available.

                           VI. COST ESTIMATE

                                      U.S. Congress
                                Congressional Budget Office
                                   Washington, DC, August 13, 1997.
Hon. James Jeffords,
Chairman, Committee on Labor and Human Resources,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1020, the Arts and 
Humanities Amendments of 1997.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Christina 
Hawley Sadoti.
            Sincerely,
                                                   June E. O'Neill.

               Congressional Budget Office Cost Estimate

S. 1020--Arts and Humanities Amendments of 1997

    Summary: S. 1020 would amend the National Foundation on the 
Arts and Humanities Act of 1965 and the Arts and Artifacts 
Indemnity Act. Authorization for the National Endowment for the 
Arts (NEA) and the National Endowment for the Humanities (NEH) 
expires at the end of fiscal year 1997. S. 1020 would 
reauthorize these programs through fiscal year 2002. The bill 
authorizes a total of $280 million for 1998 ad such sums as may 
be necessary for 1999-2002. In addition, S. 1020 would allow 
the chairpersons of the NEA and NEH to solicit donations and to 
place proceeds in interest-bearing accounts. The bill would 
allow up to 50 percent of the interest earned to be used on 
authorized activities. Because the interest could be spent 
without further appropriations, this provision would increase 
direct spending. However, this increase is likely to be 
insignificant.
    S. 1020 contains no intergovernmental or private sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated Cost to the Federal Government: The estimated 
budgetary impact of S. 1020 is shown in the following table. 
The costs of this legislation fall within budget function 500 
(Education, Employment, Training, and Social Services).

                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                              1997     1998     1999     2000     2001     2002 
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION                                       
                                                                                                                
            Including Adjustments for Inflation                                                                 
Spending under current law:                                                                                     
    Budget authority......................................      209       --       --       --       --       --
    Estimated outlays.....................................      234      140       39       13       --       --
Proposed changes:                                                                                               
    Authorization level...................................       --      280      288      296      305      314
    Estimated outlays.....................................       --      107      230      273      297      306
Spending under S. 1020:                                                                                         
    Authorization level \2\...............................      209      280      288      296      305      314
    Estimated outlays.....................................      234      247      269      286      297      306
                                                                                                                
          Not Including Adjustments for Inflation                                                               
                                                                                                                
Spending under current law:                                                                                     
    Budget authority......................................      209       --       --       --       --       --
    Estimated outlays.....................................      234      140       39       13       --       --
Proposed changes:                                                                                               
    Authorization level...................................       --      280      280      280      280      280
    Estimated outlays.....................................       --      107      226      263      280      280
Spending under S. 1020:                                                                                         
    Authorization level \1\...............................      209      280      280      280      280      280
    Estimated outlays.....................................      234      247      265      276      280      280
                                                                                                                
                                                 DIRECT SPENDING                                                
                                                                                                                
Spending under current law                                                                                      
    Estimated budget authority............................      \2\       --       --       --       --       --
    Estimated outlays.....................................      \2\       --       --       --       --       --
Proposed changes                                                                                                
    Estimated budget authority............................       --      \2\      \2\      \2\      \2\      \2\
    Estimated outlays.....................................       --      \2\      \2\      \2\      \2\      \2\
Spending under S. 1020                                                                                          
    Estimated budget authority............................      \2\      \2\      \2\      \2\      \2\      \2\
    Estimated outlays.....................................      \2\      \2\      \2\      \2\      \2\     \2\ 
----------------------------------------------------------------------------------------------------------------
\1\ The 1997 level is the amount appropriated for that year.                                                    
\2\ = less than $500,000.                                                                                       

                           Basis of Estimate

    S. 1020 would authorize a total of $280 million in fiscal 
year 1998 and such sums as may be necessary for fiscal years 
1999-2002 for the National Endowment for the Arts and the 
National Endowment for the Humanities. Including adjustments 
for inflation, authorizations would reach $314 million by 2002. 
If adjustments for inflation are not assumed, authorizations 
would not change over the 1999-2002 period. With the exception 
of a provision that would allow for a slight increase in direct 
spending, all of the spending under S. 1020 would be subject to 
appropriations.

National Endowment for the Arts

    S. 1020 would authorize $105 million for fiscal year 1998 
and such sums as may be necessary for fiscal years 1999-2002 
for the National Endowment of the Arts (NEA). Assuming 
historical spending patterns, enactment of this section would 
increase outlays by $32 million in fiscal year 1998 and by $447 
million from 1998-2002, including adjustments for inflation.
    The bill would shrink the size of the National Council of 
the Arts by reducing its membership from 26 to 20. Up to 17 
percent of the NEA's authorizations ($18 million) could be used 
for administrative expenses of the NEA in fiscal year 1998. The 
limitation on administration expenses would fall to 12 percent 
of the total appropriation in subsequent years. The bill also 
would set aside the amount over the fiscal year 1997 
appropriation of $99,494,000 (about $6 million) to be used only 
for arts education. The remaining funds would be allocated as 
follows:
          10 percent ($8 million in 1998) would be used for 
        arts education grants,
          40 percent ($33 million in 1998) would be allocated 
        to partnership grants to state and regional entities,
          40 percent would be allocated for grants to groups of 
        ``demonstrated and substantial artistic and cultural 
        importance for projects that will increase the access 
        of people in the United States to the best arts and 
        culture in the United States,'' and
          10 percent of the funds would be used for direct 
        grants to groups and individuals for arts projects, 
        productions and workshops; as under current law, grants 
        to individuals would be limited to a literature 
        fellowship, a National Heritage Fellowship, or a Jazz 
        Masters Fellowship.
    S. 1020 would authorize $175 million for the National 
Endowment for the Humanities (NEH). Assuming historical 
spending patterns, enactment of this section would increase 
outlays by $75 million in fiscal year 1998, and by $776 million 
from 1998-2002, assuming adjustments for inflation.
    As with the NEA, the membership of the National Council on 
the Humanities would be reduced from 26 to 20, and 17 percent 
of the NEH's authorization ($30 million in 1998) could be 
reserved for administrative expenses in 1998, falling to 12 
percent in subsequent years. The remaining funds would be 
allocated as follows:
          30 percent ($44 million in 1998) would go to state 
        and regional organizations through partnership grants,
          35 percent ($51 million) would be allocated for 
        national grants to groups, individuals, and state 
        agencies for activities relating to education and the 
        public humanities, and
          35 percent would be used for grants to encourage 
        research and scholarship in the humanities.

Arts and Artifacts Indemnity Act

    The Arts and Artifacts indemnity program was created in 
1975 to pay for the loss or damage of art works and artifacts 
brought into the United States or on exhibition elsewhere when 
part of an exchange of exhibition. The Arts and Artifacts 
Indemnity Act authorizes the Federal Council on the Arts and 
Humanities to make indemnity agreements with individuals, 
nonprofit organizations and governmental units. The indemnity 
agreements are backed by the credit of the United States, and 
the total potential liability is $3 billion. If an indemnified 
object is lost or damaged, the federal council must certify the 
claim and request Congress to authorize payment.
    S. 1020 would not increase the total liability of the 
federal government under this Act, which would remain at $3 
billion. However, it would broaden the types of works that 
could be indemnified to include exhibitions that originate in 
and tour the United States.
    The bill would authorize such sums as may be necessary to 
cover the administrative expenses of the council, and to cover 
any approved claims under the indemnity agreements. The last 
loss paid by the United States was in 1982 and amounted to 
$100,000. CBO has no basis for estimating the potential costs 
of this section, but it is unlikely that these expenses would 
be significant.
    Estimated intergovernmental and private sector impact: S. 
1020 contains no intergovernmental or private sector mandates 
as defined in UMRA and would impose no costs on state, local, 
or tribal governments. The bill would authorize $234 million in 
grants for fiscal year 1998 for programs under the National 
Endowment for the Arts and the National Endowment for the 
Humanities. These grants provide assistance to organizations, 
including state and local governments.
    Estimate prepared by: Federal Cost: Christina Hawley 
Sadoti; Impact on State, Local, and Tribal Governments: Marc 
Nicole, Impact on the Private Sector: Bruce Vavrichek.
    Estimate approved by: Paul N. Van de Water, Assistant 
Director for Budget Analysis.

VII. Application of law to legislative branch

    S. 1020 reauthorizes the National Endowment for the Arts, 
the National Endowment for the Humanities and the Arts and 
Artifacts Indemnity Act, and as such has no application to the 
legislative branch.

VIII. Regulatory impact statement

    The committee has determined that there will be only a 
negligible increase in the regulatory burden of paperwork as a 
result of this legislation.

IX. Section by section analysis

            Arts and Humanities Amendments of 1997
    To amend the National Foundation on the Arts and the 
Humanities Act of 1965 and the Arts and Artifacts Indemnity Act 
to improve and extend the Acts, and for other purposes.
    The short title is presented as the Arts and Humanities 
Amendments of 1997.

  title i--national foundations on the arts and the humanities act of 
                                  1965

    Section 1 of the bill amends the National Foundation on the 
Arts and the Humanities Act to provide a short title to be 
cited as the ``National Foundations on the Arts and the 
Humanities Act of 1965'' and includes a table of contents, 
indicating how current law will be reorganized, restructured, 
and replaced.
    Section 2 of the bill alters the ``Purposes'' in current 
law by changing the number of purposes from 12 to 9 with 
subparts. The ``purposes'' are reworded and reordered, but 
still include some of the same basis tenets as in current law. 
The first purpose adds a new phrase ``to support the arts and 
the humanities that are essential to social, cultural, and 
economic progress.'' The second purpose reiterates that support 
of the arts and humanities, while primarily matters for private 
and local initiative are also appropriate matters of concern 
for the Federal Government. The bill adds a purpose to 
``increase access to the arts and the humanities for all 
persons in the United States, including diverse cultures and 
urban and rural populations.''
    Section 3 of the bill alters current law definitions and 
adds a new definition of program income. Under Section 3(1) the 
bill amends the definition of the ``arts'' to include dance, 
design, literature, media, music, theater, and visual arts; as 
well as folk and traditional arts; and the study of the arts 
through apprenticeships or work-study experiences for artists 
and art teachers. It eliminates from the current law definition 
of the ``arts'' the specific terms opera, film and video, 
graphic and craft arts, industrial design, architecture and 
allied fields, creative writing, costume and fashion design, 
painting, sculpture, and photography. Section 3(5) amends the 
current law definition of ``Humanities'' by adding the study 
and interpretation of ``folklore and folklife.'' Section 3(6) 
contains a new definition of ``program income'' to mean any 
money earned or received by a recipient of an NEA or NEH grant. 
It outlines types of income from the sale of an item created, 
from a licensing fee, a rental fee for equipment, an admission 
fee, broadcast or distribution right, or a royalty on a patent 
or copyright. This section also adds definitions of ``grant,'' 
``group,'' ``cultural heritage,'' ``regional group,'' 
``State,'' and ``underserved communities.''

      title 1--national foundation on the arts and the humanities

    Section 101 of the bill establishes (authorizes) the 
National Foundation on the Arts and the Humanities composed of 
a National Endowment for the Arts, a National Endowment for the 
Humanities, and an Institute of Museum and Library Services, 
the purpose of which is to promote a national policy of support 
for the arts and the humanities in the United States. The bill 
keeps the same limitation as current law on Federal control.
    Section 102 of the bill prohibits grants from being used 
for the purposes of lobbying or providing membership services 
for groups.
    Section 103 of the bill provides for joint administration 
of NEA and NEH, with the Inspector General's Office to be 
shared and ensures non-duplication of administrative functions. 
This section requires the Chairpersons of NEA and of NEH to 
prepare a joint administrative plan not later than 60 days 
after enactment, to be implemented in not less than 180 days.
    Section 104 provides for a study on a true endowment. It 
directs the Chairpersons of NEA and NEH, in consultation with 
persons with expertise in the arts, humanities, charitable 
giving, and copyright industries and other appropriate Federal 
agencies, to jointly conduct or contract for a study on the 
feasibility of establishing a true endowment for the NEA and 
NEH in order to provide supplemental funding to support efforts 
of the NEA and NEH. The Chairpersons shall report the findings 
of the study to the appropriate committees of Congress not 
later than one year after the date on which funding is made 
available under this Act.
    Section 105 provides for the authority for the Chairperson 
of the NEA and the Chairperson of the NEH to solicit, accept, 
receive, invest and use money and other property bequeathed or 
devised; or could use, sell, or dispose of such property for 
carrying out activities of the endowment. The proceeds of all 
other funds shall be retained by the appropriate Chairperson 
and the appropriate Chairperson shall invest the proceeds in an 
interest-bearing account to the credit of the appropriate 
Endowment. Fifty percent of the accumulated interest may be 
used for carrying out the purposes of title II or title III. 
Restricted donations or funds up to $100,000 in fiscal year 
1998 and $50,000 in fiscal years 1999 through 2000 may be 
expended for purposes outlined in this section. The Jefferson 
Lecture in the Humanities is exempt from the cap on the use of 
donated funds.
    Section 106 of the bill provides authorities of 
appropriations for the Foundation from fiscal year 1998 through 
fiscal year 2002. It authorizes total appropriations for NEA: 
$105,000,000 for fiscal year 1998 and such sums as necessary 
for fiscal years 1999 through 2002 of which funds are reserved 
for administration of the Agency, reserves any amount above the 
fiscal year 1997 level of $99.494 million for specific arts 
education activities, 40 percent for partnership grants, 40 
percent for national significance grants, 10 percent for direct 
grants, and 10 percent for arts education and underserved 
communities grants. Section 106(b) authorizes total 
appropriations for NEA: $175,000,000 for fiscal year 1998 and 
such sums as necessary for fiscal years 1999 through 2002. 30 
percent of the amount appropriated is reserved for partnership 
grants, (with 5 percent under partnership grants to be reserved 
for activities relating to elementary and secondary education 
in the humanities); 35 percent for national significance 
grants, and 35 percent for scholarly research grants. Section 
106(c) limits administrative costs for NEA and NEH to not more 
than 17 percent of the amount appropriated in fiscal year 1998 
and 12 percent of the amount appropriated in fiscal years 1999 
through 2002, with not more than $100,000 available for the 
President's Committee on the Arts and the Humanities.

 National Endowment for the Arts

    Section 201 of the bill defines ``developing arts 
organization,'' ``final judgment,'' ``local arts agency,'' 
``obscene,'' ``determined to be obscene,'' ``production,'' 
``project,'' ``renovation and construction,'' and ``workshop.'' 
As in current law, ``determined to be obscene'' means in the 
``final judgment of a court of record.'' When defining 
``production,'' the bill eliminates specific arts discipline as 
part of the definition and simply says it means any activity 
involving the execution or rendition of the arts, meeting such 
standards as may be approved by the Chairperson of the NEA. It 
adds to the term ``project'' the phrase ``to enhance the widest 
public access, knowledge and understanding of the arts.''
    Section 202 of the bill establishes the National Endowment 
for the Arts. It provides that the Chairperson of NEA be 
appointed by the President by and with advice and consent of 
the Senate for a 4-year term, as in current law. It allows the 
Chairperson to serve the remainder of a predecessor's terms, or 
to serve until a successor is appointed, and the Chairperson is 
eligible for reappointment.
    Section 202(c) of the bill provides a new section for 
Partnership Grants, those formula grants to States and regional 
groups, for local arts activities, with preference to arts 
education and projects that reach rural and urban underserved 
communities. This section contains similar language as in the 
current law NEA State grants-in-aid section. Section 202(c) of 
the bill directs that funds be used for basic State grants and 
outlines types of projects funded as follows: first, projects 
that meet standards of excellence and artistic merit; that 
broaden public access to the arts in rural and urban 
underserved communities; that enhance the artistic capabilities 
of developing arts organizations through staff development; and 
that provide technical assistance to improve long range fiscal 
planning. Application procedures must be in accordance with a 
State plan, designating a sole agency for the administration of 
the State plan; and providing that funds expended as solely for 
the projects approved by the State agency. Reports are required 
as they are in current law, describing the progress made, 
objectives of the plan, and most recent information on projects 
available to all people and communities in the State, 
especially to underserved communities. The Chairperson has 
final approval on whether the State plan satisfies 
requirements.
    Section 202 of the bill authorizes a minimum State 
allotment of at least $200,000 or 1 percent of funds reserved 
for Partnership grants, whichever is greater. If funds are 
insufficient, then funds would be allotted in equal amounts. In 
the case of excess funds, 25 percent of funds available would 
be for the Chairperson to make grants to States and regional 
groups. The remainder of the excess would be allotted to each 
State in equal amounts, with no State receiving less than 
$200,000 or 1percent of the sums available to carry out this 
paragraph, whichever is greater. In general, the Federal share pays not 
more than 50 percent of the total cost of activities, with some 
exceptions. Any portion of funding provided to the State exceeding 
$125,000, shall be available to pay up to 100 percent of the cost of 
the activity, however that portion cannot exceed 20 percent of grant 
funds available to the State. There is a clause prohibiting supplanting 
of non-Federal funds. With regard to excess funds, ``State'' is defined 
as including those jurisdictions with a population of 200,000 or more.
    Section 202(d) of the bill provides a new separate 
authority for National Significance Grants to groups to 
increase access of all people, especially underserved 
communities, to the ``best of arts and culture'' in the United 
States. The Chairperson, with the recommendation of the 
National Council on the Arts provides grants for projects with 
national, regional or substantial artistic or cultural impact, 
including projects for long-range financial planning, increased 
community support; technology use; and access for individuals 
with disabilities, minority or underserved populations. The 
Federal share for these grants may not exceed 25 percent with 
exceptions, or if the annual budget of an institution is in 
excess of $3 million, the Federal share is 16.67 percent. The 
Federal share could pay 50 percent of the projects, however, 
only 10 percent of the grant funds may be used to pay 50 
percent of the cost. In awarding grants under this subsection, 
the Chairperson shall give priority to projects, productions or 
workshops that increase access of the public of the United 
States, especially underserved communities to culture and the 
arts, including access by touring, by regional or national 
dissemination, or by geographic dispersion and to arts 
education.
    Section 202(e) of the bill provides a new separate 
authority for Direct Grants to individuals and groups broadly 
representative of cultural heritage and geographically 
representative. However, grants would be awarded only to 
individuals for literature fellowships, National Heritage 
Fellowships or Jazz Master Fellowships. The Chairperson with 
the National Council on the Arts' recommendation provides 
grants to groups or individuals who meet the standard of 
artistic excellence and artistic merit. The Federal share is 
generally 50 percent with not more than 20 percent of the funds 
available with an increased Federal share. Priority will be 
given to projects that will be disseminated widely after 
completion and to projects, productions or workshops concerning 
arts education.
    Section 202(f) of the bill provides a new separate 
authority for Arts education and underserved communities 
grants. It would provide grants to State arts agencies and 
other groups to promote and improve the quality of arts 
instruction and arts education; to provide instruction in the 
arts by integrating and incorporating the arts in the teaching 
of English, math, science, foreign languages, civics and 
government, economics, history and geography or courses in the 
arts through school programs; to develop arts faculty; to 
support arts curricular development; to support 
apprenticeships, internships and work-study experiences for 
artists and arts teachers; to provide technical assistance and 
increase capacity of developing arts organizations in 
underserved communities through staff development and long-
range fiscal planning. The Federal share would be 50 percent. 
Those State arts agencies or other groups receiving a grant for 
certain activities shall conduct evaluations of such programs 
and report those findings to the Chairperson who shall in turn, 
report those findings to Congress.
    Section 203 of the bill outlines the application process 
with similar provisions to current law. Applications must be in 
accordance with regulations and procedures established by the 
Chairperson. Applications for grants must ensure artistic 
excellence, be judged by advisory panels, and take into 
consideration ``general standards of decency and respect for 
the diverse beliefs and values of the public of the U.S.'' In 
selecting groups as recipients, preference would be for 
artistically underserved rural and urban areas, and artists and 
artistic groups traditionally under represented in the arts and 
to groups proposing arts education activities. In addition, it 
requires that the NEA include with each application a copy of 
the Financial Management Guide for Non-profit organizations 
that is published by the Office of the Inspector General for 
the National Endowment for the Arts and the National Endowment 
for the Humanities. Regulations must reiterate that obscenity 
is without artistic merit, is not protected speech and will not 
be funded and clarifies that the disapproval of an application 
is not to be construed as evidence that work is obscene.
    Section 204 of the bill outlines requirements for advisory 
panels. Panels would review grants on the basis of artistic 
excellence and artistic merit and would recommend only general 
ranges of funding. Regulations must ensure that panel members 
reflect a wide geographic, ethnic and minority representation, 
as well as diverse cultural points of view and ensure that not 
more than 10 percent of the aggregate number of members of all 
the advisory panels are members from the same State. Two of the 
members would be lay individuals, with knowledge about the 
arts, but not engaged in arts as a profession or employees of 
artists or arts organizations. Each panel will make written 
records of meetings, and make those records available to the 
public while protecting individual applicants. This section 
permits site visits of an applicant's work being reviewed. One 
new clause directs that each panel will recommend more 
applicants for grants than are anticipated can be provided 
funding. This section requires that each panel change from year 
to year and provides that no individual serve more than 5 
years, no two of which may be consecutive years. This section 
prohibits any panel member from serving who has a conflict of 
interest, i.e., who is an employee or associated with an agency 
with a pending application or who has any direct or indirect 
financial interest in any application.
    Section 205 of the bill establishes the National Council on 
the Arts consisting of the Chairperson of the NEA as the Chair 
of the Council, and reduces the number from 26 (in current law) 
to 20, the other members appointed by the President, by and 
with advice and consent of the Senate. The bill describes 
selection of members who are private citizens widely recognized 
for their broad knowledge in the arts with established records 
of service; and having achieved eminence in the arts. These may 
include practicing artists, civic cultural leaders, members of 
cultural professions and others who are professionally engaged 
in the arts; allowing an appropriate distribution of members 
among the major art fields. The President may consider 
recommendations by leading national organizations in major art 
fields. There must be due regard to equitable representation of 
women, racially diverse individuals, and individuals with 
disabilities, who are involved in the arts. Members would serve 
6-year terms, but these would be staggered, expiring the third 
day of September in the year of expiration, with some serving 
the remainder of an individual's term in the case of a vacancy; 
or serving after expiration until a successor takes office. Due 
to the reduction in the size of the Council, the bill provides 
direction as to how the Council shall be reduced. Compensation 
is changed from current law level of GS-18 to a fixed daily 
rate not to exceed a GS-15. The Council will meet at least 
twice, with 11 members constituting a quorum, and all policy 
meetings will be open to the public.
    Section 205 of the bill describes the Councils duties to 
advise the NEA Chairperson on policies, to review grant 
applications, and to make recommendations with respect to 
approval, funding, and criteria of artistic excellence and 
artistic merit, including the extent to which the applicant 
serves an underserved community and the extent to which the 
applicant proposes arts education activities. This section 
institutes a new provision requiring the National Council to 
recommend more applications that can be provided funding. The 
Council is required to have written records of meetings, and to 
make records available to the public while protecting the 
privacy of individual applicant for grants. The Chairperson may 
not approve or disapprove grants until it has received the 
recommendation of the Council. A new provision would allow the 
Chairperson to have final authority to approve and to determine 
the final amount of funding. However, the Chairperson may not 
approve an application if the Council makes a negative 
recommendation. In the case of an application or an amendment 
to an application involving $35,000 or less or a request for a 
change in a grant amount of 20 percent or less, the Chairperson 
may approve or disapprove the amendment if such delegation of 
authority does not exceed 2 percent of appropriations.
    Section 206 of the bill prohibits subgranting and seasonal 
support to groups. The Chairperson must ensure that no grants 
except those made to State agency, regional group or a local 
arts agency which is an agency of local government are used to 
make grants to any other organization or individual to conduct 
activity independent of the original grant recipient. This 
section also includes compliance with Department of Labor 
standards for minimum compensation for professional performers 
and related personnel, and compliance with safety and sanitary 
laws as prescribed by the Secretary of Labor. Grant awards are 
limited to two for individuals and three for agencies or groups 
other than a State agency. Groups must be non-profit. An 
individual receiving direct grants must be a citizen or other 
national of the United States; be a permanent resident or 
filing for naturalization; or be not permanently ineligible to 
become a citizen. The Chairperson distributes payments in 
installments, so that not more than two-thirds of the grant is 
disbursed at the time the grant is approved, with the remainder 
released when the Chair finds compliance. Any loan made must be 
in accordance with the terms of the Secretary of the Treasury.
    Section 207 of the bill outlines administrative provisions 
for NEA that are comparable to those in current law. The 
Chairperson must prescribe regulations for the Chairperson's 
functions. The Chairperson appoints and pays employees, and may 
procure temporary and intermittent services of experts; utilize 
voluntary services; make payments, and rent office space. For 
publications, the Chairperson consults with the Joint Committee 
on Printing. The Chairperson coordinates the programs of NEA 
with other Federal agencies and may enter into interagency 
agreements. The role of the Federal Council on the Arts and the 
Humanities has been moved to the Arts and Artifacts Indemnity 
Act.
    Section 208 of the bill outlines NEA report requirements. 
The Chairperson must submit an annual report on or before April 
15, summarizing the activities of NEA for the preceding year. 
Each applicant is required to submit financial reports, a 
timetable for completion, and assurances that standards of 
artistic excellence are being met. Each grant recipient must 
carry out projects as described in the application or justify 
any requested change in writing; make interim reports, 
financial reports, and final reports including the condition 
that standards of artistic excellence and artistic merit are 
being met. The Chairperson determines the appropriate form of 
interim reporting, and where practicable requires a copy of the 
project or production. The Chairman conducts a post-award 
evaluation. There will be no additional funding unless each 
recipient has submitted interim, financial and final reports.
    Section 209 of the bill delineates sanctions, payment 
provisions and contains a new ``recapture'' clause. If any 
recipient of a grant fails to satisfy the grant purposes, the 
Chair can deny anysubsequent funding after consideration of a 
post award evaluation. Also direct or indirect recipients are 
prohibited from using the name of the endowment; and if the product was 
a publication, it is to carry a disclaimer that the findings, 
conclusions, recommendations expressed in this publication do reflect 
the views of NEA. After determining the noncompliance, the Chairperson, 
after providing reasonable notice and a hearing, could deny further 
funding and if compliance is impossible, the recipient must repay or 
arrange for repayment. If a determination has been made that the work 
is ``obscene,'' after reasonable notice and a hearing, the recipient 
must repay the funding and no subsequent funding would be provided. 
Funds repaid are to be deposited in the Treasury as miscellaneous 
receipts. Section 209 includes a provision that this subsection would 
not apply to grants made before October of 1990, and would not apply 
after expiration of a 7-year period.
    Section 209 of the bill includes new language for 
``recapture'' provisions whereby a recipient shall pay one-
third to one-half of the amount of revenue generated within 5 
years after the end of the grant period, but not more than the 
amount of funding--when that recipient has derived net program 
income for the creation of an original commercially successful 
project that exceeds the lesser of $50,000 or twice the amount 
of funding. The U.S. Treasurer would deposit funds paid or 
repaid under this Act in a special interest bearing account to 
the credit of the Endowment.
    Section 210 of the bill outlines provisions for the 
National Medal of Arts. A medal of appropriate design is to be 
awarded by the president on the basis of recommendations from 
the NCA to individuals or groups deserving of special 
recognition for their outstanding contribution to the 
excellence, growth, support, and availability of the arts in 
the U.S. Awards are limited to 12 in any calendar year. Awards 
can be for individuals or groups if organized or incorporated 
in the U.S. The ceremony is a presentation by the President.

            title iii--national endowment for the humanities

    Section 301 of the bill includes definitions of 
``project,'' ``renovation or construction'' and ``workshop.''
    Section 302 of the bill establishes the National Endowment 
for the Humanities. It provides that the Chairperson of NEH be 
appointed by the president by and with advice and consent of 
the Senate for a 4-year term. The Chair may serve the remainder 
of a predecessor's terms; or may serve until a successor is 
appointed; and the Chairperson is eligible for reappointment.
    Section 302(c) of the bill authorizes NEH partnership 
grants, grants to States to assist State entities, to support 
programs of the humanities councils at the State and local 
level. If defines ``State entity,'' and defines ``State.'' The 
Chairperson of NEH acting with the recommendation of the 
National Council on the Humanities is authorized to make grants 
to assist State entities. The Federal share will be not more 
than 50 percent of the cost.
    Section 302(c) of the bill provides that a State agency be 
designated as the sole agency for administration of the State 
plan. In any State agency's application for a State plan the 
chief executive officer of the State may appoint members to the 
State humanities council. These grants provide for expenditure 
from State funds an amount equal to 50 percent of the portion 
of funding through the minimum State allotment or 25 percent 
through partnership grants made, whichever is greater for the 
fiscal year involved. Funds must be expended solely on 
activities approved by the State agency to bring the humanities 
to the public. The State agency must report the progress made 
toward achieving the objectives of the State plan; including a 
written description of the level of participation by scholars 
and scholarly organizations supported; and a description of 
activities addressing the availability of the humanities to all 
people. The Chairperson may not approve an application unless 
the State plan satisfies these requirements.
    Section 302(c) of the bill authorizes grants to appropriate 
State entities, and the language is similar to that in current 
law. In any State in which the chief executive officer of the 
State fails to submit an application, the Chairperson may make 
grants to an appropriate entity in the State, if eight members 
of the council are appointed by an appropriate officer or 
agency of the State. The Officer would select members from 
among individuals who have knowledge or experience in the 
humanities. If a State fails to submit an application, any 
appropriate entity desiring to receive a grant may submit an 
application accompanied by a State plan, providing assurances 
of compliance designed to bring the humanities to the public; 
establishing a membership policy; providing for a nomination 
process; a membership rotation process; reporting procedures; 
ensuring public access to information; and making reports as 
required. The entity must provide public meetings in the State 
to allow scholars and interested organizations and the public 
to present views and make recommendations concerning the State 
plan. The plan must describe the availability of the activities 
supported by funding were available to all people in the 
community and the level of participation by scholars and 
scholarly organizations.
    Section 302(c) of the bill provides minimum State 
allotments of at least $200,000 as under current law. If funds 
are insufficient then funds will be allotted in equal amounts. 
In the case of excess funds, 34 percent of funds available will 
be for the Chairperson to make grants to State entities. Forty-
four percent will be allotted so that each State receives an 
equal amount. The remainder will be allotted so that each State 
entity receives an amount that bears the same ratio to the 
remainder as State population does to national population. In 
general, the Federal share pays not more than 50 percent of the 
total cost of activities with some exceptions. That portion of 
funding, to the State entity, which exceeds $125,000 may be 
available to the residents of the State without such portion. 
However, this portion above $125,000 which may be available to 
pay not more than 100 percent of the cost of an activity shall 
not exceed 20 percent of total funding provided through the 
grant. Funds shall not be used to supplant non-Federal funds. 
The Chairperson may not make grants to more than one entity in 
any State.
    Section 302(d) of the bill provides a new section with a 
separate authority for National Grants for groups, individuals 
and State agencies or entities to carry out activities relating 
to education and the public humanities that have a national 
audience, and are of national significance. Such activities 
include postsecondary education in the humanities; media 
projects, projects in museums, by historical organizations; 
projects in libraries, archives; public humanities projects; 
endowment building, and technology activities. The Chairperson 
with the National Council on the Humanities' recommendation 
makes grants to projects that meet the standard of excellence 
in the humanities and significance in the humanities. National 
grant are for the following purposes, some of which appear in 
current law: to develop a national policy to further the public 
good through public funding of the humanities; to strengthen 
research and humanities teaching; to foster information 
exchange, education, public understanding, and appreciation of 
the humanities; to support projects that promote literacy; to 
ensure the benefit of programs otherwise unavailable for 
geographic or economic reasons; to increase the range of 
contributors, provide management improvement and long-range 
financial planning for cultural institutions and organizations; 
to increase audience participation; to develop new sources of 
long-term support including renovation or construction of 
facilities; to stimulate greater cooperation among cultural 
institutions; and to foster greater citizen involvement in 
planning the cultural development of a community.
    Section 302(e) of the bill provides a new separate 
authority for research and scholarship grants to encourage the 
development and dissemination of significant scholarship in the 
humanities by groups, individuals, and State agencies or 
entities. These grants include fellowships for college and 
university faculty, and independent scholars; dissertation 
grants, summer stipends, and funds for scholarly publications, 
reference materials, basic research, institutional programs, 
and preservation. The Chairperson with the National Council on 
the Humanities' recommendation provides grants for training and 
workshops, research, and publications in the humanities that 
have substantial scholarly and cultural significance, and 
reflect the cultural heritage of the U.S. This section also 
includes grants for education and public understanding in the 
humanities; increasing the range of contributors, management 
improvement, and long-range planning for cultural 
organizations. Section 302(e) describes grants for training, 
workshops, and research. A fellowship may be used for study or 
research at an appropriate nonprofit institution. In the case 
where admission charges are made to the general public, the 
total amount of any grant shall not exceed 30 percent of the 
total of such activities. The Chairperson would give particular 
regard to scholars, and educational and cultural institutions 
that traditionally have been under represented.
    Section 302(f) defines the Federal and non-Federal share. 
In general, the Chairperson shall ensure that the aggregate 
amount of funding provided by the Chairperson through grants in 
subsections d(2) and e(2) are equal to the non-Federal 
contributions made for that fiscal year though in cases of 
grants relating to new sources of long-term support, the 
Federal share shall be an amount not more than 25 percent of 
the cost of the activity.
    Section 303 in the bill provides application procedures 
with the Chairperson determining what information is necessary 
in the application.
    Section 304 in the bill describes NEH review panels. The 
Chairperson may select panel members who have exhibited 
expertise and leadership in specified fields being reviewed, 
are broadly representative of diverse humanistic perspectives 
and geographic factors and who broadly represent cultural 
diversity.
    Section 305 in the bill establishes the National Council on 
the Humanities, composed of the Chairperson of NEH, who chairs 
the Council, and changes from 26 (in current law) to 20 the 
number of other council members appointed by the President, by 
and with the advice and consent of the Senate. Members are 
selected from among private citizens who are recognized for 
their broad knowledge and expertise in, the humanities; have 
established records of distinguished service, or achieved 
eminence in the humanities; including scholars and others who 
are professionally engaged in the humanities. There must be an 
appropriate distribution of members among major humanities 
fields. The President may give consideration to recommendations 
by leading national organizations in the humanities field. 
There must due regard to equitable representation of women, 
racially diverse individuals, and individuals with 
disabilities, who are involved in the humanities. Eachmember of 
the Council shall serve a term of 6 years and the terms shall be 
staggered with the terms of all Council members expiring on the third 
day of September in the year of expiration. Council members who have 
served for 1 term of less than 3 years shall be eligible for 
reappointment for 1 full term. A member of the Council shall serve 
until the successor to the member takes office. Due to the reduction in 
the size of the Council, the bill provides direction as to how the 
Council shall be reduced. Compensation will be changed from GS-18 in 
current law to a daily rate not to exceed a GS-15. The Council will 
meet at least twice during the year, with 11 members constituting a 
quorum, and all policy meetings will be open to the public.
    Section 305 describes the Council's duties to advise the 
Chairperson with respect to policies, and to make 
recommendations with respect to approval of grant applications. 
The Chairperson would not approve or disapprove an application 
until receiving the Council's recommendations, unless the 
Council fails to make a recommendation. In case of an 
application involving $35,000 or less, the Chairperson may 
approve or disapprove if such action is then reviewed by the 
Council, and if funds under such delegation do not exceed 3 
percent of appropriations.
    Section 306 of the bill outlines limitations on grants. It 
includes definitions of ``production entity,'' ``Group'' and 
``National of the United States.'' The Chairperson establishes 
criteria for eligibility. Any group eligible must be nonprofit. 
A production entity that is a non profit group may be eligible 
with the advice of the National Council on the Humanities, and 
if the grant will significantly advance the knowledge and 
understanding of the humanities in the United States. An 
individual may be eligible if he/she is a citizen or national 
and if the Chair determines with the National Council on the 
Humanities that providing the grant will advance understanding 
of the humanities in the United States. No grant may be made to 
an activity if direct or indirect admissions are used for 
purposes other than assisting the grant recipient to develop 
high standards of scholarly excellence or encourage greater 
appreciation of the humanities by the citizens of the U.S. The 
same Labor Standards apply as listed under title II.
    Section 307 of the bill outlines administrative provisions 
that are similar to current law. The Chairperson must prescribe 
regulations for the Chairperson's functions. The Chairperson 
appoints and pays employees, and may procure temporary and 
intermittent services of experts, utilize voluntary services; 
make payments, rent office space. For publications, the 
Chairperson would consult with the Joint Committee on Printing. 
The Chairperson would coordinate the programs of NEH with other 
Federal agencies and may enter into interagency agreements.
    Section 308 of the bill outlines NEH report requirements, 
eliminating the State of the Humanities report requirement. The 
Chairperson must submit an annual report on or before April 15, 
summarizing the activities of NEH for the preceding year. Each 
applicant is required to submit financial reports, assure that 
the conditions of the grant are met including that the work 
assisted meet the standards of excellence in humanities and 
significance in the humanities, and if practicable a copy of 
the work resulting from the activity. Reports are due not later 
than 90 days after the work is completed. The National Council 
on the Humanities may submit an annual report summarizing 
meetings and recommendations, while protecting the privacy of 
individual applicants for grants.
    Section 309 of the bill delineates sanctions and payment 
provisions similar to current law and adds new language for 
``recapture'' provisions. If any recipient, direct or indirect 
fails to satisfy the grant purposes or in case of grant from a 
State agency fails to comply with the State plan, then the 
Chair can deny any subsequent funding, after taking into 
consideration a post-award evaluation. Also, direct and 
indirect recipients would be prohibited from using the name of 
the endowment, and a publication would carry a disclaimer that 
the funding, conclusions, and recommendations expressed in the 
publication do not reflect the views of NEH. After determining 
non-compliance the Chairperson can take action after providing 
reasonable notice and a hearing and if still found in non-
compliance, the Chair shall provide no further funding and if 
compliance is impossible, the recipient must repay or arrange 
for repayment.
    Section 309 of the bill contains new language for 
``recapture'' authority whereby a recipient shall pay one-third 
to one-half of the amount of revenue generated within 5 years 
after the end of the grant period, but not more than the amount 
of funding--when that recipient has derived net program income 
from the creation of an original, commercially successful NEH 
activity that exceeds the lesser of $50,000 or twice the amount 
of funding. The U.S. Treasurer shall deposit funds paid or 
repaid under the Act in a special interest bearing account to 
the credit of the endowment.
    Section 310 of the bill authorizes awards. The Jefferson 
Lecture in the Humanities Award is awarded annually by the 
chairperson of NEH to one individual for distinguished 
intellectual achievement in the humanities. Each award shall 
not exceed $10,000. The National Humanities Medal may be 
awarded to individuals who have expanded the understanding of 
the humanities, broadened citizens engagement with the 
humanities or helped preserve and expand access of such 
citizens to important resources in the humanities. Not more 
than 12 of such medals may be awarded in a calender year.
    Section 102 of the bill provides conforming amendments to 
the Inspector General Act of 1978. It amends section 8G of The 
Inspector General Act to allow joint appointment of an 
Inspector General by the Chairpersons of NEH and NEA.

               Title II--Arts and Artifacts Indemnity Act

    Section 301 of the bill amends the Arts and Artifacts 
Indemnity Act to read as follows:
    Section 1 cites the short title as the ``Arts and Artifacts 
Indemnity Act.''
    Section 2 of the bill authorizes the Federal Council on the 
Arts and Humanities, referred to throughout the title as 
Council, to enter into agreements to indemnify against loss or 
damage of eligible items on exhibit. It expands indemnity 
coverage to U.S. exhibits touring the U.S.
    Section 3 of the bill outlines the types of items covered 
by indemnity including: works of art, tapestries, painting, 
sculpture, folk arts, graphics and craft arts; manuscripts, 
rare documents, books printed or published materials; 
photography, motion pictures, audio and video tape; if these 
works have educational, cultural historical or scientific 
value, and the exhibition of which is certified (where 
appropriate) by the Secretary of State or designee as being in 
the nation interest. An indemnity agreement would cover items 
on exhibition when the exhibition originates in the U.S. and, 
generally when items are part of an exchange of exhibitions. 
Therefore, indemnity agreements would cover items in an 
exhibition that originates either in the United States or 
outside the United States and is touring the United States. It 
defines ``on exhibition'' as including the period of time 
beginning on the date eligible items leave the premises of the 
lender and ending on the date such items are returned.
    Section 4 of the bill provides that any person, nonprofit 
agency, institution, or government desiring to enter into an 
indemnity agreement shall submit an application. Each item must 
be described and the estimated value established and verified. 
There must be evidence that the item described is the actual 
item. Policies must be set forth for preparation and exhibition 
of the item including transportation. The Council would receive 
the application and enter into an indemnity agreement.
    Section 5 of the bill provides that the Council review the 
estimated value of the items for coverage by an indemnity 
agreement. The aggregate amount of loss or damage is limited, 
as in current law, to $3 billion, and the individual amount for 
a single exhibition covering loss or damage is $300 million. 
The extent of coverage is delineated as follows: for $2 million 
or less coverage shall extend only to loss or damage in excess 
of the first $15,000; more than $2 million but less than $10 
million, coverage shall extend to loss in excess of the first 
$25,000, not less than $10 million but less than $125 million, 
coverage shall extend to loss in excess of the first $50,000; 
not less than $125 million but less than $200 million, coverage 
shall extend to loss in excess of the first $100,000, and not 
less than $200 million, coverage shall extend to loss in excess 
the first $200,000.
    Section 6 of the bill requires that the Council prescribe 
regulations for claims adjustment, and in the case of a claim, 
the Council must certify validity of the claim to the Speaker 
of the House and President pro tempore of the Senate.
    Section 7 of the bill requires that the Council submit a 
report to the appropriate committees of Congress containing 
information on all claims paid, pending claims and the 
aggregate face value of contracts outstanding at the end of the 
year.
    Section 8 establishes the Federal Council on the Arts and 
Humanities, made up of the Chairperson of the National 
Endowment for the Arts, the Chairperson of the National 
Endowment for the Humanities, the Director of the Institute for 
Museum and Library Services, the Secretary of Education, the 
Secretary of the Smithsonian Institution, the Director of the 
National Science Foundation, the Librarian of Congress, the 
Director of the National Gallery of Art, the Chairman of the 
Commission on Fine Arts, the Archivist of the United States, 
the Commissioner of the Public Buildings Services of the 
General Services Administration, the Assistant Secretary of 
Again, a member designated by the Secretary of State and a 
member designated by the Secretary of the Interior, a member 
designated by the Chairman of the senate Commission on Art and 
Antiquities, and a member designated by the Speaker of the U.S. 
House of Representatives. The President shall designate a 
presiding officer of the Council from among the members and the 
President is authorized to change the membership of the Council 
as the President deems necessary to meet changes in Federal 
programs or the executive branch. The Council shall promote 
coordination between the activities of the National Foundation 
on the Arts and Humanities and activities of other Federal 
agencies as well as encourage an ongoing dialogue in support of 
the arts and humanities among Federal agencies and carry out 
the Indemnity program. The following members of the Council 
shall not carry out the functions of indemnity: the Secretary 
of the Smithsonian, the Director of the National Gallery of 
Art; the member of the Council designated by the Chairman of 
the Senate Commission on Art and Antiquities; and the member of 
the Council designated by the Speaker of the U.S. House of 
Representatives.
    Section 9 of the bill authorizes appropriations as ``such 
sums as may be necessary'' to carry out the Arts and Artifacts 
Indemnity Act.

           X. MINORITY VIEWS OF SENATORS HUTCHINSON AND ENZI

    Although we've heard many arguments over the years that the 
NEA is not living up to their original intent of ``broadening 
public access to the arts,'' that so much of the Federal share 
goes to the 6 largest cities in the country, the Agency has 
soaring administrative costs, and it continues to fund 
objectionable ``art,'' we haven't heard many solutions.
    It is our belief that there are potential artists 
everywhere, in every corner of every State, from the plains in 
Wyoming to the mountains in West Virginia--from the Mississippi 
Delta to the potato fields of Idaho.
    Contrary to Jane Alexander's notion that ``the areas of 
nurturing and development of artists tend to be located in a 
few States,'' artists are everywhere--in every city, town, and 
county across this great Nation, in every home, schoolyard, and 
playground in America. It is time that this talent is realized.
    This legislation offers a number of improvements to the 
National Endowment for the Arts, and we support those changes. 
The administrative reforms will free up more money for 
programs. Restrictions on granting will improve quality and 
accountability. There is a stronger focus on increasing access 
to the arts in undeserved areas and a high priority is placed 
on arts in education. These are all changes that we support, 
and we believe this legislation is an improvement over the 
status quo.
    We continue to object, however, to the prominence given 
national activities in general, and the corresponding lack of 
State and local control over a majority of Federal arts 
spending. We do, therefore, fundamentally disagree with the 
mission of this legislation and consequently, do not support 
it.
    An amendment was offered in committee that would have 
increased the State grant allocation amount from forty percent 
to sixty percent by reducing national significance and direct 
grants. While this amendment would not have eliminated the 
national activities of the NEA, it would have strengthened 
State activities, shifting a majority of arts funding to State 
and local decision-makers and away from the National Council. 
That change, had it been adopted, would have made this 
legislation more acceptable to us. Unfortunately, it was 
defeated on a tie vote.
    The Arts Endowment has been riddled with controversial 
decisions. They have not been mistakes that merely waste 
taxpayer money, but that offend very basic religious and moral 
principles of many Americans. While the Agency has made 
programmatic changes that are aimed at avoiding similar 
controversies in the future, as long as grant decisions are 
made by an appointed ``national council,'' there will be no 
accountability and taxpayers will be unable to expect any 
genuine changes.
    The real issue is whether or not taxpayers have any control 
over how their money is spent. Some have claimed that State 
agencies can easily make poor funding decisions. While it is 
certainly possible that a State arts agency may support an 
offensive project, taxpayers can easily express feelings to 
locally elected politicians. Locally appointed or elected 
panelists will be more sensitive to local values. Individuals 
have no influence on national panelists who serve at the 
pleasure of the President and of the NEA.
    We believe it is necessary to cut out the ``Washington 
middleman'' and send the arts dollars down to the States, so 
that those who are closest to the unknown writer, the start-up 
band, or the school child can make wise investments in those 
who otherwise may have been passed over for the well-endowed 
Whitney Museum or the Boston Philharmonic.
    Additionally, by getting the decision-making out of 
Washington, the nearly 19 percent in administrative overhead 
the Agency currently maintains would virtually be abolished, 
and awarded back to the States. Artists all across America 
would win under this scenario, and could be recognized by their 
home State rather than by a bloated bureaucracy in Washington.
    Furthermore, it becomes increasingly harder to justify the 
existence of the NEA Washington bureaucracy when one takes a 
more careful look at the overhead and salary costs of the 
Agency. For example, from 1994 to 1996, the administrative 
costs of the NEA went from a little over 14 percent to almost 
19 percent at a time when the Agency was cut by 39 percent, and 
was faced with a loss of 89 positions--this amounts to almost 
20 cents on every dollar of our constituents' hard-earned 
paychecks!
    Our constituents wonder why it costs almost $19 million to 
distribute just over $50 million in NEA funds? And for good 
reason! These are their hard-earned tax dollars on the line.
    A closer analysis of how the NEA spends its administrative 
budget raises even further questions about the efficiency and 
effectiveness of the NEA. While the Agency repeatedly complains 
of the draconian effects of the budget cuts on its staff, over 
68 percent of the 154 individuals currently employed by the NEA 
earn over $50,000 per year!
    To make matters worse, the NEA's own Inspector General 
uncovered significant problems, deficiencies and abuses during 
its audit of grantees from 1991-1996: 63 percent of the 
grantees had project costs that were not reconcilable to their 
accounting records; 79 percent had inadequate documentation of 
personnel costs charged to the grant; and 53 percent had failed 
to engage independent auditors to conduct grant audits as is 
required by OMB guidelines. These numbers are alarming and 
intolerable.
    As if this scenario is not gruesome enough, how is it 
justifiable that the NEA assisted in promoting the President's 
William D. Ford Federal Direct Student Loan Program? The NEA, 
under an interagency agreement with the Department of 
Education, provided design assistance for marketing materials 
promoting the President's Direct Loan program. Although the 
Agency claims that the Department of Education reimbursed the 
Agency $100,000 under this agreement, the NEA reports that they 
have no accounting of the time or expenses they incurred in 
providing these services.
    There is example after example of successful and valuable 
arts projects that are funded by the NEA. There are folk 
festivals, art classes, traveling museums, concerts and 
visiting artists. There are institutions and performers that 
achieve local, regional and even national significance, but 
they become significant because they appeal to local values. 
National panels are not qualified to determine local values and 
they should not be empowered to make these decisions.
    The debate over the NEA is really about spending other 
people's money. It is about who gets to make decisions. It is 
about who gets to decide what art is good and what art is not. 
What is and is not worthy of government funding. We do not 
believe national panels possess any special appreciation that 
enables them to determine ``quality'' better than local panels. 
If we are going to require that taxpayers spend a part of their 
earnings on the ``fine arts,'' then we should at least allow 
them to decide what is good art and what is not.
    In conclusion, the Senate Committee on Labor and Human 
Resources has reported a bill that will improve the activities 
of the National Foundation on the Arts and Humanities and of 
the individual endowments. We thank the Chairman and his staff 
for their work on that. But it is the opinion of these two 
Senators that the improvements do not overcome the underlying 
structural problems that would remain at the NEA. We remain 
hopeful that this concern can be addressed when the full Senate 
takes up the bill for consideration.

                                                    Tim Hutchinson.
                                                         Mike Enzi.

                                
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