Addressing the Deficit: Budgetary Implications of Selected GAO Work for
Fiscal Year 1996 (Letter Report, 03/15/95, GAO/OCG-95-2).

As part of GAO's continuing effort to help Congress identify options to
reduce the deficit, this report, like its predecessor (GAO/OCG-94-3,
Mar. 11, 1994), focuses on the budgetary implications of various policy
changes and program reforms discussed in earlier GAO work but not yet
implemented or enacted. The options affect federal policies and programs
ranging from national defense to agriculture to health issues,
reflecting the breadth of GAO's work responsibilities.   Of the 120
options presented in this report, 52 are updated and 68 are new.  Most,
if not all, of the options have already been provided to interested
congressional staff.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  OCG-95-2
     TITLE:  Addressing the Deficit: Budgetary Implications of Selected 
             GAO Work for Fiscal Year 1996
      DATE:  03/15/95
   SUBJECT:  Budget deficit
             Deficit reduction
             Program evaluation
             Cost effectiveness analysis
             Fiscal policies
             Budget cuts
             Budget outlays
             Budget administration
             Spending legislation
             Cost control

             
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Cover
================================================================ COVER


Report to the Congress

March 1995

ADDRESSING THE DEFICIT - BUDGETARY
IMPLICATIONS OF SELECTED GAO WORK
FOR FISCAL YEAR 1996

GAO/OCG-95-2

Addressing the Deficit

(935151)


Abbreviations
=============================================================== ABBREV

  ADCAP - advanced capability
  AFDC - Aid to Families with Dependent Children
  AIP - Airport Improvement Program
  AOC - Administrative Office of the U.S.  Courts
  BBS - broad-based, sustainable
  BEA - Budget Enforcement Act
  BLM - Bureau of Land Management
  BRAC - base realignment and closure
  CBO - Congressional Budget Office
  CERCLA - Comprehensive Environmental Response,   Compensation and
     Liability Act
  CRP - Conservation Reserve Program
  CSFP - Commodity Supplemental Food Program
  CVP - Central Valley Project
  DFAS - Defense Finance and Accounting Service
  DGPS - differential global positioning system
  DLA - Defense Logistics Agency
  DOD - Department of Defense
  DOE - Department of Energy
  DOT - Department of Transportation
  DUR - drug utilization review
  EDWAA - economic dislocation and worker adjustment   assistance
  EM - Environmental Restoration and Waste Management
  EPA - Environmental Protection Agency
  FAA - Federal Aviation Administration
  FAS - Foreign Agricultural Service
  FDIC - Federal Deposit Insurance Corporation
  FHWA - Federal Highway Administration
  FmHA - Farmers Home Administration
  FWS - Fish and Wildlife Services
  FY - fiscal year
  GAO - General Accounting Office
  GSA - General Services Administration
  HACCP - Hazard Analysis and Critical Point Control System
  HCFA - Health Care Financing Administration
  HHS - Department of Health and Human Services
  HMO - health maintenance organization
  HUD - Department of Housing and Urban Development
  ICC - Interstate Commerce Commission
  IDB - industrial development bond
  IFAD - International Fund for Agricultural Development
  INS - Immigration and Naturalization Service
  IRS - Internal Revenue Service
  JAST - Joint Advanced Strike Technology
  JCT - Joint Committee on Taxation
  JTPA - Job Training Partnership Act
  MAP - Military Airport Program
  MPP - Market Promotion Program
  MWR - morale, welfare, and recreation
  NASA - National Aeronautics and Space Administration
  NDAA - non-development airlift aircraft
  NOAA - National Oceanic and Atmospheric Administration
  NORAD - North American Aerospace Defense Command
  NPR-1 - Naval Petroleum Reserve-1
  OCSE - Office of Child Support Enforcement
  OMB - Office of Management and Budget
  O&M - operation and maintenance
  OPEC - Organization of Petroleum Exporting Countries
  PAYGO - pay-as-you-go
  PPS - Prospective Payment System
  QMB - qualified mortgage bond
  RFE/RL - Radio Free Europe/Radio Liberty
  RHCDS - Rural Housing and Community Development Service
  RTC - Resolution Trust Corporation
  SINC - service industry noncompliance initiative
  SKFB - soup kitchens/food banks
  SPR - Strategic Petroleum Reserve
  SSA - Social Security Administration
  SSN - nuclear-powered attack submarine
  TEFAP - The Emergency Food Assistance Program
  TCMP - Taxpayer Compliance Management Program
  TPU - Torpedo Propulsion Unit
  USAO - U.S.  Attorney Office
  USDA - U.S.  Department of Agriculture
  USIA - United States Information Agency
  USTRANSCOM - U.S.  Transportation Command
  UAV - unmanned aerial vehicle
  VA - Department of Veterans Affairs
  VOA - Voice of America

Letter
=============================================================== LETTER


B-259261

March 15, 1995

To the President of the Senate and
the Speaker of the House of Representatives

In previous reports,\1 we have stressed to the Congress and the
public the urgent need for deficit reduction.  This report is part of
our continuing effort to help the Congress identify options that
could be used to reduce the deficit.  This year's report follows work
we began last year in Addressing the Deficit:  Budgetary Implications
of Selected GAO Work (GAO/OCG-94-3, March 11, 1994).  This report,
like its predecessor, systematically identifies in a single document
the budgetary implications of selected policy changes and program
reforms discussed in our work but not yet implemented or enacted.  Of
the 120 options presented in this report, 52 are updated and 68 are
new.  Most, if not all, of the options have already been provided to
interested congressional staff. 

Narrative descriptions are presented in appendix III of this report
organized by budget function and receipts.  Some of these options
reflect our recommendations; most do not, but rather represent one
way to address, in a budgetary context, some of the significant
problems identified in our evaluations of federal policies and
programs.  Inclusion of a specific option in this report does not
mean that we endorse it as the only or most feasible approach or that
other spending reductions or revenue increases are not also
appropriate for consideration by the Congress. 

We have also provided the analytical framework that we developed last
year to provide a structure for congressional consideration of
individual options in this report.  The framework, presented in
appendix II, is organized around three broad themes: 

  -- reassess objectives, that is, reconsider whether to terminate or
     revise services and programs provided;

  -- redefine beneficiaries, that is, reconsider a program's intended
     audience; and

  -- improve efficiency, that is, reconsider how a program or service
     is provided. 

This framework provides one set of criteria that may be used to
assess goals, scope, and approaches for delivering federal programs. 

To determine budgetary effects, each spending option was discussed
with the Congressional Budget Office (CBO), and each revenue option
was discussed with the Joint Committee on Taxation (JCT).  Where
possible, estimates of budgetary savings or revenue gains were
developed by CBO and JCT.  Where estimates are not provided, a brief
explanation and discussion is included with the option.  A further
discussion of the savings estimates is included in appendix I. 

Under the Budget Enforcement Act (BEA), as amended, the spending and
revenue options included in this report could be used either to
reduce the deficit or to provide funds for other programs.  Under the
pay-as-you-go (PAYGO) rules of BEA, savings from direct spending
programs (entitlement and mandatory programs) or revenue options
would reduce the deficit unless these savings were used to offset
either program expansions or tax cuts.  For discretionary spending
programs, savings from changes would contribute to additional deficit
reduction only if BEA caps on discretionary spending were lowered;
otherwise, the savings would be available for use in other
discretionary programs. 

Although we derived the options in this report from our existing body
of work, there are similarities, not surprisingly, with other deficit
reduction proposals.  For example, some options contained in this
report were included in the President's February 1995 budget
submission, Budget of the United States Government, Fiscal Year 1996;
the February 1995 CBO report, Reducing the Deficit:  Spending and
Revenue Options; and the March 1994 Republican Budget Initiative For
Fiscal Year 1995. 

We are sending copies of this report to appropriate congressional
committees and other interested parties.  Copies will be made
available to others upon request. 

This report was prepared under the direction of Paul L.  Posner,
Director for Budget Issues, who may be reached at (202) 512-9573. 
Specific questions about individual options included in the
appendixes may be directed to the GAO Contact listed with each
option.  Major contributors to this report are listed in appendix IV. 

Charles A.  Bowsher
Comptroller General
of the United States


--------------------
\1 Budget Policy:  Prompt Action Necessary to Avert Long-term Damage
to the Economy (GAO/OCG-92-2, June 5, 1992) and The Budget Deficit: 
Outlook, Implications, and Choices (GAO/OCG-90-5, September 12,
1990). 


THE STRUCTURE AND CONTENT OF THIS
REPORT
=========================================================== Appendix I

The options included in this report cover a wide range of federal
policies and programs, reflecting the breadth of GAO's work
responsibilities.  To aid in using this report, each option is
presented in a standard format in appendix III.  The options are
presented by budget function; options covering multiple functions
appear separately, as do options involving receipts.  Cognizant
congressional committees and subcommittees and the responsible
executive department or agency are indicated for each option.  The
applicable theme from the framework is also identified.  For spending
options, we also indicate the affected budget account and subfunction
and whether the spending is discretionary or direct. 

Each option is described in a brief narrative.  Although these
descriptions are intended to synopsize the key issues and problems
developed in our audits and evaluations, readers are encouraged to
refer to the related GAO products, listed at the end of each option,
for a complete discussion. 

Lastly, as noted in our letter, to determine savings and revenue
estimates, each option was discussed with the CBO and JCT.  If
specific estimates could not be provided, a brief discussion is
included with the option.  Where estimates are provided, the
following conventions were followed.\1

  -- For revenue estimates, the increase in collections reflects that
     which would occur, over and above that due under current law, if
     the option were enacted. 

  -- For direct spending programs, estimated savings show the
     difference between what the program would cost under the CBO
     baseline, which assumes continuation of current law, and what it
     would cost after the suggested modification. 

  -- For nondefense discretionary spending programs, two estimates
     are provided.  One estimate is of savings compared to the actual
     fiscal year 1995 appropriations increased for projected
     inflation.  A second estimate is of savings compared to fiscal
     year 1995 appropriations in nominal terms (held constant for the
     next 4 years). 

  -- For defense discretionary spending programs, estimates are of
     savings compared to the President's 1995 fiscal year Defense
     Plan that CBO uses for its defense discretionary estimates.  CBO
     uses this plan because it provides the programmatic detail
     necessary to estimate the effects of changes in force structures
     and weapons systems. 

Subsequent savings and revenue estimates provided by CBO and JCT may
not match exactly those contained in this report.  Differences in the
details of specific proposals, changes in assumptions which underlie
the analyses, and updated baselines can all lead to significant
differences in estimates.  Also, a few of our options--involving
sales of real estate and other government-owned property--constitute
asset sales.  Under BEA, proceeds from the sale of federal government
physical or financial assets cannot be counted as deficit reduction. 
However, both the President and some Members of the Congress have
proposed asset sales to reduce the deficit.  The President has
proposed changing the scoring rules for asset sales for those sales
that meet certain standards.  Given this context, in order to provide
policymakers the fullest possible picture of the budgetary
implications of our work, we have included those options which
constitute asset sales.  They are clearly identified as such. 

Finally, some of the options could not be estimated by CBO or JCT
under current scorekeeping conventions.  Several of these involve
management improvements that we believe can contribute to solving the
deficit problem, but where the effects are too indirect for
estimation purposes.  A few options are not estimated because they
concern future choices about spending that is not currently in the
baseline.  In other cases, savings are likely to come in years beyond
the 5-year estimation period that CBO uses. 


--------------------
\1 For a complete discussion of the uses and caveats of the CBO
estimates, see CBO's February 1995 report, Reducing the Deficit: 
Spending and Revenue Options. 


A FRAMEWORK FOR DEFICIT REDUCTION
========================================================== Appendix II

The history of deficit reduction efforts suggests that basing
decisions on explicit policy rationales, rather than considering
separate program-by-program assessments, may improve chances for
success.  A consistent and systematic framework can be an effective
means to formulate and package broad-based deficit reduction
proposals.  Additionally, this kind of approach can be used
regardless of any other budgetary control mechanism (for example,
discretionary spending limits or sequestration procedures) or any
given level of desired deficit reduction. 

GAO's deficit reduction framework consists of three broad themes: 
reassess objectives, redefine beneficiaries, and improve efficiency
and accuracy.  These three fundamental strategies are based on an
implicit set of decision rules that encourage decisionmakers to think
systematically, within an ever-changing environment, about

  -- what services the government provides or should continue to
     provide,

  -- for whom these services are or should be provided, and

  -- how services are or should be provided. 

By using a policy-oriented framework such as this, choices can be
made more clearly and the results become more defensible. 

REASSESS OBJECTIVES

The first theme within our deficit reduction framework focuses on the
objectives for federal programs or services.  Our premise is that
periodically reconsidering a program's original purpose, the
conditions under which it continues to operate, and its
cost-effectiveness, is appropriate.  Our work suggests three decision
rules which illustrate this strategy. 

  -- Programs can be considered for termination if they have
     succeeded in accomplishing their intended objectives or if it is
     determined that the programs have persistently failed to
     accomplish their objectives. 

  -- Programs can be considered for termination or revision when
     underlying conditions change such that original objectives may
     no longer be valid. 

  -- Programs can be reexamined when cost estimates increase
     significantly above those associated with original objectives,
     when benefits fall substantially below original expectations, or
     both. 

For example, the Davis-Bacon Act requires that workers on federally
assisted construction projects be paid wages at or above levels
determined to be prevailing in the area.  Weighing this objective
against opportunities to reduce federal construction costs and
increase work opportunities for less skilled workers, the Congress
could consider GAO's option to reduce the scope or repeal
Davis-Bacon. 

Another example involves reassessing rice program objectives.  If the
Congress wanted to reduce high government costs and increase the U.S. 
share of the world rice market, it could consider GAO's option to
move rice producers towards greater market orientation. 

REDEFINE BENEFICIARIES

The second theme within our deficit reduction framework focuses on
the intended beneficiaries for federal programs or services.  The
Congress originally defines the intended audience for any program or
service based on some perception of eligibility and/or need.  To
better reflect and target increasingly limited resources, these
definitions can be periodically reviewed and revised.  Our body of
work suggests four decision rules which illustrate this strategy. 

  -- Formulas for a variety of grant programs to state and local
     governments can be revised to better reflect the fiscal capacity
     of the recipient jurisdiction.  This strategy could reduce
     overall funding demands while simultaneously redistributing
     available grant funds so that the most needy receive the same or
     increased levels of support. 

  -- Eligibility rules can be revised without altering the objectives
     of the program or service. 

  -- Fees can be targeted at individuals, groups, or industries that
     directly benefit from federal programs.  Also, existing charges
     can be increased so that a greater portion of a program's cost
     is shared by the direct beneficiaries. 

  -- Tax preferences can be narrowed or eliminated by revising
     eligibility criteria or limiting the maximum amount of
     preference allowable. 

For example, at a time when federal domestic discretionary resources
are constrained, better targeting of grant formulas offers a strategy
to bring down federal outlays by concentrating reductions on
wealthier localities with fewer needs and greater capacity to absorb
cuts.  Federal grant formulas could be redesigned to lower federal
costs by disproportionately reducing federal funds to states and
localities with the strongest tax bases and fewer needs as shown in
GAO's option on formula grants. 

Another example is the Market Promotion Program (MPP), an export
promotion program that subsidizes overseas promotional activities for
U.S.  agricultural products.  Given the possibility that federal
funds may be replacing industry funds instead of supporting
additional promotional activities, GAO provides an option to reduce
spending and restrict remaining federal funds to small, generic,
new-to-export companies. 

IMPROVE EFFICIENCY

The third theme within our deficit reduction framework addresses how
the program or service is delivered.  This strategy suggests that
focusing on the approach or delivery method can significantly reduce
spending or increase collections.  Our body of work suggests five
decision rules which illustrate this strategy. 

  -- Reorganizing programs or activities with similar objectives and
     audiences can eliminate duplication and improve operational
     efficiency. 

  -- Using reengineering, benchmarking, streamlining, and other
     process change techniques can reduce the cost of delivering
     services and programs. 

  -- Using performance measurement and generally improving the
     accuracy of available program information can promote
     accountability and effectiveness and reduce errors. 

  -- Improving collection methods and ensuring that all revenues and
     debts owed are collected can increase federal revenues. 

  -- Establishing market-based prices can help the government recover
     the cost of providing services while encouraging the best use of
     the government's resources. 

As an illustration of this theme, the Department of Energy (DOE) and
the Environmental Protection Agency (EPA) both procure commonly used
analyses of toxic and radioactive contaminants in conjunction with
their responsibilities for large environmental cleanup efforts.  EPA
spends less on these activities because, unlike DOE, EPA uses a
centralized procurement system.  GAO's option offers a way to reduce
future costs by adapting DOE procurement to EPA's more efficient
processes. 

Also in keeping with the efficiency theme, GAO has identified a total
of 163 federal programs and funding streams providing employment and
training assistance.  These programs are spread across 15 departments
and independent agencies with a total budget of about $20 billion. 
Many of the programs have similar goals and provide the same services
to similar populations using separate, parallel delivery structures. 
Consolidating these programs where it is appropriate can reduce
administrative costs.  GAO's option illustrates how opportunities to
improve efficiency and flexibility in employment and training
programs can provide a basis for reducing program funding. 


OPTIONS FOR DEFICIT REDUCTION
========================================================= Appendix III

Appendix III is divided into two sections.  First, table III.1 is a
summary listing of the options organized by budget function and
receipts.  Following the table, the presentation of individual
options begins.  This is organized by function beginning with
050-national defense.  For each option, when relevant, we provide
information about authorizing committee, appropriations subcommittee,
primary agency, budget account, spending type, budget subfunction,
and framework theme.  We then provide a summary and description of
budgetary implications. 



                                   Table III.1
                     
                     Summary of Options for Deficit Reduction

                                                BEA         Framework
Option title                  Budget function   category    theme       Status
------------------------  --  ----------------  ----------  ----------  --------
Hunter joint tactical         050-National      Discretion  Reassess    New
Unmanned Aerial Vehicle       defense           ary         objectives
system

Reduce Army inventories       050-National      Discretion  Improve     New
of spare and repair           defense           ary         efficiency
parts at divisions

Improved material             050-National      Discretion  Improve     New
management can reduce         defense           ary         efficiency
shipyard costs

Reduce Army's unfilled        050-National      Discretion  Improve     New
war reserve requirements      defense           ary         efficiency
by using other inventory
items

Defense infrastructure        050-National      Discretion  Improve     Updated
                              defense           ary         efficiency

Potential reductions to       050-National      Discretion  Improve     New
the fiscal year 1996          defense           ary         efficiency
defense operation and
maintenance budget

Alter readiness status        050-National      Discretion  Reassess    New
of some ready reserve         defense           ary         objectives
force ships

Upgrades to Navy F-14         050-National      Discretion  Reassess    New
fighter aircraft may not      defense           ary         objectives
be needed

Options to acquire fewer      050-National      Discretion  Reassess    New
attack submarines             defense           ary         objectives

Continental air defense       050-National      Discretion  Improve     New
                              defense           ary         efficiency

Carrier battle group          050-National      Discretion  Improve     New
expansions and upgrades       defense           ary         efficiency

Army's Comanche               050-National      Discretion  Reassess    Updated
helicopter                    defense           ary         objectives

F-22 fighter                  050-National      Discretion  Reassess    Updated
                              defense           ary         objectives

C-17 aircraft                 050-National      Discretion  Reassess    Updated
                              defense           ary         objectives

MK-48 advanced                050-National      Discretion  Reassess    Updated
capability torpedo            defense           ary         objectives
propulsion system

Reassess defense              050-National      Discretion  Reassess    New
conversion spending           defense           ary         objectives

Improve controls over         050-National      Discretion  Improve     New
payments to defense           defense           ary         efficiency
contractors

Defense inventories           050-National      Discretion  Improve     Updated
                              defense           ary         efficiency

Use prime vendors to          050-National      Discretion  Improve     New
supply high-volume            defense           ary         efficiency
clothing and textile
items

Restructure defense           050-National      Discretion  Improve     New
transportation                defense           ary         efficiency

Reduce excess capacity        050-National      Discretion  Improve     New
and increase cost-            defense           ary         efficiency
effectiveness of depot
maintenance program

Use of innovative             050-National      Discretion  Improve     New
commercial practices to       defense           ary         efficiency
supply electronics items
to maintenance and
repair facilities

Consolidate the separate      050-National      Discretion  Improve     New
military exchange stores      defense           ary         efficiency

Copayments for care in        050-National      Discretion  Redefine    Updated
military hospitals            defense           ary         beneficiar
                                                            ies

Administering defense         050-National      Discretion  Improve     Updated
health care                   defense           ary         efficiency

Centralize Department of      050-National      Discretion  Improve     New
Energy's procurement of       defense           ary         efficiency
laboratory testing
services

Improve Department of         050-National      Discretion  Improve     New
Energy's property             defense           ary         efficiency
management controls

Restructure Department        050-National      Discretion  Reassess    New
of Energy's national          defense           ary         objectives
laboratories

Negotiate more realistic      050-National      Discretion  Reassess    New
environmental agreements      defense           ary         objectives

Improve Hanford site          050-National      Discretion  Improve     New
management                    defense           ary         efficiency

Burdensharing in the          050-National      Discretion  Improve     Updated
Republic of Korea             defense           ary         efficiency

Food aid: reduce or           150-              Discretion  Reassess    New
eliminate funding for         International     ary/        objectives
Public Law 480 Title I        affairs           direct
Program

U.S. contribution to the      150-              Discretion  Reassess    New
International Fund for        International     ary         objectives
Agricultural Development      affairs

Shortwave radio               150-              Discretion  Reassess    New
modernization program         International     ary         objectives
                              affairs

TV Marti                      150-              Discretion  Reassess    Updated
                              International     ary         objectives
                              affairs

Sell high-value property      150-              Discretion  Reassess    New
in Tokyo                      International     ary         objectives
                              affairs

Space Station                 250-General       Discretion  Reassess    Updated
                              science, space,   ary         objectives
                              and technology

Recover clean coal            270-Energy        Discretion  Reassess    New
technology funds                                ary         objectives

Delay procurement of          270-Energy        Discretion  Reassess    New
nuclear waste containers                        ary         objectives

Privatize uranium             270-Energy        Direct      Reassess    New
enrichment program                                          objectives

Enhance profitability of      270-Energy        Discretion  Improve     New
Naval Petroleum Reserve-                        ary         efficiency
1

Consolidate Strategic         270-Energy        Discretion  Improve     New
Petroleum Reserve                               ary         efficiency

Federal land policies         300-Natural       Direct      Improve     Updated
                              resources and                 efficiency
                              environment

Collaborative federal         300-Natural       Discretion  Improve     New
land management approach      resources and     ary         efficiency
                              environment

Federal timber sales          300-Natural       Discretion  Improve     Updated
                              resources and     ary         efficiency
                              environment

Conservation reserve          300-Natural       Direct      Improve     Updated
program contracts             resources and                 efficiency
                              environment

Charge fair market value      300-Natural       Direct      Improve     New
for natural resources         resources and                 efficiency
                              environment

Communication site fees       300-Natural       Direct      Improve     New
                              resources and                 efficiency
                              environment

Recreation fees at            300-Natural       Direct      Improve     Updated
federal sites                 resources and                 efficiency
                              environment

Hardrock mining               300-Natural       Direct      Improve     Updated
royalties                     resources and                 efficiency
                              environment

Natural resources             300-Natural       Discretion  Improve     Updated
revenue sharing               resources and     ary         efficiency
                              environment

Changing how federal          300-Natural       Direct      Reassess    New
needs for helium are met      resources and                 objectives
                              environment

Federal water policies        300-Natural       Direct      Improve     Updated
                              resources and                 efficiency
                              environment

Water transfers               300-Natural       Direct      Improve     New
                              resources and                 efficiency
                              environment

Pollution fees and taxes      300-Natural       Direct      Improve     Updated
                              resources and                 efficiency
                              environment

Hazardous waste cleanup       300-Natural       Discretion  Improve     Updated
cost recovery                 resources and     ary         efficiency
                              environment

Nuclear waste disposal        300-Natural       Direct      Improve     Updated
fees                          resources and                 efficiency
                              environment

U.S. Department of            350-Agriculture   Direct      Reassess    Updated
Agriculture dairy price                                     objectives
support program

Milk marketing orders         350-Agriculture   Direct      Reassess    Updated
                                                            objectives

U.S. Department of            350-Agriculture   Direct      Redefine    Updated
Agriculture crop price                                      beneficiar
supports                                                    ies

Farm lands eligible for       350-Agriculture   Direct      Improve     Updated
deficiency payments                                         efficiency

Rice program                  350-Agriculture   Direct      Reassess    New
                                                            objectives

Peanut program                350-Agriculture   Direct      Reassess    New
                                                            objectives

Reduce or eliminate           350-Agriculture   Direct      Redefine    New
funding for the Market                                      beneficiar
Promotion Program                                           ies

Reduce funding for the        350-Agriculture   Direct      Reassess    New
Export Credit Guarantee                                     objectives
Programs

National Oceanic              370-Commerce and  Discretion  Improve     New
Atmospheric                   housing credit    ary         efficiency
Administration research
fleet modernization

Centralize servicing for      370-Commerce and  Discretion  Improve     New
Rural Housing and             housing credit    ary         efficiency
Community Development
Service's single-family
housing loans

Opportunities to reduce       370-Commerce and  Discretion  Improve     Updated
the cost of the 2000          housing credit    ary         efficiency
decennial census

Eliminate or transfer         400-              Discretion  Reassess    New
Interstate Commerce           Transportation    ary         objectives
Commission functions

Cargo preference laws:        400-              Discretion  Reassess    New
their costs and effects       Transportation    ary         objectives

Increase federal fees         400-              Direct      Redefine    New
paid by foreign-flagged       Transportation                beneficiar
cruise ships                                                ies

Increase state share of       400-              Discretion  Redefine    New
state-supported               Transportation    ary         beneficiar
intercity rail passenger                                    ies
service

Reduce or eliminate           400-              Discretion  Reassess    New
Amtrak subsidies              Transportation    ary         objectives

Targeting military            400-              Discretion  Improve     New
airport program funds         Transportation    ary/        efficiency
within the national                             direct
airport system

Enhance Department of         400-              Discretion  Improve     New
Transportation's              Transportation    ary         efficiency
oversight of its
university research

Reappraise rural              450-Community     Discretion  Improve     New
development programs          and regional      ary         efficiency
                              development

Employment and training       500-Education,    Discretion  Improve     Updated
programs                      training,         ary/        efficiency
                              employment, and   direct
                              social services

Overall strategy to           550-Health        Direct      Improve     New
address prescription                                        efficiency
drug fraud and Medicaid
fraud

Medicaid: States use          550-Health        Direct      Reassess    New
illusory approaches to                                      objectives
shift program costs to
the federal government

Medicaid formula:             550-Health        Direct      Reassess    New
fairness could be                                           objectives
improved

Adopt automated drug          550-Health        Direct      Improve     New
utilization reviews                                         efficiency

Teaching hospitals'           570-Medicare      Direct      Improve     Updated
Medicare payments                                           efficiency

Medicare payment              570-Medicare      Discretion  Improve     Updated
safeguards                                      ary/        efficiency
                                                direct

Medicare payments for         570-Medicare      Direct      Improve     Updated
high technology                                             efficiency
procedures

Change the health             570-Medicare      Discretion  Improve     New
maintenance organization                        ary/        efficiency
rate-setting method for                         direct
Medicare

Fees for non-Aid to           600-Income        Direct      Redefine    Updated
Families with Dependent       security                      beneficiar
Children child support                                      ies
enforcement services

Automated child support       600-Income        Direct      Improve     New
enforcement systems           security                      efficiency

Funding for state             600-Income        Discretion  Improve     New
automated welfare             security          ary/        efficiency
systems                                         direct

Unified risk-based food       600-Income        Discretion  Improve     New
safety system                 security          ary         efficiency

Consolidation of U.S.         600-Income        Direct      Improve     New
Department of                 security                      efficiency
Agriculture food
assistance programs

Social Security               650-Social        Discretion  Improve     Updated
continuing disability         security          ary/        efficiency
reviews                                         direct

Cost sharing for              700-Veterans      Discretion  Redefine    Updated
veterans' long-term care      benefits and      ary         beneficiar
                              services                      ies

Construction of               700-Veterans      Discretion  Reassess    Updated
veterans' medical care        benefits and      ary         objectives
facilities                    services

Veterans' disability          700-Veterans      Direct      Redefine    Updated
compensation for non-         benefits and                  beneficiar
service connected             services                      ies
diseases

Justice's use of private      750-              Discretion  Improve     New
counsel to collect civil      Administration    ary         efficiency
debt                          of justice

General Services              800-General       Direct      Improve     Updated
Administration supply         government                    efficiency
depot system

The 1-dollar coin             800-General       Direct      Improve     Updated
                              government                    efficiency

Judiciary's long-range        800-General       Direct      Improve     Updated
space planning system         government                    efficiency

Premium payments to           Multiple          Discretion  Improve     New
employees while on leave                        ary         efficiency

Global positioning            Multiple          Discretion  Improve     New
system technology                               ary         efficiency

Reform or repeal the          Multiple          Discretion  Reassess    New
Davis-Bacon Act                                 ary         objectives

Better manage Department      Multiple          Discretion  Improve     New
of Energy overtime costs                        ary         efficiency

Eliminate prefinancing        Multiple          Discretion  Improve     New
funds for Department of                         ary         efficiency
Energy contractors

Use uncosted obligations      Multiple          Discretion  Improve     New
to offset future budget                         ary         efficiency
needs

Federal agency credit         Multiple          Discretion  Improve     Updated
management programs                             ary/        efficiency
                                                direct

Formula-based grant           Multiple          Discretion  Redefine    Updated
programs                                        ary/        beneficiar
                                                direct      ies

Tax treatment of health       Receipts          Direct      Redefine    Updated
insurance premiums                                          beneficiar
                                                            ies

Information reporting on      Receipts          Direct      Improve     Updated
forgiven debts                                              efficiency

Administration of the         Receipts          Direct      Improve     Updated
tax deduction for real                                      efficiency
estate taxes

Corporate tax document        Receipts          Direct      Improve     Updated
matching                                                    efficiency

Tax treatment of              Receipts          Direct      Reassess    Updated
interest earned on life                                     objectives
insurance policies and
deferred annuities

Federal agency reporting      Receipts          Direct      Improve     Updated
to the Internal Revenue                                     efficiency
Service

Independent contractor        Receipts          Direct      Improve     Updated
tax compliance                                              efficiency

Deductibility of home         Receipts          Direct      Reassess    Updated
equity loan interest                                        objectives

Internal Revenue Service      Receipts          Direct      Improve     Updated
staff utilization                                           efficiency

Collecting gasoline           Receipts          Direct      Improve     Updated
excise taxes                                                efficiency

Computing excise tax          Receipts          Direct      Improve     Updated
bases                                                       efficiency

Small-issue industrial        Receipts          Direct      Reassess    Updated
development bonds and                                       objectives
qualified mortgage bonds

Improving compliance of       Receipts          Direct      Improve     New
sole proprietors                                            efficiency

Increase highway user         Receipts          Direct      Redefine    New
fees on heavy trucks                                        beneficiar
                                                            ies
--------------------------------------------------------------------------------


   050 NATIONAL DEFENSE
------------------------------------------------------- Appendix III:1

  -- Hunter joint tactical Unmanned Aerial Vehicle system

  -- Reduce Army inventories of spare and repair parts at divisions

  -- Improved material management can reduce shipyard costs

  -- Reduce Army's unfilled war reserve requirements by using other
     inventory items

  -- Defense infrastructure

  -- Potential reductions to the fiscal year 1996 defense operation
     and maintenance budget

  -- Alter readiness status of some ready reserve force ships

  -- Upgrades to Navy F-14 fighter aircraft may not be needed

  -- Options to acquire fewer attack submarines

  -- Continental air defense

  -- Carrier battle group expansions and upgrades

  -- Army's Comanche helicopter

  -- F-22 fighter

  -- C-17 aircraft

  -- MK-48 advanced capability torpedo propulsion system

  -- Reassess defense conversion spending

  -- Improve controls over payments to defense contractors

  -- Defense inventories

  -- Use prime vendors to supply high-volume clothing and textile
     items

  -- Restructure defense transportation

  -- Reduce excess capacity and increase cost-effectiveness of depot
     maintenance program

  -- Use of innovative commercial practices to supply electronics
     items to maintenance and repair facilities

  -- Consolidate the separate military exchange stores

  -- Copayments for care in military hospitals

  -- Administering defense health care

  -- Centralize Department of Energy's procurement of laboratory
     testing services

  -- Improve Department of Energy's property management controls

  -- Restructure Department of Energy's national laboratories

  -- Negotiate more realistic environmental agreements

  -- Improve Hanford site management

  -- Burdensharing in the Republic of Korea



   OPTION:
   HUNTER JOINT TACTICAL UNMANNED
   AERIAL VEHICLE SYSTEMHUNTER
   JOINT TACTICAL UNMANNED AERIAL
   VEHICLE SYSTEM
------------------------------------------------------- Appendix III:2

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Reassess objectives
----------------------------------------------------------------------
Beginning with first fielding in 1995, the Hunter Unmanned Aerial
Vehicle (UAV) System is to provide Army Corps, Marine Divisions, and
eventually Navy Amphibious Assault Ships with an intelligence
gathering capability.  Hunter is intended to replace the Pioneer UAV
system that was used during Operation Desert Shield/Desert Storm, but
which had frequent failures.  Hunter is a $4 billion program with
unit costs projected to be about $24 million per system. 

Although Pioneer demonstrated the military utility of UAV systems in
combat, it is not clear that Hunter will ever be capable of meeting
the military requirements of the Army, Navy, and Marine Corps.  GAO
has reported that to date, the Hunter UAV system has shown itself to
be logistically insupportable and tests have identified serious
performance problems that adversely affect the system's
effectiveness.  Based on its performance to date, the system may
prove unsuitable for use by operational forces and, contrary to DOD
plans, could require costly contractor maintenance and support to
keep it operating.  Furthermore, after several crashes during
testing, the Hunter UAV system was ordered grounded by DOD and has
remained grounded. 

DOD has recently restructured the Hunter program in an effort to
address the system's problems.  However, the restructured program
would further delay and curtail critical testing while allowing for
additional procurement of systems whose performance is so far
unproven and possibly defective.  Even so, in October 1994, the
Commanding General of the Army's Operational Test and Evaluation
Command expressed his belief that it is unlikely Hunter will be ready
for Initial Operational Test and Evaluation by July 1995, as called
for in the restructuring plan. 

Given the problems with the Hunter system, and the fact that DOD is
developing a number of other UAV systems including a close-range, or
maneuver, system and several endurance systems, the Congress may wish
to reconsider the need to purchase Hunter.  Terminating the program
could produce the following savings. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                   230     220     200     180     170
Outlays                             50     110     170     180     180
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:2.1

Unmanned Aerial Vehicles:  No More Hunter Systems Should Be Bought
Until Problems Are Fixed (GAO/NSIAD-95-52, March 1, 1995). 

Unmanned Aerial Vehicles:  Performance of Short-Range System Still in
Question (GAO/NSIAD-94-65, December 15, 1993). 


      GAO CONTACT
----------------------------------------------------- Appendix III:2.2

Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   REDUCE ARMY INVENTORIES OF
   SPARE AND REPAIR PARTS AT
   DIVISIONSREDUCE ARMY
   INVENTORIES OF SPARE AND REPAIR
   PARTS AT DIVISIONS
------------------------------------------------------- Appendix III:3

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Account                   Operation and Maintenance, Army (21-2020)

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
The five Army divisions are authorized to stock more than 26,000
items such as parts for wheel and track vehicles and other support
equipment for their retail level inventories valued at more than $230
million. 

Despite recent reductions in authorized inventories for these
activities, the divisions continue to stock inventory that
contributes little toward meeting the needs of their customers.  GAO
found that among the five divisions about $47 million was invested in
inventory items that had two or fewer demands during the previous 12
months.  Of this, $37 million had no requests.  Additionally, $61
million was invested in inventory that accounted for only 11 percent
of the items issued to the divisions' customers. 

Stocking items at the retail level that receive few demands
represents an inventory investment that could be avoided.  The Army's
own studies have shown similar results and have recommended that the
infrequently demanded items be removed from the list of items that
the divisions are authorized to stock.  These studies have also
recommended that the criteria for determining what items should be
stocked need to be reevaluated.  While DOD agrees that the criterion
for determining what inventory items should be stocked at the
divisions needs to be reevaluated, DOD did not fully agree that all
infrequently requested items should be removed from stock. 

Savings under this option could be achieved by reducing Army
inventories of spare and repair parts.  For example, if the Congress
chooses to reduce future investment in these items by $108 million to
reflect GAO's estimate, the following savings could result. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                   108       0       0       0       0
Outlays                             70      30       8       0       0
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:3.1

Army Inventory:  Opportunities Exist for Additional Reductions to
Retail Level Inventories (GAO/NSIAD-94-129, June 6, 1994). 

Army Inventory:  Divisions' Authorized Levels of Demand-Based Items
Can Be Reduced (GAO/NSIAD-93-09, October 20, 1992). 

Army Inventory:  Fewer Items Should Be Stocked at the Division Level
(GAO/NSIAD-91-218, July 24, 1991). 


      GAO CONTACT
----------------------------------------------------- Appendix III:3.2

Mark E.  Gebicke, (202) 512-5140



   OPTION:
   IMPROVED MATERIAL MANAGEMENT
   CAN REDUCE SHIPYARD
   COSTSIMPROVED MATERIAL
   MANAGEMENT CAN REDUCE SHIPYARD
   COSTS
------------------------------------------------------- Appendix III:4

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Account                   Operation and Maintenance, Navy (17-1804)

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
The Navy's public shipyards support peacetime fleet maintenance needs
and provide a base for responding to wartime requirements.  Although
the eventual size of the public shipyard industrial base is uncertain
because of fleet downsizing, each shipyard should operate as
efficiently as possible. 

Despite recent improvements in shipyard material management, the
shipyards' material requirements determination process still is not
working as intended.  Since shipyards order more material than needed
to accomplish ship repairs, they have unused material after repairs
are completed.  GAO found that in fiscal years 1991 through 1993, the
shipyards wrote off $88 million in losses for unused material,
including $56 million in material sent to disposal.  At the end of
fiscal year 1993, the shipyards had $34.7 million of material on hand
that had not been used on completed repairs and $11.8 million of
material on order for repairs that were already completed. 

GAO also found that shipyards maintain inventories of material that
are not recorded on official records, issue more shop store material
than needed for some ship repairs, and do not ensure compliance with
policies to eliminate excess shop store inventories and protect
material assets from loss.  As a result, inventory records were not
accurate and material funds were wasted.  DOD agreed with GAO's
findings and conclusions. 

The Congress could reduce appropriations by $46.5 million for the
Navy's shipyard repair material investment to account for excess
inventories. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                    50       0       0       0       0
Outlays                             40      10       0       0       0
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:4.1

Navy Supply:  Improved Material Management Can Reduce Shipyard Costs
(GAO/NSIAD-94-181, July 27, 1994). 


      GAO CONTACT
----------------------------------------------------- Appendix III:4.2

Mark E.  Gebicke, (202) 512-5140



   OPTION:
   REDUCE ARMY'S UNFILLED WAR
   RESERVE REQUIREMENTS BY USING
   OTHER INVENTORY ITEMSREDUCE
   ARMY'S UNFILLED WAR RESERVE
   REQUIREMENTS BY USING OTHER
   INVENTORY ITEMS
------------------------------------------------------- Appendix III:5

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Account                   Operation and Maintenance, Army (21-2020)

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
Between 1992 and 1994, Department of Defense (DOD) policies
restricted the services with regard to filling war reserve
requirements with assets procured with funds other than those
specifically appropriated for that purpose.  In February 1994, the
DOD Comptroller changed the policy and advised the Army that it could
use inventory items not needed for peacetime operations for these
purposes as long as the total amount of protected war reserve
inventory did not exceed $2.9 billion--the cumulative amount the
Congress had previously appropriated for buying war reserve
inventory. 

GAO analysis shows that the Army could fill $497 million of its
unfilled war reserve requirements for spare and repair parts by
transferring items not needed for peacetime operating purposes to the
war reserve account.  DOD agreed with GAO's analysis but is reluctant
to reclassify items not needed for peacetime operating purposes to
war reserves unless the Congress eliminates or modifies section 8007
of Public Law 103-139, the Department of Defense Appropriations Act
for 1994.  This particular section provides that except in the
amounts equal to the amounts appropriated for war reserves, no
obligations may be made to procure or increase the value of war
reserve material inventory unless the Secretary of Defense had
notified the Congress prior to such obligations. 

For fiscal year 1995, the administration did not request funding for
the Army's unfilled war reserve requirements nor does DOD have plans
to fund the requirements in the 1995 Defense Plan.  If a future
administration budget proposal were made for unfilled war reserve
requirements, the Congress may wish to encourage DOD to shift
peacetime inventory by using funding already in the baseline
(operation and maintenance, Army account) to fill the new
requirements. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:5.1

Army Inventory:  Unfilled War Reserve Requirements Could Be Met With
Items From Other Inventory (GAO/NSIAD-94-207, August 25, 1994). 


      GAO CONTACT
----------------------------------------------------- Appendix III:5.2

Mark E.  Gebicke, (202) 512-5140



   OPTION:
   DEFENSE INFRASTRUCTUREDEFENSE
   INFRASTRUCTURE
------------------------------------------------------- Appendix III:6

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
As DOD realigns and downsizes, GAO has reported that it needs to
ensure that the remaining infrastructure is downsized commensurate
with the remaining forces.  As pointed out in DOD's self-initiated
Bottom Up Review, there are numerous opportunities to reduce the
defense infrastructure without affecting readiness.  In fact,
reducing the infrastructure could enhance readiness in that moneys
now being spent to maintain unneeded infrastructure could be applied
to readiness enhancement measures.  Significant budget reductions
could be achieved by streamlining the command structure of the
remaining forces; sharing medical facilities and services;
consolidating depots and shipyards; reforming acquisition processes;
consolidating and eliminating research, development, and training
facilities; using simulators for training and exercises; and reducing
dependence on government-owned housing. 

Savings for this option cannot be estimated until a comprehensive
consolidation and downsizing plan is specified.  According to the
Bottom Up Review, infrastructure areas and processes accounted for
$160 billion of the $254 billion fiscal year 1994 Defense budget. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:6.1

1994 DOD Budget:  Potential Reductions to the Operation and
Maintenance Budget (GAO/NSIAD-93-295BR, September 16, 1993). 

Depot Maintenance:  Issues in Management and Restructuring to Support
a Downsized Military (GAO/T-NSIAD-93-13, May 6, 1993). 

Depot Maintenance:  Issues in Allocating Workload Between the Public
and Private Sectors (GAO-T-NSIAD-94-161, April 12, 1994). 

Military Bases:  Analysis of DOD's Recommendations and Selection
Process for Closures and Realignments (GAO/NSIAD-93-173, April 15,
1993). 


      GAO CONTACT
----------------------------------------------------- Appendix III:6.2

Donna M.  Heivilin, (202) 512-8412



   OPTION:
   POTENTIAL REDUCTIONS TO THE
   FISCAL YEAR 1996 DEFENSE
   OPERATION AND MAINTENANCE
   BUDGETPOTENTIAL REDUCTIONS TO
   THE FISCAL YEAR 1996 DEFENSE
   OPERATION AND MAINTENANCE
   BUDGET
------------------------------------------------------- Appendix III:7

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
The military services' operation and maintenance (O&M) accounts are
used to fund a wide range of military activities from training and
purchasing of spare and repair parts to civilian personnel. 

GAO analysis of selected O&M requests for fiscal year 1995 showed
that the budget for that year could have been reduced by $4.5 billion
without damaging defense operations and capabilities.  The largest
potential reductions, each for over $500 million, were associated
with better management of spare and repair parts inventories, funds
requested for ground operating tempo that are not used for training
purposes, overstated civilian personnel requirements, and excessive
unobligated balances from prior years' appropriations.  Another
potential reduction of about $470 million was associated with
improved maintenance practices that the services could adopt. 

The Congress may wish to consider the potential opportunity for
savings when formulating fiscal year 1996 appropriations for
operation and maintenance accounts. 

Based on GAO's analysis regarding potential savings in the fiscal
year 1995 O&M budget, the Congress may wish to consider reductions of
a similar magnitude, $4.5 billion, when formulating fiscal year 1996
appropriations for O&M accounts.  It is important for the Congress to
be aware that savings for this option include savings for other
options involving the individual services' O&M accounts since the
problems GAO identified persist.  CBO noted that budget authority
savings could be larger due to savings from recurring costs. 
However, CBO is unable to identify the particular years in which
these savings would be achieved or the amounts. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                 4,500       0       0       0       0
Outlays                          3,400     850     150      50      20
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:7.1

1995 Budget:  Potential Reductions to the Operation and Maintenance
Programs (GAO/NSIAD-94-246BR, September 6, 1994). 


      GAO CONTACT
----------------------------------------------------- Appendix III:7.2

Mark E.  Gebicke, (202) 512-5140



   OPTION:
   ALTER READINESS STATUS OF SOME
   READY RESERVE FORCE SHIPSALTER
   READINESS STATUS OF SOME READY
   RESERVE FORCE SHIPS
------------------------------------------------------- Appendix III:8

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Account                   National Defense Sealift Fund (17-4557)

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Reassess objectives
----------------------------------------------------------------------
Ready Reserve Force ships are used by the military services to
transport cargo to where it is needed.  A 1990 DOD Mobility
Requirements Study recommended maintaining 63 ships at a high
readiness level (such as able to be activated in 4 or 5 days) with
operation and maintenance costing hundreds of millions of dollars. 
Consistent with this study, the Army has a long-term plan to increase
its capability to reach seaports more quickly. 

However, GAO has expressed a concern that the Army's current ability
to move cargo from key installations to seaports is constrained by
deteriorated rail facilities.  GAO found that although the Army plans
to increase its capability to reach seaports more quickly, most
transportation infrastructure renovation and repair projects will not
be completed as anticipated in DOD's Mobility Requirements Study. 
Further, GAO found that DOD's analysis did not support maintaining 63
ships in a high state of readiness.  For example, the study's model
assumed only 14 ships would need to be ready to load cargo by the 5th
day. 

Because the various components of the U.S.  mobility forces must work
together to synchronize the delivery of equipment and supplies, GAO
believes that it is possible to keep some Ready Reserve Force ships
at a lower readiness level.  Under similar logic, the Maritime
Administration's fiscal year 1994 Ready Reserve Force budget request
for maintenance and operations was $136 million, or approximately
$221 million less than the $357 million identified in the Mobility
Study.  The administration concluded that reduced funding in fiscal
year 1994 would not result in a great degradation of readiness. 
Appropriations could be reduced by keeping more Ready Reserve Force
Ships in a lower readiness level than planned until transportation
renovations and/or repairs are complete.  For example, based on GAO's
audit work, if the Congress chose this alternative and 20 ships were
kept in a lower readiness status, the following savings could be
achieved. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                    20      20      20      20      20
Outlays                             15      18      20      20      20
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:8.1

Ready Reserve Force:  Ship Readiness Has Improved, but Other Concerns
Remain (GAO/NSIAD-95-24, November 8, 1994). 

Strategic Mobility:  Serious Problems Remain in U.S.  Deployment
Capabilities (GAO/T-NSIAD-94-165, April 26, 1994). 

DOD's Mobility Requirements:  Alternative Assumptions Could Affect
Recommended Acquisition Plan (GAO/NSIAD-93-103, April 22, 1993). 


      GAO CONTACT
----------------------------------------------------- Appendix III:8.2

Mark E.  Gebicke, (202) 512-5140



   OPTION:
   UPGRADES TO NAVY F-14 FIGHTER
   AIRCRAFT MAY NOT BE
   NEEDEDUPGRADES TO NAVY F-14
   FIGHTER AIRCRAFT MAY NOT BE
   NEEDED
------------------------------------------------------- Appendix III:9

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Account                   Aircraft Procurement, Navy (17-1506)

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Reassess objectives
----------------------------------------------------------------------
Until recently, the Navy planned to spend over $2.5 billion from
fiscal years 1994-2003 on structural, survivability, and capability
upgrades for many F-14 fighter aircraft.  About $1.6 billion was
planned for a very limited ground attack upgrade to 210 aircraft, and
another $970 million was planned for structural and survivability
improvements to 198 older F-14A and B model aircraft (157 of which
would then receive the ground attack upgrade along with 53 F-14D
models). 

A GAO analysis concluded that the first upgrade did not provide
enough additional capability and would not be fielded soon enough to
warrant the expenditure of $1.6 billion and the program was
terminated when the Congress did not appropriate these funds.  Fiscal
year 1995 funds were appropriated for F-14A/B structural and
survivability improvements, and that program is likely to continue
for several years.  Navy officials continue to believe a ground
attack upgrade is necessary.  A final decision on the extent of the
upgrade depends on the results of a cost-effectiveness and
operational assessment and an acquisition milestone decision
scheduled for the first quarter of fiscal year 1995. 

We question the need for F-14 structural/survivability upgrades.  The
Navy has stated that F-14s are using up their service life and that
structural upgrades are needed to keep F-14s operating until they are
retired and replaced by F/A-18E/F aircraft beginning in fiscal year
2000.  The Navy plans to retire and store about 150 F-14s over the
next 2 to 3 years as it reduces its force structure.  In lieu of
structural modifications, some of these aircraft with service life
remaining, could possibly be brought back out of storage in future
years, and operated until F-14s are gradually retired and replaced by
F/A-18E/F aircraft.  If the Congress chose to cancel the F-14
structural/survivability modification program, the following savings
could be achieved. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                   130     120     120     110     110
Outlays                             20      60     100     110     110
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:9.1

Naval Aviation:  F-14 Upgrades Are Not Adequately Justified
(GAO/NSIAD-95-12, October 19, 1994). 


      GAO CONTACT
----------------------------------------------------- Appendix III:9.2

Richard A.  Davis, (202) 512-3504



   OPTION:
   OPTIONS TO ACQUIRE FEWER ATTACK
   SUBMARINESOPTIONS TO ACQUIRE
   FEWER ATTACK SUBMARINES
------------------------------------------------------ Appendix III:10

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Account                   Shipbuilding and Conversion, Navy (17-1611)

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Reassess objectives
----------------------------------------------------------------------
Nuclear-powered attack submarines (SSN) are the Navy's prime
antisubmarine warfare asset.  Today, faced with a changed world
threat, a new defense posture, and constrained defense budgets, the
Navy is reducing the size of its SSN fleet.  The DOD's Bottom-Up
Review determined that the Navy needed to maintain a force of 45 to
55 SSNs after fiscal year 1999 to meet the requirements of the
defense strategy, including both regional conflicts and peacetime
presence operations. 

One option the Congress may consider is to cancel plans to buy the
third Seawolf submarine and defer acquisition of a new generation
submarine until 2003, while continuing some research and development
efforts through 2000.  The estimated savings reflected in the table
include the costs associated with consolidating submarine production
at one of the two facilities and maintaining that facility over the
next 5 years.  However, due to the delayed acquisition of the new
generation submarine, beginning in 2003, the Navy would have to
increase its annual shipbuilding budgets more than currently planned. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                 2,130     920   3,410     670   1,470
Outlays                            -20     750   1,320   1,550   1,210
----------------------------------------------------------------------
Source:  Congressional Budget Office. 

Note:  Higher outlays from increased shutdown and maintenance costs,
as well as research and development costs, completely offset outlay
savings in 1996. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:10.1

Attack Submarines:  Alternatives for a More Affordable SSN Force
Structure (GAO/NSIAD-95-16, October 13, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:10.2

Richard A.  Davis, (202) 512-3504



   OPTION:
   CONTINENTAL AIR
   DEFENSECONTINENTAL AIR DEFENSE
------------------------------------------------------ Appendix III:11

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Accounts                  Operation and Maintenance, Air National
                          Guard (57-3840)
                          Operation and Maintenance, Air Force
                          (57-3400)
                          National Guard Personnel, Air Force
                          (57-3850)
                          Military Personnel, Air Force (57-3500)
                          Procurement-funded Replenishment Spares
                          Replacement Support Equipment and
                          Modifications

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
The continental air defense mission evolved during the Cold War to
detect and intercept Soviet bombers attacking North America via the
North Pole.  The force that carries out that mission is within the
North American Aerospace Defense Command (NORAD), which is a joint
U.S.  and Canadian command.  As of May 1994, the force consisted of
150 primary aircraft comprised of Air National Guard F-15A/B and
F-16A/B aircraft in 10 dedicated units, as well as 2 F-15 dual-tasked
general-purpose units which stand alert for NORAD.  At that time the
Air Force budgeted about $370 million annually to operate and support
the continental air defense force. 

The former Soviet Union no longer poses a significant threat of a
bomber attack on the continental United States.  Further, internal
problems within Russia and other former Soviet Union countries have
extended the time it would take them to return to previous levels of
military readiness and capabilities.  Reflecting these changing
realities, the Chairman of the Joint Chiefs of Staff determined in
1993 that the United States no longer needed a large, dedicated air
defense force and that the dedicated force could be significantly
reduced or eliminated. 

Since the threat of a Soviet-style air attack against the United
States has largely disappeared, the air defense force now focuses its
activities on air sovereignty missions.  These missions provide
surveillance and control of territorial airspace, including
activities such as assisting aircraft in distress or intercepting
aircraft as part of anti-drug smuggling efforts.  However, active and
reserve general-purpose and training forces could perform this
mission because they (1) have comparable or better aircraft, (2) are
located at or near existing air defense bases, and (3) have pilots
who possess similar skills or could acquire the necessary skills used
by air defense and air sovereignty pilots. 

Based on our audit work, GAO has concluded that significant savings
could be achieved by dual-tasking the active, reserve, and training
forces.  Savings could also be achieved if the dedicated continental
air defense force and mission were eliminated.  If the Congress chose
to eliminate the dedicated force the following savings could be
achieved. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                   210     430     450     470     480
Outlays                            160     370     420     450     470
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:11.1

Continental Air Defense:  A Dedicated Force Is No Longer Needed
(GAO/NSIAD-94-76, May 3, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:11.2

Richard A.  Davis, (202) 512-3504



   OPTION:
   CARRIER BATTLE GROUP EXPANSIONS
   AND UPGRADESCARRIER BATTLE
   GROUP EXPANSIONS AND UPGRADES
------------------------------------------------------ Appendix III:12

----------------------------------  ----------------------------------
Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Accounts                            Operation and Maintenance, Navy
                                    (17-1804)
                                    Military Personnel, Navy (17-
                                    1453)
                                    Procurement-funded Replenishment
                                    Spares
                                    Replacement Support Equipment and
                                    Modifications

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Aircraft carrier battle groups are the centerpiece of the Navy's
surface force and significantly influence the size, composition, and
cost of the fleet.  The annualized cost to acquire, operate, and
support a single Navy carrier battle group is about $1.7 billion (in
fiscal year 1995 dollars) and will continue to increase.  The Navy is
embarking on several costly carrier-related programs--procuring
another carrier, refueling existing carriers, and replacing/upgrading
combat aircraft. 

GAO's analysis indicates that there are opportunities for using less
costly options to satisfy many of the carrier battle groups'
traditional roles without unreasonably increasing the risk that U.S. 
national security would be threatened.  For example, one less costly
option would be to rely more on increasingly capable surface
combatants, such as cruisers, destroyers, or frigates, for overseas
presence and crises response.  If the Congress chose to retire one
aircraft carrier and one active air wing in 1996, the following
savings could be achieved. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                   290     600     630     650     670
Outlays                            210     480     560     610     640
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:12.1

Navy Carrier Battle Groups:  The Structure and Affordability of the
Future Force (GAO/NSIAD-93-74, February 25, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:12.2

Richard A.  Davis, (202) 512-3504



   OPTION:
   ARMY'S COMANCHE
   HELICOPTERARMY'S COMANCHE
   HELICOPTER
------------------------------------------------------ Appendix III:13

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Account                   Research, Development, Test and Evaluation,
                          Army (21-2040)

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Reassess objectives
----------------------------------------------------------------------
When fielded in 2003, the Comanche helicopter is to replace the
Vietnam-era scout and attack helicopters that the Army considers
incapable of meeting existing or future requirements.  The Comanche's
overall program cost has grown to approximately $45 billion, with an
estimated program unit cost of about $35 million.  Anticipated cost
increases and other unresolved technical risks indicate that future
cost growth is likely.  Moreover, the Army's Comanche helicopter
program currently faces a $540 million funding shortfall for fiscal
years 1995-2004.  In order to cope with anticipated funding
shortfalls, the Army is proposing to streamline the program.  This
entails merging the demonstration, validation, engineering, and
manufacturing development phases into one developmental phase.  In
December 1994, the Secretary of Defense decided to restructure the
Comanche program as a prototype/technology base program, resulting in
a program cost reduction from $4.2 billion to about $2 billion for
fiscal years 1996 through 2001. 

Although light attack missions are part of the Army's plan for the
Comanche, its lethality is now expected to rival or surpass that of
the Apache--the Army's premiere attack helicopter.  In addition, as
the Army reduces its total helicopter fleet, it plans to modify many
of those that will remain to increase combat capabilities.  For
example, the Army is arming the Kiowa and plans to improve the basic
model Apaches, including adding Longbow modifications to 227 Apaches. 
These actions, collectively, tend to blur the distinction in roles
among the Army's helicopter fleet. 

Given real and probable development cost increases, uncertain
operating and support cost savings, questions about the role of the
Comanche compared to other more affordable Army helicopters, and
declining defense budgets, the Congress may wish to rethink the need
to purchase the Comanche.  Terminating the program would produce the
following savings. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                   370     500     520     520     500
Outlays                            210     410     490     500     500
----------------------------------------------------------------------
Source:  Congressional Budget Office. 

Note:  The Comanche Helicopter program has been restructured to a
prototype program only in the administration's 1996 budget request. 
Therefore, under the President's 1996 Defense Plan, savings from
terminating the program would be considerably lower than the estimate
above. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:13.1

Army Aviation:  Modernization Strategy Needs to Be Reassessed
(GAO/NSIAD-95-9, November 21, 1994). 

Comanche Helicopter:  Program Needs Reassessment Due to Increased
Unit Cost and Other Factors (GAO/NSIAD-92-204, May 27, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:13.2

Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   F-22 FIGHTERF-22 FIGHTER
------------------------------------------------------ Appendix III:14

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Account                   Aircraft Procurement, Air Force (57-3010)

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Reassess objectives
----------------------------------------------------------------------
In recent years, GAO has issued numerous reports on the Air Force's
F-22 program leading to the following findings and conclusions. 

The Air Force's F-22 program was initiated in 1981 to meet the
evolving threat projected for the mid-1990s.  Since the F-22 program
entered full-scale development in 1991, the severity of the projected
military threat in terms of quantities and capabilities had declined. 
Instead of confronting thousands of modern Soviet fighters, U.S.  air
forces are now expected to confront potential adversary air forces
that include few fighters that have the capability to challenge the
F-15--the U.S.  front line fighter.  GAO's analysis shows that the
F-15 exceeds the most advanced fighter threat system expected to
exist for many years.  Further, our analysis indicated that the
current inventory of F-15s can be economically maintained in a
structurally sound condition until 2015 or later. 

DOD is currently planning to procure significant units before
completing operational tests and evaluations, thereby increasing the
cost, schedule, and performance risks within the system.  Initial
operational tests and evaluations that determine the system's
operational utility and appropriateness for production are not
scheduled to be completed until after the Air Force will have
committed to procure 80 aircraft involving an investment of $12.4
billion.  Air Force plans call for procurement of 4 aircraft a year,
increasing to 36 a year (a 900 percent increase) before initial
operational tests and their evaluation are scheduled to be completed. 
Many aircraft systems entering production before starting operational
testing have required major modification later which is often costly. 

Using DOD guidelines, F-22 program concurrency is high because the
F-22 program is scheduled to proceed into low rate initial production
well before any operational testing starts.  Furthermore, the F-22
program contemplates a higher commitment as a percent of total
production prior to completion of initial operational testing than
most modern fighter programs. 

Because the need for the F-22 is not urgent and the concurrency
between development and production is high, the Congress could choose
to restrict production of F-22s to six aircraft in 1999 and eight
aircraft in 2000 until initial operational tests and evaluations are
completed in February 2002.  One Air Force official stated that one
set of production tooling can produce six to eight production
aircraft a year.  If the Congress decides to restrict production in
this way, the following savings could be achieved. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                     0       0       0     740   1,740
Outlays                              0       0       0      50     290
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:14.1

Weapons Acquisition:  Low-Rate Initial Production Used to Buy Weapon
Systems Prematurely (GAO/NSIAD-95-18, November 21, 1994). 

Tactical Aircraft:  F-15 Replacement is Premature as Currently
Planned (GAO/NSIAD-94-118, March 25, 1994). 

Tactical Aircraft:  Planned F-15 Replacement Is Premature
(GAO/C-NSIAD-94-11, December 8, 1993). 

F-22 Fighter:  Concurrency in Development and Production
(GAO/NSIAD-95-59, report in progress). 


      GAO CONTACT
---------------------------------------------------- Appendix III:14.2

Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   C-17 AIRCRAFTC-17 AIRCRAFT
------------------------------------------------------ Appendix III:15

----------------------------------  ----------------------------------
Authorizing committees              Armed Services (Senate)
                                    National Security (House)

Appropriations subcommittees        Defense (Senate)
                                    National Security (House)

Primary agency                      Department of Defense

Account                             Aircraft Procurement, Air Force
                                    (57-3010)

Spending type                       Discretionary

Budget subfunction                  Department of Defense--Military

Framework theme                     Reassess objectives
----------------------------------------------------------------------
Many GAO reports and testimonies issued over the past decade have
produced the following findings and conclusions regarding the Air
Force C-17. 

The C-17 has been a troubled program almost since its inception and
has fallen far short of original cost, schedule, and performance
objectives.  As a result of the program's problems, the Department of
Defense (DOD) sponsored a cost and operational effectiveness analysis
to explore alternatives to the C-17 for meeting planned airlift
capacity requirements, including acquiring additional commercial
wide-body derivative aircraft.  Although the analysis shows that
there are cost effective wide-body alternatives, DOD has not made a
final decision on substituting commercial wide-body aircraft for the
C-17. 

The Congress may wish to purchase commercial wide-body aircraft over
the period 1996 to 2000 instead of purchasing more than 40 C-17
aircraft.  Estimated funding identified for strategic airlift
purposes in the 1995 Defense Plan could be used.\2 The following
savings could be achieved if 34 commercial wide-body aircraft were
purchased instead of buying additional C-17s. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                   210   1,660   1,480   2,370   2,380
Outlays                             10     150     560   1,090   1,570
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\2 The 1995 plan for strategic airlift, according to DOD, could buy
more C-17s or non-development airlift aircraft (NDAA) or a
combination of NDAA and C-17s.  The specifics of how DOD would use
this money are not available now and may not be available until the
fall of 1995 when DOD is scheduled to decide whether or not to
purchase more C-17s.  Moreover, the 1995 plan for strategic airlift
did not include any money in the year 2000.  CBO assumed that the
administration would need roughly $4.3 billion in 2000 (about the
same amount in 1999) to continue procurement. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:15.1

Military Airlift:  Comparison of C-5 and C-17 Airfield Availability
(GAO/NSIAD-94-225, July 11, 1994). 

Military Airlift:  The C-17 Proposed Settlement and Program Update
(GAO/T-NSIAD-94-172, April 28, 1994). 

Military Airlift:  The C-17 Program Update and Proposed Settlement
(GAO/T-NSIAD-94-166, April 19, 1994). 

Military Airlift:  C-17 Settlement Is Not a Good Deal
(GAO/NSIAD-94-141, April 15, 1994). 

Military Airlift:  The C-17 Program Status and Proposed Settlement
(GAO/T-NSIAD-94-115, February 10, 1994). 

Military Airlift:  Status of the C-17 Development Program
(GAO/T-NSIAD-93-6, March 10, 1993) and (GAO/T-NSIAD-93-8, March 18,
1993). 

Defense Industry:  Status of the C-17 Program and Related Issues
Affecting the McDonnell Douglas Corporation (GAO/T-NSIAD-92-4,
November 14, 1992). 

Military Aircraft:  C-17 Wing Flap Requires Additional Testing
(GAO/NSIAD-92-160, July 8, 1992). 

Military Airlift:  Selected Events in the Development of the C-17
(GAO/NSIAD-92-181FS, May 4, 1992). 

Military Airlift:  Cost and Complexity of the C-17 Aircraft Research
and Development Program (GAO/NSIAD-91-5, March 19, 1991). 

Status of the Air Force's C-17 Aircraft Program (GAO/T-NSIAD-90-48,
June 19, 1990). 

Military Airlift:  C-17 Faces Schedule, Cost, and Performance
Challenges (GAO/NSIAD-89-195, August 18, 1989). 


      GAO CONTACT
---------------------------------------------------- Appendix III:15.2

Louis J.  Rodrigues, (202) 512-4841



   OPTION:
   MK-48 ADVANCED CAPABILITY
   TORPEDO PROPULSION SYSTEMMK-48
   ADVANCED CAPABILITY TORPEDO
   PROPULSION SYSTEM
------------------------------------------------------ Appendix III:16

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Account                   Weapons Procurement, Navy (17-1507)

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Reassess objectives
----------------------------------------------------------------------
In 1986, the Navy established a requirement to upgrade the propulsion
system on its MK-48 Advanced Capability (ADCAP) torpedo.  The upgrade
was intended to reduce noise levels when the torpedo was fired from
the SSN-21 Seawolf submarine.  In January 1992, the Navy stated that
the Seawolf's requirements could be met by the current ADCAP, without
the upgrade.  The Navy now plans to combine the Torpedo Propulsion
Unit (TPU) with a new guidance and control unit.  Together these
improvements, referred to as the ADCAP Modification Program, are
estimated to cost about $711 million.  According to a Navy official,
the Navy plans to upgrade about 1,386 ADCAP torpedoes starting about
January 1997. 

Although operational test and evaluation of the ADCAP Modification
Program will not be complete until late 1995, the Navy plans to seek
approval for low-rate initial production in February 1995.  In 1992,
GAO questioned the need for the TPU and recommended that the TPU be
terminated.  Although the Navy now justifies the TPU in part on the
basis of improving ADCAP shallow water performance, latest Navy
testing has shown that the current ADCAP torpedo can effectively
operate in shallow water.  If the Congress chose to terminate the
upgrade program, the following savings could be achieved. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                    20      20      20      20       0
Outlays                             10      10      20      20      10
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:16.1

Navy Torpedo Program:  MK-48 ADCAP Propulsion System Upgrade Not
Needed (GAO/NSIAD-92-191, September 10, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:16.2

Richard A.  Davis, (202) 512-3504



   OPTION:
   REASSESS DEFENSE CONVERSION
   SPENDINGREASSESS DEFENSE
   CONVERSION SPENDING
------------------------------------------------------ Appendix III:17

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Reassess objectives
----------------------------------------------------------------------
Estimates of DOD's portion of the total federal funds to be spent on
defense conversion for fiscal years 1993 through 1997 are increasing. 
However, we found no evidence that (1) the level of spending is
appropriate in light of other government programs that support
similar purposes and (2) the private economy has not already
responded to the need for which these funds were authorized and
appropriated.  Consequently, the Congress may wish to slow DOD's
spending in this area. 

The President's defense conversion initiative, announced on March 11,
1993, totaled $19.6 billion over 5 years; DOD's portion was 42
percent.  The administration's February 1994 estimate of the cost of
the initiative was $21.6 billion; DOD's portion has increased to 59
percent.  A study for DOD's 1993 Defense Conversion Commission
identified 116 other federal or state programs, not classified as
defense conversion, that could help ease the impact of defense
downsizing.  These programs cost about $24 billion in fiscal year
1993.  Other related programs include federal activities to develop
advanced industrial technology with costs of about $10 billion in
fiscal year 1994. 

The United States is now in the tenth year of defense downsizing and
many firms, individuals, and communities who were adversely affected
may have already responded.  GAO reports show that overall, savings
from slowing defense conversion spending would depend on the programs
and activities affected.  As an illustrative example, the
Congressional Budget Office estimates that if the Technology
Reinvestment Program, one component of defense conversion spending,
was eliminated beginning in fiscal year 1996, the following savings
could be achieved. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                   650     680     700     730     750
Outlays                            280     560     650     690     720
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:17.1

Defense Conversion:  Capital Conditions Have Improved for Small- and
Medium-Sized Firms (GAO/NSIAD-94-224, July 21, 1994). 

Defense Conversion:  Status of Funding and Spending
(GAO/NSIAD-94-218BR, June 30, 1994). 

Defense Conversion:  Slow Start Limits Spending (GAO/NSIAD-94-72,
January 25, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:17.2

David E.  Cooper, (202) 512-4587



   OPTION:
   IMPROVE CONTROLS OVER PAYMENTS
   TO DEFENSE CONTRACTORSIMPROVE
   CONTROLS OVER PAYMENTS TO
   DEFENSE CONTRACTORS
------------------------------------------------------ Appendix III:18

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
Weak financial controls have resulted in millions of dollars of
incorrect payments being made by the Defense Finance and Accounting
Service (DFAS), the principal contract-paying activity of the
Department of Defense.  During a 6-month period, DFAS processed $751
million in checks from defense contractors.  GAO researched checks
totaling $392 million and found that $305 million, 78 percent,
represented overpayments by the government.  Overpayments resulted
from DFAS making duplicate payments and paying invoices without
considering previous progress payments. 

Contractors, rather than DFAS' controls, detected most overpayments. 
GAO work shows that this increases the risk that losses will result
from undetected or unreturned payments.  Overpayments cost the
government thousands of dollars of interest each day; underpayments
are also costly as Defense is required to pay interest on valid
invoices that are paid late. 

Defense is working to strengthen its existing internal control
procedures to prevent overpayments and detect them more rapidly when
they do occur.  Initiatives are also underway to reform and
streamline the complex regulatory policies and procedures that affect
contract payments.  GAO believes, however, that the large dollar
amounts at risk warrant DOD's viewing the need for corrective actions
with an increased sense of urgency. 

CBO agrees that stronger internal controls can reduce costs from
over- and underpayments to contractors.  However, savings depend on
the specific changes in control systems that would be required and
their likely effects. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:18.1

DOD Procurement:  Overpayments and Underpayments at Selected
Contractors Show Major Problem (GAO/NSIAD-94-245, August 5, 1994). 

DOD Procurement:  Millions in Overpayments Returned by DOD
Contractors (GAO/NSIAD-94-106, March 14, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:18.2

David E.  Cooper, (202) 512-4587



   OPTION:
   DEFENSE INVENTORIESDEFENSE
   INVENTORIES
------------------------------------------------------ Appendix III:19

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
Over 100 GAO reports have pointed out DOD inventory management
problems and have shown that DOD has continually bought and stored
items that greatly exceeded its operational and war reserve needs. 
Systemic problems in determining requirements and inadequate
financial accountability and control have contributed to poor
inventory management practices.  Further, DOD's culture has
traditionally emphasized overbuying and placed little value on
economy and efficiency, causing unneeded items to pile up in
warehouses.  Force reductions and base closures will only compound
the situation and result in additional unneeded inventory. 

DOD has been slow to implement private sector practices that could
reduce inventory costs.  In this regard, the Defense Logistics Agency
has recently begun conducting pilot programs to demonstrate the
applicability of commercial practices and to tailor changes required
in each of its facilities so that the successful results of the
programs could be applied in supply and distribution. 

Systemic reforms--such as improving the way inventory requirements
are determined, using commercial inventory management practices, and
changing financial management policies and practices--are needed to
achieve further reductions in DOD's budget requirements.  GAO
estimates that, as of September 1993, only about half of DOD's $77.5
billion in inventory was needed to be on hand to support current
operations and war reserves.  GAO presents several specific options
relating to DOD inventories.  See options "Use Prime Vendors to
Supply High-Volume Clothing and Textile Items," "Use of Innovative
Commercial Practices to Supply Electronics Items," "Reduce Army
Inventories of Spare and Repair Parts at Divisions," and "Improved
Material Management Can Reduce Shipyard Costs."


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:19.1

Commercial Practices:  DOD Could Reduce Electronics Inventories by
Using Private Sector Techniques (GAO/NSIAD-94-110, June 29, 1994). 

Commercial Practices:  Leading-Edge Practices Can Help DOD Better
Manage Clothing and Textile Stocks (GAO/NSIAD-94-64, April 13, 1994). 

Commercial Practices:  DOD Could Save Millions by Reducing
Maintenance and Repair Inventories (GAO/NSIAD-93-155, June 7, 1993). 

DOD Food Inventory:  Using Private Sector Practices Can Reduce Costs
and Eliminate Problems (GAO/NSIAD-93-110, June 4, 1993). 

Defense Transportation:  Commercial Practices Offer Improvement
Opportunities (GAO/NSIAD-94-26, November 26, 1993). 

Defense Inventory:  Top Management Attention Is Crucial
(GAO/NSIAD-90-145, March 26, 1990). 


      GAO CONTACT
---------------------------------------------------- Appendix III:19.2

Donna M.  Heivilin, (202) 512-8412


   OPTION:
   USE PRIME VENDORS TO SUPPLY
   HIGH-VOLUME CLOTHING AND
   TEXTILE ITEMS USE PRIME VENDORS
   TO SUPPLY HIGH-VOLUME CLOTHING
   AND TEXTILE ITEMS
------------------------------------------------------ Appendix III:20

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
The Department of Defense (DOD) spends over a billion dollars for
clothing and textile items sold to military service customers,
primarily the services' 14 recruit induction centers and over 300
military exchange stores. 

GAO has reported that while private sector companies are cutting
costs by minimizing inventories, DOD continues to store redundant
levels of clothing and textile inventories throughout its wholesale
and retail system.  Much of this inventory is aged; for about 26
percent of the items, DOD had 10 years of supply on hand.  To
maintain these stocks, DOD employs a large operations infrastructure
and thus incurs unnecessary inventory storage and handling costs. 

Many private sector firms and some federal agencies with uniformed
employees are relying on prime vendors to manage their clothing
inventories.  Prime vendors provide timely and direct delivery
between customers and suppliers, and order additional stock from
manufacturers on short notice, with quick turnaround, to minimize
inventory holding costs and improve customer service.  DOD plans to
implement a prime vendor program at recruit induction centers
beginning in fiscal year 1995.  GAO believes that substantial
opportunities exist to reduce DOD annual expenditures on clothing and
textile items by adopting best commercial practices on a wide-scale
basis, CBO cannot develop a 5-year savings estimate for this option
at this time. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:20.1

Commercial Practices:  Leading-Edge Practices Can Help DOD Better
Manage Clothing and Textile Stocks (GAO/NSIAD-94-64, April 13, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:20.2

Donna M.  Heivilin, (202) 512-8412


   OPTION:
   RESTRUCTURE DEFENSE
   TRANSPORTATIONRESTRUCTURE
   DEFENSE TRANSPORTATION
------------------------------------------------------ Appendix III:21

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
Numerous studies by DOD, presidential commissions, and others have
reported that the structure of the defense transportation system is
fragmented and inefficient.  Traffic management processes were
developed independently for each mode of transportation, and each
supported with independently developed automated systems.  GAO
believes that DOD needs to better integrate traffic management and to
provide more effective support, at lower cost, both in peace and in
war. 

In 1992, DOD designated the U.S.  Transportation Command (USTRANSCOM)
the single DOD manager for defense transportation in peace and war. 
However, GAO work shows that the extensive field organization and
multiple component command responsibilities continue to exist. 
USTRANSCOM and the services also continue to support multiple
independent automated transportation systems.  Savings could be
achieved by restructuring the traffic management infrastructure,
including the implementation of a 1988 proposal by a DOD task force
to consolidate the individual headquarters commands.  While CBO
agrees that savings would result from implementation of this option,
it cannot develop a 5-year savings estimate until numerous variables,
such as the extent of consolidation and the impact on command and
support structures, are determined. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:21.1

Defense Transportation:  Commercial Practices Offer Improvement
Opportunities (NSIAD-94-26, November 26, 1993). 

Defense Transportation:  Ineffective Oversight Contributes to Freight
Losses (NSIAD-92-96, June 18, 1992). 

Defense Reorganization:  DOD's Efforts to Streamline the
Transportation Command (NSIAD-91-36BR, October 26, 1990). 


      GAO CONTACT
---------------------------------------------------- Appendix III:21.2

Donna M.  Heivilin, (202) 512-8412



   OPTION:
   REDUCE EXCESS CAPACITY AND
   INCREASE COST-EFFECTIVENESS OF
   DEPOT MAINTENANCE PROGRAMREDUCE
   EXCESS CAPACITY AND INCREASE
   COST-EFFECTIVENESS OF DEPOT
   MAINTENANCE PROGRAM
------------------------------------------------------ Appendix III:22

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
DOD's annual $15 billion depot maintenance program provides for major
overhaul of parts, rebuilding parts and end items, modifying systems
and equipment by applying new or improved components, and
manufacturing parts unavailable from the private sector.  This work
is accomplished by thousands of commercial contractors as well as by
DOD employees in large industrial depots maintained by the military
departments.  Factors such as threat changes, new war-fighting plans,
force structure reductions, and increased reliability and
maintainability of many military systems have significantly reduced
depot maintenance requirements over the past few years.  The
department has been struggling to implement initiatives to (1)
identify what maintenance should be conducted at depots and what
should be conducted in operational units, (2) cost-effectively
allocate depot maintenance workload between the public and private
sectors, (3) downsize the military depot maintenance system\1 to
reduce excess capacity, and (4) implement a cost-effective approach
for managing DOD's depot management programs, systems, and
facilities.  Changes in several areas could improve the
cost-effectiveness of the DOD depot maintenance program. 

First, the current DOD depot management structure is not conducive to
making interservicing decisions that are essential to developing a
more efficient and effective depot maintenance system.  Several prior
GAO studies have discussed this problem in detail.  By consolidating
the management of the depot maintenance program in a single DOD
agency or command, the department would produce the greatest
opportunity for efficiency and matching depot capacity with future
requirements. 

Second, legislation that prohibits the military departments from
contracting out more than 40 percent of their depot maintenance work
to the private sector may preclude the most cost-effective allocation
of workload.  Furthermore, since statistics gathered regarding this
workload allocation are inconsistent among the services and between
the public and private sector, DOD's analysis of the so-called 60-40
split between the public and private sector is not meaningful.  The
Congress may wish to consider legislation eliminating the 60-40
requirement and providing that DOD assign depot work to the public or
private sector based on merit-based criteria that includes industrial
base, readiness, and core requirements as well as cost. 

CBO cannot develop a 5-year savings estimate at this time.  The
magnitude of savings would depend on the resulting structure and size
of the depot maintenance system and workload split between the
private and public sectors. 


--------------------
\1 With full implementation of currently approved base realignment
and closure (BRAC) decisions, the number of military depots will be
reduced to 24, and more closures are expected to be announced as a
part of the 1995 BRAC process. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:22.1

Navy Maintenance:  Assessment of the Public and Private Shipyard
Competition Program (GAO/NSIAD-94-184, May 25, 1994). 

Correspondence to the Chairman, Subcommittee on Readiness, Committee
on Armed Services, July 28, 1994 (follow-up to April 12, 1994, Depot
Maintenance Testimony). 

Depot Maintenance:  Issues in Allocating Workload Between the Public
and Private Sectors (GAO/T-NSIAD-94-161, April 12, 1994). 

Depot Maintenance:  Issues in Management and Restructuring to Support
a Downsized Military (GAO/T-NSIAD-93-13, May 6, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:22.2

Donna M.  Heivilin, (202) 512-8412



   OPTION:
   USE OF INNOVATIVE COMMERCIAL
   PRACTICES TO SUPPLY ELECTRONICS
   ITEMS TO MAINTENANCE AND REPAIR
   FACILITIESUSE OF INNOVATIVE
   COMMERCIAL PRACTICES TO SUPPLY
   ELECTRONICS ITEMS TO
   MAINTENANCE AND REPAIR
   FACILITIES
------------------------------------------------------ Appendix III:23

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
The Defense Logistics Agency (DLA) manages over 1 million electronics
items, such as resistors, fuses, and switches.  It stores this
inventory, valued at over $2 billion, at 28 distribution depots and
other storage locations.  This large level of inventory reflects
DLA's practice of buying and storing electronics supplies to ensure
they are available to customers--sometimes several years in advance
of when the supplies are actually needed.  The turnover of DLA's
electronics inventory is slow.  In fiscal year 1993, the wholesale
inventory of such items would turn over once every 4 years.  In
comparison, private sector suppliers often turn their stock over 4
times a year. 

Many private sector companies have adopted modern inventory
management practices, including long-term relationships with
suppliers, direct delivery programs, and direct communication
channels between suppliers and end users.  With these practices,
companies do not store supplies at intermediate handling and storage
locations, as DOD does.  Instead, they arrange for suppliers to
deliver inventory items directly to the end users facility close to
the time when the items are needed.  The result is a reduction in
inventories and related holding costs as well as improved customer
service. 

DLA has initiated several programs to adopt commercial practices for
electronics items, but overall progress is slow and projected results
are limited.  However, DLA recently initiated a study to examine the
feasibility of using "supplier parks" at military industrial
facilities--a successful technique currently in use by progressive
private firms.  Budgetary savings would result if DLA managed
electronics inventories in this manner. 

GAO believes that substantial opportunities exist to reduce DOD
expenditures on electronics items by adopting best commercial
practices on a wide-scale basis.  CBO cannot develop a 5-year savings
estimate for this option at this time. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:23.1

Commercial Practices:  DOD Could Reduce Electronics Inventories by
Using Private Sector Techniques (GAO/NSIAD-94-110, June 29, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:23.2

Donna M.  Heivilin, (202)512-8412



   OPTION:
   CONSOLIDATE THE SEPARATE
   MILITARY EXCHANGE
   STORESCONSOLIDATE THE SEPARATE
   MILITARY EXCHANGE STORES
------------------------------------------------------ Appendix III:24

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
GAO reviewed the "morale, welfare, and recreation (MWR)" program--a
$12 billion dollar enterprise that provides service members, their
dependents, and eligible civilians with an affordable source of goods
and services like those available to civilians--and found that
revenue generated by the MWR activities is likely to decrease in the
1990's because of the downsizing of forces and increasing private
sector competition.  Appropriated funds--which now constitute 10
percent of MWR funding--are also expected to decline as overall
budgets decline. 

Exchange stores are the largest producer of MWR revenue.  DOD's
decentralized approach to managing the MWR program will not work well
in this environment.  Since 1968, studies by GAO, DOD, and others
have recommended the consolidation of exchanges into a single entity. 
Each study predicted financial benefits could be achieved through
consolidation.  While the Army and Air Force exchanges have been
consolidated, the Navy and Marine Corps retain independent exchanges. 
Further consolidations could achieve additional savings.  CBO cannot
develop a 5-year savings estimate until numerous variables, such as
the extent of consolidation, are determined. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:24.1

Morale, Welfare, and Recreation:  Declining Funds Require DOD to Take
Action (GAO/NSIAD-94-120, February 28, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:24.2

Donna M.  Heivilin, (202) 512-8412



   OPTION:
   COPAYMENTS FOR CARE IN MILITARY
   HOSPITALS COPAYMENTS FOR CARE
   IN MILITARY HOSPITALS
------------------------------------------------------ Appendix III:25

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Account                   Defense Health Program (97-0130)

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Redefine beneficiaries
----------------------------------------------------------------------
Numerous GAO reports and testimonies have documented the problems of
coordinated care in the military health service system.  In
particular, we have reported that currently care received by military
beneficiaries in military hospitals and clinics is free.  However,
when care must be obtained through civilian providers, military
beneficiaries share in the costs of the care they receive.  This
uneven system has led to confusion, uncertainty, and inequity among
beneficiaries as to what their health care benefits are.  Further,
research has shown that free care leads to greater (and unnecessary)
utilization and, therefore, greater costs. 

DOD has suggested a new set of cost-sharing requirements for care
provided by civilian network providers under its health care reform
proposal.  However, the proposal maintains free care to beneficiaries
in military facilities, thereby continuing the inequity and
overutilization problems. 

The Congress may wish to establish beneficiary cost-sharing
requirements for care received in military hospitals similar to the
DOD health care reform proposal for care that beneficiaries will
receive from civilian facilities. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                   210     200     200     200     200
Outlays                            180     190     190     200     200

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   210     200     200     200     200
Outlays                            180     190     200     200     200
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:25.1

Defense Health Care:  Lessons Learned From DOD's Managed Health Care
Initiatives (GAO/T-HRD-93-21, May 10, 1993). 

Defense Health Care:  Obstacles in Implementing Coordinated Care
(GAO/T-HRD-92-24, April 7, 1992). 

Defense Health Care:  Implementing Coordinated Care--A Status Report
(GAO/HRD-92-10, October 3, 1991). 

The Military Health Services System--Prospects for the Future
(GAO/T-HRD-91-11, March 14, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:25.2

David P.  Baine, (202) 512-7101



   OPTION:
   ADMINISTERING DEFENSE HEALTH
   CAREADMINISTERING DEFENSE
   HEALTH CARE
------------------------------------------------------ Appendix III:26

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Account                   Defense Health Program (97-0130)

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
Each of the three military departments (Army, Navy, and Air Force)
operates its own health care system, providing medical care to active
duty personnel, their dependents, retirees, and survivors of military
personnel.  To a large extent, these systems perform many of the same
administrative, management, and operational functions. 

Since 1949 over 22 studies have reviewed whether a central entity
should be created within DOD for the centralized management and
administration of the three systems.  Most of these studies
encouraged some form of organizational consolidation.  A Defense
health agency would consolidate the three military medical systems
into one centrally managed system, eliminating duplicate
administrative, management, and operational functions.  No specific
budget estimate can be developed until numerous variables, such as
the extent of consolidation and the impact on command and support
structures, are determined. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:26.1

Defense Health Care:  Lessons Learned From DOD's Managed Health Care
Initiatives (GAO/T-HRD-93-21, May 10, 1993). 

Defense Health Care:  Obstacles in Implementing Coordinated Care
(GAO/T-HRD-92-24, April 7, 1992). 

Defense Health Care:  Implementing Coordinated Care--A Status Report
(GAO/HRD-92-10, October 3, 1991). 

The Military Health Services System--Prospects for the Future
(GAO/T-HRD-91-11, March 14, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:26.2

David P.  Baine, (202) 512-7101



   OPTION:
   CENTRALIZE DEPARTMENT OF
   ENERGY'S PROCUREMENT OF
   LABORATORY TESTING
   SERVICESCENTRALIZE DEPARTMENT
   OF ENERGY'S PROCUREMENT OF
   LABORATORY TESTING SERVICES
------------------------------------------------------ Appendix III:27

------------------------  --------------------------------------------
Authorizing committees    Energy and Natural Resources (Senate)
                          Resources (House)
                          Commerce (House)

Appropriations            Energy and Water Development
subcommittees             (Senate and House)

Primary agency            Department of Energy

Account                   Defense Environment, Restoration & Waste
                          Management (89-0242)

Spending type             Discretionary

Budget subfunction        Atomic energy defense activities

Framework theme           Improve efficiency
----------------------------------------------------------------------
Both the Department of Energy (DOE) and the Environmental Protection
Agency (EPA) are responsible for large environmental cleanup efforts. 
A major component of DOE's cleanup program involves analyses of toxic
and radioactive contaminants.  DOE has estimated that these analyses
may cost the federal government more than $15 billion over the next
30 years.  While both agencies analyze nonradioactive organic and
inorganic chemicals using some of the same testing methods, the
agencies procure these commonly-used analyses in a different manner. 
EPA centrally contracts for them while DOE employs a decentralized
procurement approach that relies heavily on its operating contractors
to subcontract for them through commercial laboratories. 

Under its procurement approach, DOE pays higher prices to its
commercial laboratories than EPA does for the same analyses and
methods, partly because decentralized purchasing practices do not
produce price competition, volume discounts, and compliance with one
standard contract format.  Also, its decentralized approach to
procuring commonly-used analyses results in duplication of contractor
efforts in the award and management of commercial laboratory
subcontracts, which adds inefficiencies and increases administrative
costs.  GAO's preliminary analysis indicates that if DOE contracted
for these services through one central procurement function, similar
to EPA's approach, it would receive substantially lower prices from
commercial laboratories by consolidating its overall buying power and
greatly reduce the inherent duplication in contract award and
oversight activities. 

DOE estimates that laboratory analyses cost at least 15 percent of
its cleanup costs.  For fiscal year 1995, DOE was appropriated about
$5 billion for Defense Environmental Restoration and Waste
Management.  By centralizing its laboratory analyses, GAO assumes DOE
could achieve savings of $62 million annually as shown in the table
below. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                    62      62      62      62      62
Outlays                             37      57      62      62      62

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    62      63      65      67      69
Outlays                             37      58      64      66      68
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:27.1

Report expected to be issued by May 1995


      GAO CONTACT
---------------------------------------------------- Appendix III:27.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   IMPROVE DEPARTMENT OF ENERGY'S
   PROPERTY MANAGEMENT
   CONTROLSIMPROVE DEPARTMENT OF
   ENERGY'S PROPERTY MANAGEMENT
   CONTROLS
------------------------------------------------------ Appendix III:28

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          Energy and Natural Resources (Senate)
                          National Security (House)
                          Commerce (House)

Appropriations            Energy and Water Development
subcommittees             (Senate and House)

Primary agency            Department of Energy

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Atomic energy defense activities

Framework theme           Improve efficiency
----------------------------------------------------------------------
The Department of Energy (DOE) has accumulated a considerable amount
of property, including computer, office, and electronic equipment,
most of which is managed by its contractors.  GAO reviewed the
property management activities of 20 of DOE's major contractors and
found that $74 million in government-owned property was missing.  GAO
also determined that, of the 20 contractors reviewed, only seven had
property management systems that were approved by DOE as of January
31, 1994.  Without such approval, no one can know with certainty how
much property might be missing. 

Based on 5 years of audit work in this area, GAO believes that each
year millions of dollars are spent unnecessarily to replace property
that has become missing as a result of contractor actions.  To curb
this expense, DOE must give property management improvement a higher
departmental priority.  This improvement could include DOE taking
steps to recoup the value of lost or missing property from the
responsible contractors.  In addition, DOE can ensure that all
departmental contractors have approved property management systems in
place.  While improved controls will achieve savings, a savings
estimate was not developed for this option because the value and
amount of missing property is unknown. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:28.1

Nuclear Security:  Property Control Problems at DOE's Livermore
Laboratory Continue (GAO/RCED-91-141, May 16, 1991). 

Nuclear Security:  DOE Oversight of Livermore's Property Management
System Is Inadequate (GAO/RCED-90-122, April 18, 1990). 

Department of Energy:  Status of DOE's Property Management System
(GAO/RCED-94-154FS, April 7, 1994). 

Department of Energy:  The Property Management System at the Rocky
Flats Plant Is Inadequate (GAO/RCED-94-77, March 1, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:28.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   RESTRUCTURE DEPARTMENT OF
   ENERGY'S NATIONAL
   LABORATORIESRESTRUCTURE
   DEPARTMENT OF ENERGY'S NATIONAL
   LABORATORIES
------------------------------------------------------ Appendix III:29

------------------------  --------------------------------------------
Authorizing committees    Energy and Natural Resources (Senate)
                          Commerce (House)

Appropriations            Energy and Water Development
subcommittees             (Senate and House)

Primary agency            Department of Energy

Account                   Energy Supply, R&D Activities (89-0224)

Spending type             Discretionary

Budget subfunction        Energy supply

Framework theme           Reassess objectives
----------------------------------------------------------------------
The Department of Energy's (DOE) laboratory network is comprised of
28 labs, with a budget of nearly $8 billion and employment at 63,000. 
Recent shifts in national priorities--principally, the dramatic
reduction in the arms race and proposed cutbacks in energy and
nuclear research funding--raise questions about the need for all
these labs.  In particular, DOE's three large defense labs, costing
about $1 billion annually, were created to design and test nuclear
weapons, a role which has greatly diminished over time.  Currently,
these labs allocate less than half their budgets to nuclear weapons
design, development and testing--the principal reasons they were
created.  Yet, as GAO has reported, DOE still maintains a redundant
structure with respect to nuclear weapons work, an arrangement that
may no longer be the most efficient alternative for meeting defense
requirements. 

Aside from deciding on the ideal number of labs, most experts GAO
consulted agree that the missions of the laboratories now need to be
clarified if their resources are to be used most effectively.  Some
are suggesting the current laboratory structure may not be the most
rational if the labs are to move into newer mission areas. 
Suggestions for restructuring range from converting some labs into
private or quasi-public entities, transferring labs to universities,
or assigning them to different agencies whose missions better match
lab strengths. 

The Congress should reconsider the role and mission of the
laboratories, which could be restructured in various ways.  For
example, the recent Galvin Commission examined a transfer of most of
the nuclear weapons functions of Lawrence Livermore to Los Alamos
laboratory.  Los Alamos officials estimated that having both
facilities design weapons but only one engineer and test them would
save up to $200 million in annual operating costs.  The table below
reflects these savings. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                   200     200     200     200     200
Outlays                            120     185     200     200     200

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   200     204     209     215     221
Outlays                            120     188     207     212     218
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:29.1

National Laboratories Need Clearer Mission and Better Management
(GAO/RCED-95-10, January 27, 1995). 

DOE's National Laboratories:  Adopting New Missions and Managing
Effectively Pose Significant Challenges (GAO/T-RCED-94-113, February
3, 1994). 

Department of Energy:  Management Problems Require a Long-Term
Commitment to Change (GAO/RCED-93-72, August 31, 1993). 

Energy Policy:  Changes Needed to Make National Energy Planning More
Useful (GAO/RCED-93-29, April 27, 1993). 

Nuclear Weapons Complex:  Issues Surrounding Consolidating Los Alamos
and Lawrence Livermore National Laboratories (GAO/RCED-92-98,
September 24, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:29.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   NEGOTIATE MORE REALISTIC
   ENVIRONMENTAL
   AGREEMENTSNEGOTIATE MORE
   REALISTIC ENVIRONMENTAL
   AGREEEMENTS
------------------------------------------------------ Appendix III:30

------------------------  --------------------------------------------
Authorizing committees    Energy and Natural Resources (Senate)
                          Resources (House)
                          Commerce (House)

Appropriations            Energy and Water Development
subcommittees             (Senate and House)

Primary agency            Department of Energy

Account                   Defense Environment & Waste Management (89-
                          0242)

Spending type             Discretionary

Budget subfunction        Atomic energy defense activities

Framework theme           Reassess objectives
----------------------------------------------------------------------
The Department of Energy's (DOE) Environmental Restoration and Waste
Management (EM) program oversees and directs all aspects of the
agency's nuclear weapons complex cleanups.  DOE has faced criticism
about poor management and high costs in the EM program. 

As required by Superfund legislation for sites on the National
Priorities List, and to secure compliance with other statutes, the
Department of Energy (DOE) has entered into agreements with the
Environmental Protection Agency and various states to clean up and
conduct related activities at the nuclear weapons complex sites.  For
fiscal year 1995 alone, about $1.4 billion has been targeted for this
and related purposes. 

However, many of these environmental agreements were negotiated
before DOE had accurate information on which to base the scope of
work or the milestones to which it is committed.  As a result, the
agreements taken together do not reflect a national strategy of
targeting resources based on the highest risks to human health and
the environment.  Moreover, many of the contaminated groundwater and
soil problems do not yet have acceptable cleanup solutions.  And
although DOE has spent over $600 million to develop new cleanup
technologies, few of them have yet to find their way into DOE's
cleanup agenda. 

In addition, the EM program, as CBO noted, has not been efficiently
managed.  Internal and external reviews have found excessive levels
of funds supporting management functions. 

DOE could achieve both long-term and short-term budgetary savings if
it delayed cleanup actions where existing methods cannot achieve the
necessary cleanup levels efficiently or effectively.  Delaying such
projects would require that DOE renegotiate environmental agreements
to establish milestones that would allow the agency to employ more
advanced cleanup technologies in the future.  By renegotiating
environmental agreements to delay certain environmental restoration
projects and by reducing inefficient administrative and management
functions, DOE could achieve significant savings.  The Congress may
wish to reflect these savings from increased managerial effectiveness
in a 10-percent reduction in DOE's EM budget. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                   582     582     582     582     582
Outlays                            288     491     582     582     582

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   602     623     645     667     691
Outlays                            303     521     631     653     676
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:30.1

Department of Energy:  National Priorities Needed for Meeting
Environmental Agreements (GAO/RCED-95-1, March 3, 1995). 

Department of Energy:  Management Changes Needed to Expand Use of
Innovative Cleanup Technologies (GAO/RCED-94-205, August 10, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:30.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   IMPROVE HANFORD SITE
   MANAGEMENTIMPROVE HANFORD SITE
   MANAGEMENT
------------------------------------------------------ Appendix III:31

------------------------  --------------------------------------------
Authorizing committees    Energy and Natural Resources (Senate)
                          Resources (House)
                          Commerce (House)

Appropriations            Energy and Water Development
subcommittees             (Senate and House)

Primary agency            Department of Energy

Account                   Defense Environmental Restoration & Waste
                          Management
                          (89-0242)

Spending type             Discretionary

Budget subfunction        Atomic energy defense activities

Framework theme           Improve efficiency
----------------------------------------------------------------------
The Hanford Site, a 560-square-mile installation managed by the
Department of Energy (DOE), has produced nuclear materials for
national defense since 1943.  GAO believes that improvement could be
made in the management of the site that would reduce future costs. 
Descriptions of the two components of this option follow. 


         HANFORD FARM MAINTENANCE
         PROCEDURES
-------------------------------------------------- Appendix III:31.0.1

Over 61 million gallons of high-level radioactive waste are stored in
177 underground storage tanks at DOE's Hanford Site in southeast
Washington State.  Timely maintenance of these aging tanks and
equipment for monitoring them is critical because of the hazardous
nature of the contents and the potential consequences of a
significant leak or other accident.  However, a 1992 DOE study found
problems with the maintenance program. 

GAO believes that DOE has made progress in strengthening the $32
million tank farm maintenance program, resulting in the reduction of
the number of uncompleted maintenance projects.  However, development
of benchmark and, where appropriate, engineered performance standards
would help identify additional opportunities to improve tank farm
maintenance. 

The Congress may wish to encourage DOE to improve the efficiency of
its tank farm maintenance program.  Savings would depend on the
specific actions taken. 


         WELL-DRILLING TECHNOLOGY
-------------------------------------------------- Appendix III:31.0.2

As part of the cleanup of radioactive and hazardous wastes at its
Hanford Site in southeastern Washington State, DOE will install
almost 900 permanent and temporary monitoring wells in fiscal years
1993-1997 at a cost of more than $270 million.  However, the cost of
installing wells could be reduced through the adoption of faster and
less expensive well-drilling technologies and using the drilling
workforce more efficiently. 

GAO believes that Hanford should expedite the evaluation of
alternative well-drilling technologies and, in the interim, require
its contractors to select the most cost-effective technology,
consistent with safety standards, for use at each well being drilled. 
While employing less costly technologies and more efficient work
forces could achieve savings, a budget estimate cannot be developed
to reflect such savings.  This is because the link between
operational efficiencies and the resulting savings is not certain
enough for estimation purposes. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:31.1

Nuclear Waste:  Future Improvements Needed in the Hanford Tank Farm
Maintenance Program (GAO/RCED-95-29, November 8, 1994). 

Nuclear Waste:  Hanford's Well-Drilling Costs Can Be Reduced
(GAO/RCED-93-71, March 4, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:31.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   BURDENSHARING IN THE REPUBLIC
   OF KOREABURDENSHARING IN THE
   REPUBLIC OF KOREA
------------------------------------------------------ Appendix III:32

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Defense (Senate)
subcommittees             National Security (House)

Primary agency            Department of Defense

Accounts                  Operation and Maintenance, Army (21-2020)
                          Air Force (57-3400)
                          Navy (17-1804)

Spending type             Discretionary

Budget subfunction        Department of Defense--Military

Framework theme           Improve efficiency
----------------------------------------------------------------------
The United States expects to spend $845 million in fiscal year 1995
on operations and maintenance to support American troops in the
Republic of Korea.  Operations and maintenance costs include salaries
of local national employees working for the U.S.  military,
utilities, and support services contracts.  In 1995, national labor
costs (in Korean currency) will amount to the equivalent of about
$370 million, or 44 percent of the total estimated operations and
maintenance costs.  During negotiations in 1994, the United States
asked the Korean government to pay $311 million to offset total
won-based operations and maintenance costs; the Republic of Korea
agreed to pay $300 million.  About $90 million of Korea's
contribution will offset the national labor costs in 1995. 

The United States plans to conduct further negotiations in the spring
of 1995 with the Republic of Korea on the level of its support for
these costs.  GAO believes that the United States should seek an
agreement with the Republic of Korea to increase its contribution to
include payment of all won-based labor costs.  Attaining this goal
would significantly reduce the costs to maintain the U.S.  presence
in Korea.  If an agreement were reached, the following savings could
be achieved. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                   290     300     310     320     330
Outlays                            220     280     300     310     320
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:32.1

Military Presence:  U.S.  Personnel in the Pacific Theater
(GAO/NSIAD-91-192, August 20, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:32.2

Joseph E.  Kelley, (202) 512-4128



   150 INTERNATIONAL AFFAIRS
------------------------------------------------------ Appendix III:33

  -- Food aid:  reduce or eliminate funding for Public Law 480 Title
     I Program

  -- U.S.  contribution to the International Fund for Agricultural
     Development

  -- Shortwave radio modernization program

  -- TV Marti

  -- Sell high-value property in Tokyo



   OPTION:
   FOOD AID:  REDUCE OR ELIMINATE
   FUNDING FOR PUBLIC LAW 480
   TITLE I PROGRAMFOOD AID: 
   REDUCE OR ELIMINATE FUNDING FOR
   PUBLIC LAW 480 TITLE I PROGRAM
------------------------------------------------------ Appendix III:34

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition, and Forestry
                          (Senate) Commerce, Science, and
                          Transportation (Senate)
                          Agriculture (House)

Appropriations            Agriculture, Rural Development, and Related
subcommittees             Agencies (Senate)
                          Agriculture (House)

Primary agency            Department of Agriculture

Accounts                  P.L. 480 Grants (12-2278)
                          P.L. 480 Program (12-2277)

Spending type             Discretionary/Direct

Budget subfunction        International affairs

Framework theme           Reassess objectives
----------------------------------------------------------------------
Through the Public Law 480 Title I Food Aid Program, U.S. 
agricultural commodities are sold to developing countries on
long-term credit at below-market interest rates.  The current goal of
the program is to promote the foreign policy of the United States by
enhancing the food security of developing countries.  The Public Law
480 legislation specifies ways that agricultural commodities provided
under the program can support this goal, including their use to
promote broad-based, sustainable (BBS) development, and develop and
expand markets for U.S.  agricultural commodities. 

Title I's contribution to BBS development and long-term market
development for U.S.  agricultural goods is limited for many reasons. 
Title I aid has minimal impact on BBS development because the value
of foreign exchange a country might save through purchasing Title I
commodities on concessional terms--the vehicle through which BBS
development could occur--is small relative to the country's
development needs.  Also, the program provides USDA little leverage
to influence development activities or initiate policy reforms in the
recipient country.  Furthermore, other competing objectives dilute
whatever leverage might be associated with the program. 

Title I's contribution to long-term, foreign market development for
U.S.  agricultural commodities has not been demonstrated.  Title I
commodities tend to be price sensitive, therefore it is difficult to
transform the concessional market share established through the Title
I program into commercial market share, unless the United States can
offer competitive prices and financing. 

In addition, several legislatively mandated program requirements
(that is, cargo preference rules, reexport restrictions, and
commodity eligibility rules) impose constraints on recipients that
undermine market development efforts. 

Despite streamlined management adopted in 1990 amendments to the
Title I program, multiple and sometimes competing objectives, as well
as contradictory program requirements, continue to encumber the Title
I program, making it difficult to create and implement an effective
program strategy.  Thus, from this perspective, the Congress may wish
to consider reducing or eliminating funding for the Title I program. 
The savings presented below assume that the program authority would
not be extended beyond fiscal year 1996.\3 The delay would permit
USDA to lower production through an increased acreage set-aside in
1996 which would not build surpluses or otherwise affect the budget. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                     0     268     268     268     268
Outlays                              0     148     254     268     268

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     0     286     296     306     317
Outlays                              0     158     277     301     312
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\3 The savings include $29 million for ocean freight differential
costs for the shipment of agricultural commodities. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:34.1

Public Law 480 Title I:  Economic and Market Development Objectives
Not Met (GAO/T-GGD-94-191, August 3, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:34.2

Allan I.  Mendelowitz, (202) 512-4812



   OPTION:
   U.S.  CONTRIBUTION TO THE
   INTERNATIONAL FUND FOR
   AGRICULTURAL DEVELOPMENTU.S. 
   CONTRIBUTION TO THE
   INTERNATIONAL FUND FOR
   AGRICULTURAL DEVELOPMENT
------------------------------------------------------ Appendix III:35

------------------------  --------------------------------------------
Authorizing committees    Foreign Relations (Senate)
                          International Relations (House)

Appropriations            Foreign Operations (Senate and House)
subcommittees

Primary agency            Funds appropriated to the President

Account                   International Organizations and Programs
                          (11-1005)

Spending type             Discretionary

Budget subfunction        International development and humanitarian
                          assistance

Framework theme           Reassess objectives
----------------------------------------------------------------------
The International Fund for Agricultural Development (IFAD) finances
projects designed to promote agricultural self-sufficiency in food
deficit countries.  Members of the Organization for Economic
Cooperation and Development, and the Organization of Petroleum
Exporting Countries (OPEC) provide most of the funding for IFAD
operations, but the United States is the largest single financial
contributor.  The United States has provided IFAD about $542 million
since its inception in 1977:  $200 million as the initial
contribution, and $180 million, $79.7 million, and $82.8 million for
the first, second, and third replenishments, respectively.  The IFAD
Governing Council will vote on the fourth replenishment in early
1995. 

GAO first reported on IFAD in 1981.  Since that time, GAO has noted
that IFAD has expanded its size and role in project development and
implementation significantly beyond what was originally intended. 
IFAD develops its own projects and its expanded staff is involved in
all phases of project management as a consequence.  Personnel and
administrative costs have increased dramatically.  At the same time,
donations from OPEC countries have fallen off sharply.  GAO has
criticized the IFAD funding trends, expanded staff levels, and
increased involvement in projects and recommended that IFAD's mission
and funding (both the amount and the contribution ratio) be
reexamined. 

Given the significant changes in IFAD's operations, the funding
uncertainties on the part of other members, and the limited U.S. 
government involvement in monitoring IFAD field activities, GAO
believes that further U.S.  support for IFAD warrants reassessment. 
CBO did not provide an estimate of budgetary savings for fiscal years
1996 through 2000 because the administration did not request and the
Congress did not provide any funds for IFAD in 1995.  If the Congress
chose to suspend further U.S.  contributions, no future
appropriations would be needed. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:35.1

Multilateral Foreign Aid:  U.S.  Participation in the International
Fund for Agricultural Development (GAO/NSIAD-93-176, September 24,
1993). 

Status Report on U.S.  Participation in the International Fund for
Agricultural Development (ID-81-33, March 27, 1981). 


      GAO CONTACT
---------------------------------------------------- Appendix III:35.2

Joseph E.  Kelley, (202) 512-4128



   OPTION:
   SHORTWAVE RADIO MODERNIZATION
   PROGRAMSHORTWAVE RADIO
   MODERNIZATION PROGRAM
------------------------------------------------------ Appendix III:36

------------------------  --------------------------------------------
Authorizing committees    Foreign Relations (Senate)
                          International Relaltions (House)

Appropriations            Commerce, Justice, State, the Judiciary, and
Subcommittees             Related Agencies (Senate and House)

Primary agency            U.S. Information Agency

Account                   Radio Construction (67-0204)

Spending type             Discretionary

Budget subfunction        Foreign information and exchange activities

Framework theme           Reassess objectives
----------------------------------------------------------------------
Voice of America (VOA) broadcasts are sent to about 29 leased and
owned relay stations worldwide via satellite.  Relay stations
broadcast VOA programs via shortwave and medium wave transmissions. 
GAO believes that major political changes and advances in
communications technology may render some of the Voice of America's
(VOA) planned shortwave station modernization projects obsolete
before they are finished. 

In Eastern Europe and the republics of the former Soviet Union,
indigenous media, including television, have become relatively
reliable sources of information.  Further, audiences for U.S. 
government direct broadcasts (VOA and Radio Free Europe/Radio Liberty
(RFE/RL)) have declined.  In response to the recent consolidation of
VOA and RFE/RL within the U.S.  Information Agency, the radios have
cut back direct broadcast hours and are planning to eliminate
redundant language broadcasts.  In several locations, they are using
alternatives--such as providing programs to local stations for
rebroadcast--to supplement or replace direct broadcasts.  By the turn
of the century, direct broadcasts from satellites delivering
high-quality signals may be available. 

Despite these changes and the fact that fewer people in target
audiences are listening to shortwave broadcasts, VOA plans to
continue to construct new shortwave stations and modernize existing
ones.  Over half of the $900 million VOA plans to spend on
modernization between 1994 and 2003 is for shortwave projects that
have not yet begun.  The planned shortwave modernization projects are
not supported by cost-benefit analyses.  In 1994, GAO recommended
that VOA analyze the costs and benefits of its shortwave
modernization projects, given the consolidation of VOA and RFE/RL and
the changing political and technological environment. 

Because the planned shortwave modernization projects are not
supported by cost-benefit analysis, GAO believes that further
requests for additional appropriations should be scrutinized and
delayed pending further analyses.  Only a fraction of the dollars
associated with planned modernization projects has been appropriated;
therefore, the estimated budget savings compared with the baseline is
modest.  The following table reflects the savings that could be
achieved--only $5 million has been appropriated--if the new Pacific
Island shortwave station was not constructed. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                     5       5       5       5       5
Outlays                              2       3       5       5       5

Savings from the 1995 funding level adjusted for inflati
----------------------------------------------------------------------
Budget authority                     5       5       6       6       6
Outlays                              2       3       5       6       6
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:36.1

Voice of America:  Station Modernization Projects Need to Be
Justified (GAO/NSIAD-94-69, January 24, 1994). 

Voice of America:  Management Actions Needed to Adjust to a Changing
Environment (GAO/NSIAD-92-150, July 24, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:36.2

Joseph E.  Kelley, (202) 512-4128



   OPTION:
   TV MARTI TV MARTI
------------------------------------------------------ Appendix III:37

------------------------  --------------------------------------------
Authorizing committees    Foreign Relations (Senate)
                          International Relations (House)

Appropriations            Commerce, Justice, State, and Judiciary
subcommittees             (Senate and House)

Primary agency            U.S. Information Agency

Account                   Broadcasting to Cuba (67-0208)

Spending type             Discretionary

Budget subfunction        Foreign information and exchange activities

Framework theme           Reassess objectives
----------------------------------------------------------------------
GAO reports show that although USIA provides television broadcasts to
Cuba through TV Marti, the broadcasts are constantly and effectively
jammed.  USIA's research data shows that, mainly as a result of the
jamming, the number of Cubans who are able to watch the broadcasts is
small.  Other factors that decrease effectiveness of TV Marti include
problems with transmission facilities, broadcast hours that are not
convenient to viewers, and a broadcast signal that does not reach
much beyond the greater Havana area.  The U.S.  Advisory Commission
on Public Diplomacy has reported that TV Marti is not cost-effective
and has repeatedly recommended that it be terminated.  In March 1994,
the Advisory Panel on Radio Marti and TV Marti concluded that TV
Marti cannot be considered cost effective and would not be cost
effective unless the viewing audience in Cuba could be substantially
expanded.  According to the Director of USIA's Office of Cuba
Broadcasting, TV Marti expanded its daily broadcasts in August 1994
by 2 hours (from 3:30 am to 8:00 am), but Cuban jamming also
expanded.  In an attempt to overcome jamming, TV Marti has plans to
convert from VHF to UHF transmission, at a cost of $1.2 million, even
though Cuba could acquire equipment to jam the new signal at
relatively little cost.  Furthermore, GAO has criticized controls
over program quality and objectivity, and according to the Advisory
Panel, identified problems do not appear to have been fully resolved. 

The Congress may wish to eliminate TV Marti given its persistent
problems and its limited ability to achieve its goals.  If TV Marti
were eliminated, the savings that could be achieved are shown in the
following table. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                     2       8       8       8       8
Outlays                              2       7       8       8       8

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     2       9       9      10      10
Outlays                              2       8       9       9      10
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:37.1

TV Marti:  Costs and Compliance With Broadcast Standards and
International Agreements (GAO/NSIAD-92-199, May 6, 1992). 

Broadcasts to Cuba:  TV Marti Surveys are Flawed (GAO/NSIAD-90-252,
August 9, 1990). 


      GAO CONTACT
---------------------------------------------------- Appendix III:37.2

Joseph E.  Kelley, (202) 512-4128



   OPTION:
   SELL HIGH-VALUE PROPERTY IN
   TOKYOSELL HIGH-VALUE PROPERTY
   IN TOKYO
------------------------------------------------------ Appendix III:38

------------------------  --------------------------------------------
Authorizing committees    Foreign Relations (Senate)
                          International Affairs (House)

Appropriations            Commerce, Justice, State, the Judiciary, and
subcommittees             Related Agencies (Senate and House)

Primary agency            Department of State

Account                   Acquisition and Maintenance of Buildings
                          Abroad (19-0535)

Spending type             Discretionary

Budget subfunction        Conduct of foreign affairs

Framework theme           Reassess objectives
----------------------------------------------------------------------
The United States government owns about 3,000 real properties
oversees--valued at about $12 billion--some of which could be sold or
leased.  The State Department is permitted to use real property sales
proceeds for other facilities' needs without specific OMB or
Congressional approval. 

GAO believes that some high-value properties in Tokyo, Japan, are
underdeveloped.  Analysis demonstrates the feasibility of--and
identifies options for--selling portions of this property.  One
option would be to sell the Deputy Chief of Mission residence and
construct a less costly replacement residence on the government-owned
housing compound.  The State Department has rejected this option
because the embassy desired to retain the facility for
representational purposes. 

The current sales value of this property is uncertain.  There has
been no recent appraisal of the Deputy Chief of Mission residence,
but in 1990, it was valued at $92 million.  Embassy information,
based on Japanese government reports, shows that residential property
values have declined about 30 percent since 1990. 

GAO assumes that the Deputy Chief of Mission residence is valued at
$40 million--a conservative estimate at less than 50 percent of its
value in 1990.  GAO also assumes that a replacement residence would
be built on the Mitsui compound prior to the current residence being
sold.  The second residence could be built on government-owned
property for $3.8 million, according to a 1991 study conducted for
the State Department. 

As described in our letter, this option involves an asset sale. 
Under current BEA rules, therefore, it could not be used for deficit
reduction.  Furthermore, the Congress would have to specifically
restrict proceeds from the sale of the Deputy Chief of Mission
residence from reverting to the State Department's budget, as
currently authorized.  If legislation were changed, the savings that
could be achieved from selling this property are shown in the
following table. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Asset Sale
----------------------------------------------------------------------
Budget authority                    -4       0       0       0      40
Outlays                             -1      -1      -1      -1      40
----------------------------------------------------------------------
Source:  Congressional Budget Office. 

Note:  CBO scored this option using the following assumption.  Four
million dollars would be authorized for the construction of the new
Deputy Chief of Mission residence on the Mitsui compound.  The sale
of the old residence would occur after construction of the first is
completed.  The sale of the old residence at the assumed level of $40
million would count as savings if legislation were changed. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:38.1

Management of Overseas Real Property (GAO/HR-93-15, December 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:38.2

Joseph E.  Kelley, (202) 512-4128


   250 GENERAL SCIENCE, SPACE, AND
   TECHNOLOGY
------------------------------------------------------ Appendix III:39

  -- Space Station



   OPTION:
   SPACE STATION SPACE STATION
------------------------------------------------------ Appendix III:40

----------------------------------  ----------------------------------
Authorizing committees              Commerce, Science and
                                    Transportation (Senate)
                                    Science (House)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (Senate and House)

Primary agency                      National Aeronautics and Space
                                    Administration

Account                             Human Space Flight (80-0111)

Spending type                       Discretionary

Budget subfunction                  Space flight, research, and
                                    supporting activities

Framework theme                     Reassess objectives
----------------------------------------------------------------------
In 8 reports and testimonies issued since 1991, GAO has expressed
concerns about rising cost estimates that have prompted several
redesigns of the space station since it was first funded in fiscal
year 1985.  In 1993, the station was redesigned again and Russia was
brought in as a partner.  NASA believed that Russian participation
would improve the station's capabilities and reduce the estimated
cost to complete assembly by $2 billion.  The Congress subsequently
capped funding from fiscal year 1994 through 2002 at $17.4 billion. 

While all the details of Russian participation have not yet been
worked out, it appears that increased Russian involvement in the
station will not produce savings and in fact may add to the cost to
complete assembly.  NASA believes that it can identify other savings
to offset the added costs of Russian participation and stay within
the $17.4 billion cap.  It is not clear that all the necessary
reductions can be achieved.  Also, it has not been determined to what
degree U.S.  researchers will benefit from the additional resources
available from Russian involvement. 

Given the uncertainty that still surrounds the station's cost,
schedule, and performance, the Congress may wish to consider whether,
and to what extent, it wants to accept NASA's most recent changes. 
After reviewing the details of these changes, the Congress could
consider whether to accept the project's latest redesign, reduce its
scope and cost, or terminate it.  If the project were terminated, the
following savings would result. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                 2,100   2,100   2,100   2,100   2,100
Outlays                          1,323   1,953   2,100   2,100   2,100

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                 2,169   2,243   2,323   2,402   2,486
Outlays                          1,367   2,064   2,288   2,367   2,450
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:40.1

Space Station:  Update on the Impact of the Expanded Russian Role
(GAO/NSIAD-94-248, July 29, 1994). 

Space Station:  Impact of the Expanded Russian Role on Funding and
Research (GAO/NSIAD-94-220, June 21, 1994). 

Space Station:  Information on National Security Applications and
Cost (GAO/NSIAD-93-208, May 18, 1993). 

Space Station:  Program Instability and Cost Growth Continue Pending
Redesign (GAO/NSIAD-93-187, May 18, 1993). 

NASA:  Large Programs May Consume Increasing Share of Limited Future
Budgets (GAO/NSIAD-92-278, September 4, 1992). 

Space Station:  Status of Financial Reserves (GAO/NSIAD-92-279, July
20, 1992). 

NASA Budget:  Potential Shortfalls in Funding NASA's 5-Year Plan
(GAO/T-NSIAD-92-18, March 17, 1992). 

Questions Remain on the Costs, Uses, and Risks of the Redesigned
Space Station (GAO/T-NSIAD-91-26, May 1, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:40.2

Donna M.  Heivilin, (202) 512-8412



   270 ENERGY
------------------------------------------------------ Appendix III:41

  -- Recover clean coal technology funds

  -- Delay procurement of nuclear waste containers

  -- Privatize uranium enrichment program

  -- Enhance profitability of Naval Petroleum Reserve-1

  -- Consolidate Strategic Petroleum Reserve



   OPTION:
   RECOVER CLEAN COAL TECHNOLOGY
   FUNDS RECOVER CLEAN COAL
   TECHNOLOGY FUNDS
------------------------------------------------------ Appendix III:42

------------------------  --------------------------------------------
Authorizing committees    Energy and Natural Resources (Senate)
                          Commerce (House)

Appropriations            Interior and Related Agencies (Senate and
subcommittees             House)

Primary agency            Department of Energy

Account                   Clean Coal Technology (89-0235)

Spending type             Discretionary

Budget subfunction        Energy supply

Framework theme           Reassess objectives
----------------------------------------------------------------------
In a May 1994 report to the Congress, DOE estimated that on the basis
of its analyses of the funding requirements for the 45 projects in
the Clean Coal Technology Program, there would be about $150 million
remaining in uncommitted program funds.  These funds would remain
after meeting the projects' funding needs and after considering the
probability of potential project cost increases and the probability
of additional projects withdrawing from the program.  According to
DOE, part of this remaining balance would be needed to pay annual
program administrative costs.  In its fiscal year 1995 departmental
budget request, DOE requested congressional approval to reallocate
$100 million ($20 million in fiscal year 1995 and $80 million in
fiscal year 1996) of the uncommitted funds to begin a new
international clean coal technology transfer effort.  However, DOE's
proposal was not approved.  Thus, at least $100 million in
uncommitted funds originally appropriated for the Clean Coal
Technology Program could be rescinded.  If the Congress chose to cut
future budget authority by this amount, the following savings could
occur.  However, savings in outlays would occur beyond the 5-year
period, when budget authority is expected to be used. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                   100       0       0       0       0
Outlays                              0       0       0       0       0

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   100       0       0       0       0
Outlays                              0       0       0       0       0
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:42.1

Fossil Fuels:  Lessons Learned in DOE's Clean Coal Technology Program
(GAO/RCED-94-174, May 26, 1994). 

Fossil Fuels:  Improvements Needed in DOE's Clean Coal Technology
Program (GAO/RCED-92-17, October 30, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:42.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   DELAY PROCUREMENT OF NUCLEAR
   WASTE CONTAINERS DELAY
   PROCUREMENT OF NUCLEAR WASTE
   CONTAINERS
------------------------------------------------------ Appendix III:43

------------------------  --------------------------------------------
Authorizing committees    Energy and Natural Resources (Senate)
                          Resources (House)
                          Commerce (House)

Appropriations            Energy and Water Development (Senate and
subcommittees             House)

Primary agency            Department of Energy

Account                   Nuclear Waste Disposal Fund (89-5227)

Spending type             Discretionary

Budget subfunction        Energy supply

Framework theme           Reassess objectives
----------------------------------------------------------------------
In February 1994, DOE decided to develop by 1998 a system of nuclear
waste containers, called multipurpose containers, that would be used
initially to store and/or transport waste, and later to permanently
dispose of the waste in an underground geologic repository.  DOE
plans to spend $36 million on this initiative in fiscal year 1995 and
about $254 million in fiscal years 1996 through 1999. 

GAO is concerned that the repository will not be ready to receive the
waste for at least 15 more years and that DOE has no realistic
prospects for developing a federal facility to temporarily store the
waste.  Until the repository is ready, DOE intends to make the
multipurpose containers available to utilities that operate nuclear
power plants to store their waste. 

Developing the multipurpose container system over the next few years
so utilities can use the containers to store waste is premature for
two reasons.  First, the final design of the container system
depends, in part, on the results of ongoing studies of a candidate
repository site in Nevada.  Development and use of the container
system in advance of the results of these studies may require DOE to
eventually spend more money to rework the container system to make it
compatible with the actual repository environment.  Second, DOE's
preliminary position is that, in the absence of a repository or
federal storage facility, DOE is not obligated to begin accepting
waste from utilities.  Delaying the procurement of a container system
indefinitely could reduce future costs and produce the following
savings. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                    64      64      64      64       0
Outlays                             32      58      64      64      32

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    64      64      64      64       0
Outlays                             32      58      64      64      32
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:43.1

Nuclear Waste:  Comprehensive Review of the Disposal Program Is
Needed (GAO/RCED-94-299, September 27, 1994). 

Nuclear Waste:  Development of Casks for Transporting Spent Fuel
Needs Modification (GAO/RCED-92-56, March 13, 1992). 

Nuclear Waste:  Operation of Monitored Retrievable Storage Facility
Is Unlikely by 1998 (GAO/RCED-91-194, September 24, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:43.2

Victor S.  Rezendes, (202) 512-3841


   OPTION:
   PRIVATIZE URANIUM ENRICHMENT
   PROGRAM PRIVATIZE URANIUM
   ENRICHMENT PROGRAM
------------------------------------------------------ Appendix III:44

----------------------------------  ----------------------------------
Authorizing committees              Energy and Natural Resources
                                    (Senate) Commerce (House)

Primary agency                      U.S. Enrichment Corporation

Account                             U.S. Enrichment Corporation Fund
                                    (95-4045)

Spending type                       Direct

Budget subfunction                  Energy supply

Framework theme                     Reassess objectives
----------------------------------------------------------------------
For many years GAO supported legislation that would have created a
government corporation as an initial step toward the eventual
privatization of the Department of Energy's uranium enrichment
program.  The Energy Policy Act of 1992 established the United States
Enrichment Corporation which returns revenues less operating expenses
and a deposit to a working capital fund to the Treasury.  The act
also requires the corporation to develop by July 1995 a plan to
privatize the government's uranium business and requires GAO to
review the plan before it is implemented.  GAO is to determine if (1)
the sale of the corporation would result in any undue cost to the
government and (2) the revenues gained from the sale would represent
at least the net present value of the corporation. 

To illustrate potential savings from this option, if the United
States Enrichment Corporation were sold, CBO estimates that the
5-year savings that follow could be achieved.  According to CBO,
selling the Corporation would require about $150 million in expenses
in 1996 to prepare and implement the sale.  After sale, which CBO
assumes would be completed in fiscal year 1997, the government would
reduce net outlays for 1998 through 2000.  Based on Office of
Management and Budget and United States Enrichment Corporation
information, CBO estimates that asset sale receipts for selling the
Corporation would total about $1.5 billion over the 1996 through 1997
period.  Under current budget rules, however, receipts from asset
sales are not scorable for deficit reduction. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Assets sales
----------------------------------------------------------------------
Budget authority                   400   1,100       0       0       0
Outlays                            400   1,100       0       0       0
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     0       0       0       0       0
Outlays                           -150      -8      10      88     159
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:44.1

UEC Cash Flow Projection (GAO/RCED-92-292BR, September 17, 1992). 

Comments on Proposed Legislation to Restructure DOE's Uranium
Enrichment Program (GAO/T-RCED-92-14, October 29, 1991). 

Comments on H.R.  2480, The Uranium Enrichment Reorganization Act
(GAO/T-RCED-91-3, October 11, 1990). 

Comments on Smith Barney's Uranium Enrichment Analysis
(GAO/T-RCED-90-101, July 31, 1990). 


      GAO CONTACT
---------------------------------------------------- Appendix III:44.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   ENHANCE PROFITABILITY OF NAVAL
   PETROLEUM RESERVE-1 ENHANCE
   PROFITABILITY OF NAVAL
   PETROLEUM RESERVE-1
------------------------------------------------------ Appendix III:45

------------------------  --------------------------------------------
Authorizing committees    Armed Services (Senate)
                          National Security (House)

Appropriations            Interior and Related Agencies (Senate and
subcommittees             House)

Primary agency            Department of Energy

Account                   Energy Programs (89-0219)

Spending type             Discretionary

Budget subfunction        Energy supply

Framework theme           Improve efficiency
----------------------------------------------------------------------
The Naval Petroleum Reserve-1 (NPR-1) in Elk Hills, California, was
established in the early 1900s to ensure fuel supplies for the
military.  The reserves were largely inactive until the Congress
enacted new legislation in 1976 in response to the 1973 through 1974
Arab oil embargo.  The Naval Petroleum Reserves Production Act of
1976 (Public Law 94-258) changed NPR-1 from a strategic reserve for
the military to a source of oil for the U.S.  economy and revenue for
the U.S.  government.  The U.S.  government owns approximately 78
percent of this oil and gas field; Chevron U.S.A., Inc.  owns 22
percent.  DOE, as the administrator for the U.S.  government, is
authorized to develop and operate the field. 

Since NPR-1 has been primarily viewed as a source of revenue for the
U.S.  Treasury, GAO has issued a series of reports relating to issues
that need to be addressed to (1) protect the government's interests
in the event of the sale of the reserve, (2) increase its revenues by
improving its marketing techniques, and (3) enhance its profitability
by operating the field more along the line of a commercial oil and
gas operation. 

The Congress may wish to consider amending the NPR Production Act of
1976 to provide DOE with the flexibility to operate NPR-1 in a way
that maximizes the value of the asset rather than maximizing the
production of oil, as is currently the case. 

If the Congress and the Secretary of Energy adopt our
recommendations, we believe that over the next 30 years, hundreds of
millions of dollars could be generated for the U.S.  taxpayer.  For
example, to meet the production requirement, DOE injects gas to
enhance oil recovery.  According to preliminary studies by DOE,
Bechtel, and Chevron, if this requirement was eliminated, the gas
sold from two reservoirs could generate a profit of about $200
million in net present value to DOE. 

While CBO agrees that revenues might be generated over the long-term
from this option, CBO is not able to estimate year-to-year savings. 
The CBO baseline already anticipates some revenue from NPR-1. 
Estimating additional future revenues would depend on the specific
management changes adopted, the time needed for implementation, and
future market conditions. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:45.1

Naval Petroleum Reserve:  Opportunities Exist to Enhance Its
Profitability (GAO/RCED-95-65, January 12, 1995). 

Naval Petroleum Reserve:  Limited Opportunities Exist to Increase
Revenues From Oil Sales in California (GAO/RCED-94-126, May 24,
1994). 

Naval Petroleum Reserve No.  1:  Efforts to Sell the Reserve
(GAO/RCED-88-198, July 28, 1988). 


      GAO CONTACT
---------------------------------------------------- Appendix III:45.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   CONSOLIDATE STRATEGIC PETROLEUM
   RESERVECONSOLIDATE STRATEGIC
   PETROLEUM RESERVE
------------------------------------------------------ Appendix III:46

------------------------  --------------------------------------------
Authorizing committees    Energy and Natural Resources (Senate)
                          Commerce (House)

Appropriations            Interior and Related Agencies (Senate and
subcommittees             House)

Primary agency            Department of Energy

Accounts                  Strategic Petroleum Reserve (89-0218)
                          SPR Petroleum Account (89-0233)

Spending type             Discretionary

Budget subfunction        Defense-related activities
                          Emergency energy preparedness

Framework theme           Improve efficiency
----------------------------------------------------------------------
Because of budget constraints, very little crude oil has been
purchased for storage in the Strategic Petroleum Reserve (SPR) since
1993, and no additional purchases are planned for fiscal year 1995. 
Currently, the reserve has about 150 million barrels of excess
storage capacity spread out over four of the five storage sites. 
Consolidation of storage sites would result in lower operations and
maintenance costs if DOE maintains the amount of oil stored in the
reserve at its current level of about 600 million barrels.  DOE has
decided to close one site that has a serious problem with water
intrusion.  Additional savings could result from closing another site
in addition to the one with the water intrusion problem.  Reducing
the number of storage sites would reduce the amount of oil that could
be withdrawn on a daily basis. 

Savings for this option would depend on the number of storage sites
closed and the associated transfer costs.  Preliminary estimates have
been calculated by a DOE contractor for several alternatives, with
varying time frames for potential savings.  The estimated net cost
savings from decommissioning and mothballing specific storage sites
and transferring the oil to the remaining sites range from about $105
million to about $394 million after a 20-year period, depending on
the consolidation alternative selected and whether the sites are
reactivated. 

To illustrate the potential savings that could be achieved from this
option, two sites could be mothballed and not reopened.  According to
CBO, if DOE was required to sell a sufficient amount of existing oil
stocks to pay for the consolidation, no net transport and handling
costs for shutting down two facilities and moving oil elsewhere would
occur.  This scenario would require asset sale receipts (selling of
oil stocks) to pay for the consolidation costs.  As shown in the
table that follows, paying for such costs with receipts would then
yield net operations savings of about $15 million to $25 million per
year beginning in fiscal year 1999. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                     0       0       0      15      25
Outlays                              0       0       0       0      12

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     0       0       0      17      28
Outlays                              0       0       0       0      11
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:46.1

Energy Policy:  Ranking Options to Improve the Readiness of and
Expand the Strategic Petroleum Reserve (GAO/RCED-94-259, August 18,
1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:46.2

Victor S.  Rezendes, (202) 512-3841



   300 NATURAL RESOURCES AND
   ENVIRONMENT
------------------------------------------------------ Appendix III:47

  -- Federal land policies

  -- Collaborative federal land management approach

  -- Federal timber sales

  -- Conservation reserve program contracts

  -- Charge fair market value for natural resources

  -- Communication site fees

  -- Recreation fees at federal sites

  -- Hardrock mining royalties

  -- Natural resources revenue sharing

  -- Changing how federal needs for helium are met

  -- Federal water policies

  -- Water transfers

  -- Pollution fees and taxes

  -- Hazardous waste cleanup cost recovery

  -- Nuclear waste disposal fees



   OPTION:
   FEDERAL LAND POLICIES FEDERAL
   LAND POLICIES
------------------------------------------------------ Appendix III:48

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Energy and Natural Resources (Senate)
                          Agriculture (House)
                          Resources (House)
                          Transportation and Infrastructure (House)

Primary agencies          Department of the Interior
                          Department of Agriculture

Spending type             Direct

Framework theme           Improve efficiency
----------------------------------------------------------------------
The federal government owns and manages more than 700 million
acres--nearly one-third of the U.S.  landmass.  For many years, these
lands have been sold or otherwise made available for a variety of
purposes to private citizens, corporations, and state and local
governments.  In many cases, the rate of return received by the
government for the sale or use of these valuable natural resources
has fallen far below reasonable market-based levels. 

This option has two components:  increased fees for patenting
hardrock mining claims and higher fees for concessionaires operating
on federal lands.  Descriptions of each component follow. 


      INCREASED FEES FOR PATENTING
      HARDROCK MINING CLAIMS
---------------------------------------------------- Appendix III:48.1

The Mining Law of 1872 allows holders of economically minable claims
to obtain all rights and interests to both the land and the minerals
by patenting them for $2.50 or $5.00 an acre--an amount that
approximated the fair market value for western grazing land and
farmland in 1872.  Over the last 123 years, the federal government
has sold about 3.2 million acres of public lands, or an area about
the size of Connecticut, under this patent provision.  As a result,
some patent holders have reaped huge profits at the government's
expense.  At the time of GAO's 1989 study, 265 patent applications
were pending for more than 80,000 acres of public land.  At just 12
of these sites, if all the land applied for was patented, the
government would have received about $16,000 for land appraised in
1988 at between $14.4 million and $47.1 million. 

Both the House-passed version (H.R.  322) and the Senate-passed
version (S.  775) of hardrock mining law reform eliminated the
patenting of federal land, and the fiscal year 1995 appropriations
bill for the Department of the Interior and related agencies (H.R. 
4602) includes a 1-year moratorium on new mining patent applications,
including about 180 that are pending. 


      HIGHER FEES FOR
      CONCESSIONAIRES OPERATING ON
      FEDERAL LANDS
---------------------------------------------------- Appendix III:48.2

The federal government enters into agreements with concessionaires to
serve as the principal operators of parks, forests, and other
recreation areas.  In 1991, GAO reported that concessionaires
generated about
$1.4 billion in gross revenues and paid the government about $35
million in concession fees--an average return to the government of
about 2 percent.  Interior's follow-on report to the Vice President's
National Performance Review concluded that receipts from concession
franchise fees must be actively pursued by the National Park Service,
estimating that substantial revenue could be generated by promoting
competition, expediting contract renegotiations, and boosting the
government's return.  Legislation to reform concession management
overwhelmingly passed both houses during the 103rd Congress. 
However, a compromise could not be reached and the legislation did
not pass before the Congress adjourned.  However, concession
legislation will likely be one of five key park and recreation bills
the House Committee on Resources will address. 

CBO cannot develop a 5-year estimate of additional receipts due to
increased fees for patenting hardrock mining claims at this time. 
The difficulties of estimating the commercial value of holdings,
combined with the lack of essential data on those holdings, makes
estimating savings difficult. 

CBO also cannot develop a 5-year estimate of additional receipts from
higher fees for concessionaires operating on federal land at this
time.  Any increase in the average rate of return to the government
from concessionaire revenue would depend on future market
competition, contract renegotiations, and the specific management
changes adopted by the Congress. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:48.3


         HARDROCK MINING PATENTS
-------------------------------------------------- Appendix III:48.3.1

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Federal Land Management:  The Mining Law of 1872 Needs Revision
(GAO/RCED-89-72, March 10, 1989). 


         CONCESSIONAIRES OPERATING
         ON FEDERAL LANDS
-------------------------------------------------- Appendix III:48.3.2

Federal Lands:  Little Progress Made in Improving Oversight of
Concessionaires (GAO/T-RCED-93-42, May 27, 1993). 

Forest Service:  Little Assurance That Fair Market Value Fees Are
Collected From Ski Areas (GAO/RCED-93-107, April 16, 1993). 

Federal Lands:  Improvements Needed in Managing Concessionaires
(GAO/RCED-91-163, June 11, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:48.4

James Duffus, III (202) 512-7756



   OPTION:
   COLLABORATIVE FEDERAL LAND
   MANAGEMENT APPROACH
   COLLABORATIVE FEDERAL LAND
   MANAGEMENT APPROACH
------------------------------------------------------ Appendix III:49

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Energy and Natural Resources (Senate)
                          Agriculture (House)
                          Resources (House)

Appropriations            Interior and Related Agencies (Senate and
subcommittees             House)

Primary agencies          Department of the Interior
                          Department of Agriculture

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Conservation and land management

Framework theme           Improve efficiency
----------------------------------------------------------------------
As a result of the National Performance Review recommendations, the
four primary federal land management agencies--the National Park
Service, Bureau of Land Management (BLM), and Fish and Wildlife
Service within Interior and the Forest Service within
Agriculture--have prepared or are preparing a streamlining plan that
would show how they would reduce and restructure its workforce. 
However, by looking beyond existing jurisdictional boundaries, a
collaborative federal approach to land management has the potential
to achieve additional efficiencies by refocusing, combining, or
eliminating certain missions, programs, activities, or field
locations. 

Through the years, there have been several attempts to have agencies
collaborate in managing federal land.  These include (1)
consolidating BLM's and the Forest Service's responsibilities for
managing adjacent lands in western Oregon and Washington to eliminate
280 permanent positions at an estimated annual savings of $10.3
million, (2) the potential for eliminating 2 to 4 Forest Service
regions, about 40 forest supervisor offices, and 70 district offices,
estimated in 1992 to save between $3.5 million and $15.2 million over
5 years and between $82 million and $95.7 million over 10 years, and
(3) using shared resources such as a Forest Service supervisor
overseeing both Forest Service and BLM employees in Oregon. 

CBO cannot develop a 5-year savings estimate at this time. 
Estimating savings due to sharing resources between the Forest
Service and BLM can be difficult.  Savings would depend on the extent
of the work force restructuring and implementation plan. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:49.1

Forestry Functions:  Unresolved Issues Affect Forest Service and BLM
Organizations in Western Oregon (GAO/RCED-94-124, May 17, 1994). 

Forest Service Management:  Issues to Be Considered in Developing a
New Stewardship Strategy (GAO/T-RCED-94-116, February 1, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:49.2

James Duffus, III (202) 512-7756



   OPTION:
   FEDERAL TIMBER SALES FEDERAL
   TIMBER SALES
------------------------------------------------------ Appendix III:50

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Agriculture (House)

Appropriations            Interior and Related Agencies (Senate and
subcommittees             House)

Primary agency            Department of Agriculture

Account                   National Forest System (12-1106)
                          National Forest Service Receipts (12-9990)

Spending type             Discretionary

Budget subfunction        Conservation and land management

Framework theme           Improve efficiency
----------------------------------------------------------------------
USDA's Forest Service does not always recover its costs on sales of
timber, resulting in below-cost sales.  Currently, the Service
receives most of its operating funds from receipts from timber sales
and from appropriated funds linked to primarily timber management and
harvest.  Thus, in every national forest, even in those where timber
harvesting is uneconomic and other activities and uses are more
valuable, forest managers are overwhelmingly dependent on timber
sales for funding. 

GAO estimated that in fiscal year 1990, under the most conservative
definition of costs, $35.6 million in Forest Service preparation and
administration expenses went unrecovered.  GAO's estimates ranged as
high as $112.2 million when all operating costs and payments to
states were considered. 

The Congress may wish to cease all below-cost federal timber sales. 
For example, all future timber sales could be eliminated in three of
the Forest Service's nine regions where, on average over the last
decade, cash expenditures have exceeded cash receipts but would also
reduce Forest Service outlays for timber management, reforestation,
construction of logging roads, and other program costs.  CBO
estimates that the following net 5-year savings in federal outlays
could be achieved. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                    20      35      50      60      80
Outlays                             15      30      45      55      75

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    20      35      50      60      80
Outlays                             15      30      45      55      75
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:50.1

Forest Service Management:  Issues to Be Considered in Developing a
New Stewardship Strategy (GAO/T-RCED-94-116, February 1, 1994). 

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Comments on Below-Cost Timber Bills (GAO/RCED-92-160R, April 1,
1992). 

Forest Service Needs to Improve Efforts to Reduce Below-Cost Timber
Sales (GAO/T-RCED-91-43, April 25, 1991). 

Forest Service Needs to Improve Efforts to Protect the Government's
Financial Interest and Reduce Below-Cost Timber Sales
(GAO/T-RCED-91-42, April 24, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:50.2

James Duffus, III (202) 512-7756



   OPTION:
   CONSERVATION RESERVE PROGRAM
   CONTRACTSCONSERVATION RESERVE
   PROGRAM CONTRACTS
------------------------------------------------------ Appendix III:51

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Agriculture (House)

Primary agency            Department of Agriculture

Account                   Conservation Reserve Program (12-3319)

Spending type             Direct

Budget subfunction        Conservation and land management

Framework theme           Improve efficiency
----------------------------------------------------------------------
The Conservation Reserve Program (CRP) was mandated by the Food
Security Act of 1985 to help farmers control soil erosion on
environmentally sensitive cropland, decrease production of surplus
agricultural commodities, and support farmers' income.  To implement
CRP, USDA offered 10- to 15-year contracts for rental payments to
farmers who agreed to replace cropland with a grass cover or other
conserving use.  CRP contracts begin to expire in 1996.  Between
fiscal years 1996 through 2003, these contracts commit the government
to pay $6.1 billion in annual rental payments. 

From its inception through 1992, about 36.5 million acres have been
enrolled.  For fiscal year 1995, the government's annual rental
payments to farmers are estimated to be $1.7 billion.  Although
enrolling acreage in CRP instead of annual commodity programs reduces
costs in USDA's annual price and income support programs, USDA has
estimated that the CRP has a net government cost between $2 billion
and $6.6 billion over the life of the program. 

Since 1985, several conditions have emerged that may warrant
modifying CRP contracts to provide farmers more flexibility to use
their CRP land for new crop and conservation opportunities.  A
favorable climate for CRP reform now exists due to a general
improvement in the farm economy since the 1980s, potential new market
growth arising from the North American Free Trade Agreement and the
General Agreement on Tariffs and Trade, and the application of more
sustainable practices of the conservation compliance program.  Under
these new conditions, modifying CRP contracts could release suitable
acres for the development of new conservation cropping practices. 

There are numerous options to modify CRP contracts to adjust to new
conditions.  Two options include (1) allowing farmers to terminate
contracts without incurring financial penalty and (2) permitting
conservation-compatible economic uses on their CRP acres, such as
haying, grazing, and biomass production.  Budget savings under the
first option would depend on assumptions concerning when and how many
farmers participate and the extent to which these farmers participate
in other USDA price and income support programs.  Consistent with
this option, in December 1994, the Secretary of Agriculture announced
that USDA will consider requests from farmers to be released from
their CRP contracts or to reduce the acreage subject to it.  Under
the second option, the contract holder would receive a reduced rental
payment in return for the ability to generate revenues on their CRP
land. 

Under both options, there are also nonbudget considerations.  If
farmers terminate their CRP contracts early to return to crop
production, it will be necessary to develop alternative means of
sustaining the environmental benefits that have been achieved through
CRP.  If farmers are permitted to return some of their CRP acres to
uses such as haying and grazing, there could be a significant
economic impact on existing livestock producers. 

CBO cannot develop a 5-year savings estimate for the first component
of this option--early termination of CRP contracts--at this time. 
Savings would depend on the farmer participation and potential
interactions with other agricultural programs. 

To illustrate the potential savings under the second component of
this option, permitting conservation-compatible economic uses on CRP
acres, farmers could be allowed to use some of the land in the CRP
for haying or grazing in exchange for a fee or a reduction in other
government payments.  The per acre charge would be set according to
local market rental rates for haying or grazing.  CBO estimates that
federal outlays would thus be reduced by an estimated $453 million
over the 1996 through 2000 period. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Budget authority                    80      92      89     100      91
Outlays                             80      92      89     100      91
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:51.1

Conservation Reserve Program:  Alternatives Are Available for
Managing Environmentally Sensitive Cropland (GAO/RCED-95-42, in
draft, expected March 1995). 

Conservation Reserve Program:  Cost-Effectiveness Is Uncertain
(GAO/RCED-93-132, March 26, 1993). 

Conservation Reserve Program:  Determining Program's Effects on
Production Depends on Assumptions (GAO/RCED-90-201, July 25, 1990). 

Farm Programs:  Conservation Reserve Program Could Be Less Costly and
More Effective (GAO/RCED-90-13, November 15, 1989). 


      GAO CONTACT
---------------------------------------------------- Appendix III:51.2

John W.  Harman, (202) 512-5138



   OPTION:
   CHARGE FAIR MARKET VALUE FOR
   NATURAL RESOURCESCHARGE FAIR
   MARKET VALUE FOR NATURAL
   RESOURCES
------------------------------------------------------ Appendix III:52

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Energy and Natural Resources (Senate)
                          Agriculture (House)
                          Resources (House)

Primary agencies          Department of Agriculture
                          Department of the Interior

Spending type             Direct

Framework theme           Improve efficiency
----------------------------------------------------------------------
Market-based incentives may provide opportunities to encourage
ecologically and economically sound use of the nation's natural
resources.  For example, some believe that forest managers should be
rewarded for making money and protecting the environment.  They have
suggested that forest managers be allowed to charge fair market value
for all of the resources within their land units and that each land
unit receive funds from the net receipts it earned the previous year. 
While this approach would require specific statutory authority,
legislative precedent exists for returning revenues to the agencies
or land units carrying out the activities or programs. 

According to the World Resources Institute, with approximately 250
million visitor days annually, at a conservative value of about $10
per day of recreational use, the national forests provide
recreational services worth $2.5 billion per year compared to the
gross value of timber sales of $800 million in 1991.  The Forest
Service estimates that if it collected the full value of the
recreational services it provides, annual revenues would reach $5
billion.  At the same time, fees would sensitize consumers to the
value of the services the forests provide. 

CBO cannot develop a 5-year estimate for this option at this time. 
Future revenues would depend on the fee structure, method of
implementation, and market reaction. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:52.1

Forest Service Management:  Issues to Be Considered in Developing a
New Stewardship Strategy (GAO/T-RCED-94-116, February 1, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:52.2

James Duffus, III (202) 512-7756



   OPTION:
   COMMUNICATION SITE
   FEESCOMMUNICATION SITE FEES
------------------------------------------------------ Appendix III:53

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Energy and Natural Resources (Senate)
                          Agriculture (House)
                          Resources (House)

Primary agencies          Department of Agriculture
                          Department of the Interior

Spending type             Direct

Framework theme           Improve efficiency
----------------------------------------------------------------------
In many cases, current annual fees for using communications sites on
lands administered by Agriculture's Forest Service and Interior's
Bureau of Land Management (BLM) are significantly below fair market
value.  For example, the annual fees paid by television broadcasters
at a large Forest Service communications site near Los Angeles,
California, are only about 2 to 15 percent of fees based on the
site's appraised fair market value. 

Forest Service and BLM officials estimate that charging fees based on
fair market value would increase total federal revenues by over 500
percent--from about $4 million annually to about $23 million
annually.  CBO cannot develop a 5-year estimate for this option at
this time.  Additional revenues gained by charging fair market value
would depend on the fee structure adopted, implementation, and future
market conditions. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:53.1

Federal Lands:  Fees for Communications Sites Are Below Fair Market
Value (GAO/RCED-94-248, July 12, 1994). 

Federal Lands:  Fees for Communications Sites Are Below Fair Market
Value (GAO/T-RCED-94-262, July 12, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:53.2

James Duffus, III (202) 512-7756



   OPTION:
   RECREATION FEES AT FEDERAL
   SITES RECREATION FEES AT
   FEDERAL SITES
------------------------------------------------------ Appendix III:54

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Energy and Natural Resources (Senate)
                          Agriculture (House)
                          Resources (House)
                          Transportation and Infrastructure (House)

Primary agencies          Department of the Interior
                          Department of Agriculture
                          Department of the Army

Spending type             Direct

Framework theme           Improve efficiency
----------------------------------------------------------------------
Improved pricing of user fees at recreational sites could help defray
direct costs to the government, shift the cost burden from the
taxpayers to the beneficiaries of the services, and alleviate
overcrowding at many sites.  Entrance and user fees are charged at
some sites, but the fees generally cover only a small portion of the
costs for services provided to visitors.  For example, in 1993,
Interior's National Park Service spent an estimated $230 million on
services for visitors but recovered only an estimated $90 million in
fees.  Interior's Office of Inspector General reported that the
Service did not collect as much as anticipated because the fees
collected were not returned to the individual parks.  This led to a
lack of incentive, which, together with staffing and funding
shortfalls, resulted in the Service not collecting an estimated $105
million during fiscal year 1991. 

Interior's follow-on report to the Vice President's National
Performance Review concluded that reform in the nature, level, and
collection of fees in national parks could generate substantial
revenues.  The administration's fiscal year 1995 budget sought
expanded authority to increase park entrance and other recreation
user fees.  Legislation to increase entrance fees and to give the
Secretary of the Interior more discretion to set entrance,
recreation, and special-use fees was introduced in both the House
(H.R.  4533) and the Senate (S.  2121).  However, neither of these
bills passed before the 103rd Congress adjourned. 

Increasing such fees and disallowing their use for increased park
spending would yield net new receipts over the fiscal year 1996
through 2000 period as shown in the following table.  Any spending
increases resulting from increased fees would be subject to new
authorizing legislation. 



                           Five-Year Savings

                          (Dollar in millions)

                                FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Added receipts                  175     172     181     188     196
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:54.1

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Forest Service:  Difficult Choices Face the Future of the Recreation
Program (GAO/RCED-91-115, April 15, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:54.2

James Duffus, III (202) 512-7756



   OPTION:
   HARDROCK MINING
   ROYALTIESHARDROCK MINING
   ROYALTIES
------------------------------------------------------ Appendix III:55

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Energy and Natural Resources (Senate)
                          Agriculture (House)
                          Resources (House)

Primary agencies          Department of the Interior
                          Department of Agriculture

Spending type             Direct

Framework theme           Improve efficiency
----------------------------------------------------------------------
The government receives no financial compensation for hardrock
minerals extracted from federal lands.  In 1990, hardrock minerals
worth at least $1.2 billion were extracted from federal lands, while
known, economically recoverable reserves of hardrock minerals
remaining on federal lands were valued at $64.9 billion. 

The Congress may wish to consider receiving financial compensation
for hardrock minerals extracted from federal lands.  The
administration's fiscal year 1995 budget assumed fee levels and
reforms consistent with H.R.  322, the House-passed version of
hardrock mining law reform.  This bill would have charged an
8-percent royalty on gross profits on existing and future claims. 
Conversely, the Senate-passed version (S.  775) would have charged a
2-percent royalty on net (point of extraction).  The lengthy 2-year
effort to overhaul the nation's 122-year old mining policy ended on
September 29, 1994, when House and Senate conferees acknowledged that
they could not reconcile their differences.  If the Congress adopted
fee levels and reforms consistent with H.R.  322, the House-passed
version, CBO estimates that the following receipts would be gained. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Added receipts                      70      70      70      70      70
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:55.1

Mineral Royalties:  Royalties in the Western States and in Major
Mineral-Producing Countries (GAO/RCED-93-109, March 29, 1993). 

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Mineral Resources:  Value of Hardrock Minerals Extracted From and
Remaining on Federal Lands (GAO/RCED-92-192, August 24, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:55.2

James Duffus, III (202) 512-7756



   OPTION:
   NATURAL RESOURCES REVENUE
   SHARINGNATURAL RESOURCES
   REVENUE SHARING
------------------------------------------------------ Appendix III:56

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Energy and Natural Resources (Senate)
                          Agriculture (House)
                          Resources (House)

Appropriations            Agriculture, Rural Development, and Related
subcommittees             Agencies (Senate)
                          Interior and Related Agencies (Senate)
                          Interior (House)
                          Agriculture, Rural Development, Food and
                          Drug Administration, and Related Agencies
                          (House)

Primary agencies          Department of the Interior
                          Department of Agriculture

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Conservation and land management

Framework theme           Improve efficiency
----------------------------------------------------------------------
The federal government collects fees from private interests for the
sale or use of natural resources on federal lands.  A percentage of
these fees is, under certain conditions, allocated to states and
counties as an offset for tax revenues not received from the federal
lands. 

Federal land-managing agencies typically do not deduct the full costs
of their programs from the gross receipts that the programs generate
before sharing the receipts with states and counties.  Sharing
federal receipts on a gross, rather than a net, basis often reduces
the federal government's share of the revenues to a level below its
costs. 

According to CBO, changing revenue-sharing from a gross-receipt to a
net-receipt basis would reduce net federal outlays and produce the
savings shown as follows. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                   170     175     180     190     195
Outlays                            135     175     180     190     195

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   170     175     180     190     195
Outlays                            135     175     180     190     195
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:56.1

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Rangeland Management:  Current Formula Keeps Grazing Fees Low
(GAO/RCED-91-185BR, June 11, 1991). 

Forest Service Needs to Improve Efforts to Reduce Below-Cost Timber
Sales (GAO/T-RCED-91-43, April 25, 1991). 

Mineral Revenues:  Collection and Distribution of Revenues From
Acquired Lands (GAO/RCED-90-7, August 2, 1990). 


      GAO CONTACT
---------------------------------------------------- Appendix III:56.2

James Duffus, III (202) 512-7756



   OPTION:
   CHANGING HOW FEDERAL NEEDS FOR
   HELIUM ARE METCHANGING HOW
   FEDERAL NEEDS FOR HELIUM ARE
   MET
------------------------------------------------------ Appendix III:57

------------------------  --------------------------------------------
Authorizing committees    Energy and Natural Resources (Senate)
                          Resources (House)

Appropriations            Interior and Related Agencies (Senate and
subcommittees             House)

Primary agency            Department of the Interior

Accounts                  Helium fund (14-4053)

Spending type             Direct

Budget subfunction        Other natural resources

Framework theme           Reassess objectives
----------------------------------------------------------------------
The Helium Act of 1960 was passed in response to growing federal
needs for helium.  The objectives of the 1960 act are to (1) conserve
helium for future use, (2) provide a sustained supply of helium
sufficient for essential government activities, and (3) foster and
encourage individual enterprise in the development and distribution
of helium.  The act required that federal agencies purchase their
major requirements for helium from Interior's Bureau of Mines. 

The 1960 act required that the program's net capital and retained
earnings, plus subsequent program borrowing from the Treasury for
purchases of crude helium, be established as debt in the Helium Fund. 
The act required that the helium program debt, plus compound
interest, be repaid to the Treasury by 1995 from helium sales
revenues.  Because the Bureau did not set its sale price to federal
agencies high enough to recover the initial program costs and
subsequent interest the Helium Fund remains in debt. 

As GAO reports document, many conditions have changed since the
Helium Act of 1960 was passed and we believe the act's objectives
should be reassessed.  In 1960, the Bureau was the sole producer of
refined helium, but now a helium private industry supplies almost 90
percent of refined U.S.  helium and could meet federal needs for
helium if there were no Bureau program.  Also, in 1960 there was
concern that helium conservation was necessary to ensure that federal
needs could be met, but now the Bureau has enough helium in storage
to meet federal needs until at least 2070.  Because these changes
have affected the act's objectives and the Bureau's ability to repay
the helium debt, GAO has recommended that the Congress (1) reassess
how to meet current and foreseeable federal needs for helium and (2)
cancel the program debt because canceling the debt would not
adversely affect the federal budget.  Any decision on how to meet
federal needs for helium should consider not only the effects of the
changes that have occurred since 1960, but also (1) the
interrelationship of the act's objectives, recognizing that a change
to one could affect another, and (2) the decision's effect on the
federal budget and the total cost of supplying helium to the U.S. 
economy. 

The administration's fiscal year 1996 budget proposed to privatize
the helium program by (1) selling or leasing the Bureau of Mines
production facility and (2) selling the crude helium reserve. 
However, under the Budget Enforcement Act of 1990 (BEA) rules,
proceeds from asset sales cannot be used to offset discretionary
spending or new spending from PAYGO-controlled legislation. 
Recognizing this, the administration has proposed to amend the rules. 

Our option, like H.R.  3967 which was introduced during the 103rd
Congress, is scored under current scorekeeping rules.  Under these
rules the following savings could be achieved if the Congress chose
to prohibit the Bureau of Mines from refining crude helium and
selling refined helium.  Instead, the Bureau would sell crude helium. 
Under this alternative, the federal government would maintain a small
helium reserve inventory, and federal agencies would be required to
buy refined helium from private industry sources.  Savings from the
sale of facilities and equipment no longer needed to store helium
would yield assets sales of $1 million.  Both sets of savings are
shown in the tables that follow. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Assets sales
----------------------------------------------------------------------
Budget authority                     0       1       0       0       0
Outlays                              0       1       0       0       0
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     0       0       0       0       0
Outlays                              0       4       7       7       8
----------------------------------------------------------------------
Source:  Congressional Budget Office. 

Note:  The CBO estimates do not reflect the effects of cancelling the
program debt because cancelling the debt would not adversely affect
the federal debt. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:57.1

Mineral Resources:  H.R.  3967--A Bill to Change How Federal Needs
for Refined Helium Are Met (GAO/T-RCED-94-183, April 19, 1994). 

Mineral Resources:  Meeting Federal Needs for Helium
(GAO/T-RCED-93-44, May 20, 1993). 

Mineral Resources:  Meeting Federal Needs for Helium (GAO/RCED-93-1,
October 30, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:57.2

James Duffus, III (202) 512-7756



   OPTION:
   FEDERAL WATER POLICIESFEDERAL
   WATER POLICIES
------------------------------------------------------ Appendix III:58

------------------------  --------------------------------------------
Authorizing committees    Energy and Natural Resources (Senate)
                          Resources (House)

Primary agency            Department of the Interior

Accounts                  Multiple

Spending type             Direct

Budget subfunction        Water resources

Framework theme           Improve efficiency
----------------------------------------------------------------------
This broad option has four components:  increased fees for subsidized
federal water to large farms, subsidized water to produce subsidized
crops, repayment of water project construction costs, and federal
water subsidies.  Descriptions of each of the components follow. 


      INCREASED FEES FOR
      SUBSIDIZED FEDERAL WATER TO
      LARGE FARMS
---------------------------------------------------- Appendix III:58.1

Under the Reclamation Reform Act of 1982, as amended, some farmers
have reorganized large farming operations into multiple, smaller
landholdings to be eligible to receive additional federally
subsidized irrigation water.  The act limits to 960 the maximum
number of owned or leased acres that individuals or legal entities
(such as partnerships or corporations) can irrigate with federal
water at rates that exclude interest on the government's investment
in the irrigation component of its water resource projects.  However,
due to the vague definition of the term "farm," the flow of federally
subsidized water to land holdings above the 960 acre-limit has not
been stopped, and the federal government is not collecting revenues
which it is entitled to receive under the act. 


      SUBSIDIZED WATER TO PRODUCE
      SUBSIDIZED CROPS
---------------------------------------------------- Appendix III:58.2

The use of federally subsidized water to produce federally subsidized
crops results in the government paying double subsidies.  According
to the Department of the Interior, between 1976 and 1985, an average
of 38 percent of the acreage served by the Bureau of Reclamation
nationwide was used to produce crops that are also eligible for
subsidies through the Department of Agriculture's commodity programs. 
Estimates of the cost of federal water subsidies vary but are
substantial.  Interior estimated that irrigation subsidies used to
produce subsidized crops throughout the 17 western states totaled
$203 million in 1986; the Bureau of Reclamation placed the figure at
$830 million. 


      REPAYMENT OF WATER PROJECT
      CONSTRUCTION COSTS
---------------------------------------------------- Appendix III:58.3

By the end of fiscal year 1990, after receiving water from the
Central Valley Project (CVP) in California's Central Valley Basin for
over 40 years, irrigators had repaid only $10 million, or 1 percent,
of the over $1 billion in construction costs that they owe the
federal government.  In 1986, the Congress required irrigators and
other users to pay their share of the federal investment in the CVP
by 2030.  While construction costs may ultimately be recovered by
2030, the dollars that eventually flow to the Treasury could be worth
much less than if they had been repaid sooner.  The Congress may wish
to accelerate the repayment schedule. 


      FEDERAL WATER SUBSIDIES
---------------------------------------------------- Appendix III:58.4

Estimates of the current cost of federal water subsidies are
substantial.  For example, the Department of the Interior reported
that irrigation subsidies throughout the 17 western states totaled
$534 million in 1986, while the Bureau of Reclamation placed the cost
at $2.2 billion.  Estimates differ because of different definitions
of an irrigation subsidy, different interest rates used to calculate
the subsidies, and different methods for compounding unpaid interest. 
Much has changed in the West since the subsidies were established in
1902, and it is not known whether the subsidies are still warranted
or whether irrigators could pay more of the cost of the water
delivered. 

The savings in the table below would be achieved if the Congress
required farms of more than 960 acres to pay the full cost of federal
irrigation water and allowed those who grow surplus agricultural
commodities to receive either crop support payments or federally
subsidized water in the CVP, but not both.  A 5-year estimate of
additional receipts for the repayment of water project construction
costs could not be made because savings fall beyond the 5-year period
CBO uses.  Savings from changing federal water subsidies cannot be
developed at this time because savings would depend on the extent to
which irrigators could be made to pay more of these costs. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    15      15      20      30      30
Outlays                             15      15      20      30      30
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:58.5


         SUBSIDIZED FEDERAL WATER
         TO LARGE FARMS
-------------------------------------------------- Appendix III:58.5.1

Water Subsidies:  The Westhaven Trust Reinforces the Need to Change
Reclamation Law (GAO/RCED-90-198, June 5, 1990). 

Water Subsidies:  Basic Changes Needed to Avoid Abuse of the 960-Acre
Limit (GAO/RCED-90-6, October 12, 1989). 


         SUBSIDIZED WATER TO
         PRODUCE SUBSIDIZED CROPS
-------------------------------------------------- Appendix III:58.5.2

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 

Reclamation Law:  Changes Needed Before Water Service Contracts Are
Renewed (GAO/RCED-91-175, August 22, 1991). 


         REPAYMENT OF WATER
         PROJECT CONSTRUCTION
         COSTS
-------------------------------------------------- Appendix III:58.5.3

Water Subsidies:  Impact of Higher Irrigation Rates on Central Valley
Project Farmers, (GAO/RCED-94-8, April 19, 1994). 

Reclamation Law:  Changes Needed Before Water Service Contracts Are
Renewed, (GAO/RCED-91-175, August 22, 1991). 


         FEDERAL WATER SUBSIDIES
-------------------------------------------------- Appendix III:58.5.4

Water Subsidies:  Impact of Higher Irrigation Rates on Central Valley
Project Farmers (GAO/RCED-94-8, April 19, 1994). 

Natural Resources Management Issues (GAO/OCG-93-17TR, December 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:58.6

James Duffus, III (202) 512-7756



   OPTION:
   WATER TRANSFERSWATER TRANSFERS
------------------------------------------------------ Appendix III:59

------------------------  --------------------------------------------
Authorizing committees    Energy and Natural Resources (Senate)
                          Resources (House)

Primary agency            Department of the Interior

Spending type             Direct

Framework theme           Improve efficiency
----------------------------------------------------------------------
Water transfers, in which rights to use water are bought and sold,
are a mechanism for relocating scarce water to new users by allowing
those who place the highest economic value on it to purchase it. 
Water transfers from irrigation to municipal and industrial uses can
increase federal revenues because municipal and industrial users pay
rates based on their full share of the project's construction cost
plus interest.  In contrast, many irrigators pay only a portion of
their share of the construction costs and are exempt from paying
interest.  However, increasing federal revenues will reduce the net
benefits to the buyers and sellers, thereby discouraging some
transfers.  Deciding how much the Bureau of Reclamation should charge
for transferred water involves balancing the increase in federal
revenues with retaining incentives for water transfers to occur. 

A 5-year estimate of additional receipts cannot be developed at this
time.  The difficulties of estimating the highest economic value of
water and which users are willing to pay that value inhibit
estimation. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:59.1

Water Markets:  Increasing Federal Revenues Through Water Transfers
(GAO/RCED-94-164, September 21, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:59.2

James Duffus, III (202) 512-7756



   OPTION:
   POLLUTION FEES AND
   TAXESPOLLUTION FEES AND TAXES
------------------------------------------------------ Appendix III:60

------------------------  --------------------------------------------
Authorizing committees    Finance (Senate)
                          Ways and Means (House)

Primary agency            Environmental Protection Agency

Spending type             Direct

Framework theme           Improve efficiency
----------------------------------------------------------------------
User fees, cost reimbursement mechanisms, and pollution taxes could
help defray the costs of administering environmental protection
programs, encourage pollution prevention, and generate significant
revenue.  Taxes on emissions of pollutants, and on the harmful
substances themselves, could supplement regulatory efforts to meet
the objectives of existing environmental laws.  Based on our audit
work GAO has identified several specific areas where fees and taxes
might be effective, including, but not limited to, (1) requiring
states to collect permit fees on industrial and municipal dischargers
to surface waters and (2) establishing a pollution tax on
dischargers, based on volume, toxicity, or both. 

Based on our work, an example of a pollution fee which the Congress
may wish to consider is an excise tax on toxic water pollutants. 
Savings below illustrate a tax on water pollution discharges whose
rate increases with the toxicity of the discharge, effective on
discharges of water pollutants made after December 31, 1995.  Rates
range from $0.2426 per pound for the least toxic pollutant to $63.40
per pound for the most toxic pollutant. 



                           Five-year Revenues

                         (Dollars in billions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Revenue gain                       0.4     0.6     0.6     0.6     0.6
----------------------------------------------------------------------
Source:  Joint Committee on Taxation. 

Note:  JCT provided its revenue estimates in billions of dollars. 



      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:60.1

Environmental Protection:  Implications of Using Pollution Taxes to
Supplement Regulation (GAO/RCED-93-13, February 17, 1993). 

Hazardous Waste:  Much Work Remains to Accelerate Facility Cleanups
(GAO/RCED-93-15, January 19, 1993). 

Drinking Water:  Widening Gap Between Needs and Available Resources
Threatens Vital EPA Program (GAO/RCED-92-184, July 6, 1992). 

Water Pollution:  Stronger Efforts Needed by EPA to Control Toxic
Water Pollution (GAO/RCED-91-154, July 19, 1991). 


      GAO CONTACT
---------------------------------------------------- Appendix III:60.2

Peter Guerrero, (202) 512-6111



   OPTION:
   HAZARDOUS WASTE CLEANUP COST
   RECOVERYHAZARDOUS WASTE CLEANUP
   COST RECOVERY
------------------------------------------------------ Appendix III:61

------------------------  --------------------------------------------
Authorizing committees    Environment and Public Works (Senate)
                          Commerce (House)
                          Transportation and Infrastructure (House)

Appropriations            VA, HUD, and Independent Agencies (Senate
subcommittees             and House)

Primary agency            Environmental Protection Agency

Account                   Hazardous Substance Superfund (20-8145)

Spending type             Discretionary

Budget subfunction        Pollution control and abatement

Framework theme           Improve efficiency
----------------------------------------------------------------------
GAO first reported on the need for a better managed superfund program
in 1989.  More recently GAO has found that the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA)
prevents the Environmental Protection Agency (EPA) from charging
polluters hundreds of millions of dollars in additional interest on
the cost EPA incurs to clean up Superfund sites by setting an
interest rate significantly lower than commercial rates.  The act
also fails to explicitly authorize EPA to recover indirect costs,
such as those for research and development.  If EPA had been allowed
to accrue interest at a commercial rate from the date funds were
expended, GAO estimates that $105 million in interest could have been
accrued in 1990 on the funds EPA expended in fiscal year 1989 alone. 
We also estimated that through fiscal year 1988, EPA did not collect
$800 million in indirect clean-up costs incurred from activities such
as administrative management, research and development on clean-up
approaches, and some enforcement, audit and legal services. 

The Congress should amend CERCLA to allow EPA to recover from
responsible parties more interest on the cost it incurs to clean up
Superfund sites and to explicitly authorize EPA to recover indirect
costs. 

Savings could not be estimated due to EPA's varying success in
collecting the full amount of current penalty and interest charges. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:61.1

Superfund:  EPA Has Opportunities to Increase Recoveries of Costs
(GAO/RCED-94-196, September 28, 1994). 

Superfund:  More Settlement Authority and EPA Cost Controls Could
Increase Cost Recovery (GAO/RCED-91-144, July 18, 1991). 

Superfund:  A More Vigorous and Better Managed Enforcement Program is
Needed (GAO/RCED-90-22, December 14, 1989). 


      GAO CONTACT
---------------------------------------------------- Appendix III:61.2

Peter Guerrero, (202) 512-6111



   OPTION:
   NUCLEAR WASTE DISPOSAL
   FEESNUCLEAR WASTE DISPOSAL FEES
------------------------------------------------------ Appendix III:62

------------------------  --------------------------------------------
Authorizing committees    Energy and Natural Resources (Senate)
                          Commerce (House)
                          Resources (House)

Primary agency            Department of Energy

Spending type             Direct

Framework theme           Improve efficiency
----------------------------------------------------------------------
Utilities pay a fee to the Nuclear Waste Fund to finance the
development of storage and permanent disposal facilities for
high-level radioactive wastes.  The amount of this fee has not
changed since 1983, making the fund susceptible to future budget
shortfalls.  To help ensure that sufficient revenues are collected to
cover increases in cost estimates caused by price inflation, the
Congress should amend the Nuclear Waste Policy Act of 1982 to direct
the Secretary of Energy to automatically adjust for inflation the
nuclear waste disposal fee that utilities pay into the Nuclear Waste
Fund.  If the fee were indexed to inflation, the following additional
receipts could be expected. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Added receipts                      19      40      64      86     110
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:62.1

Status of Actions to Improve DOE User-Fee Assessments
(GAO/RCED-92-165, June 10, 1992). 

Changes Needed in DOE User-Fee Assessments (GAO/T-RCED-91-52, May 8,
1991). 

Changes Needed in DOE User-Fee Assessments to Avoid Funding Shortfall
(GAO/RCED-90-65, June 7, 1990). 


      GAO CONTACT
---------------------------------------------------- Appendix III:62.2

Victor S.  Rezendes, (202) 512-3841



   350 AGRICULTURE
------------------------------------------------------ Appendix III:63

  -- U.S.  Department of Agriculture dairy price support program

  -- Milk marketing orders

  -- U.S.  Department of Agriculture crop price supports

  -- Farm lands eligible for deficiency payments

  -- Rice program

  -- Peanut program

  -- Reduce or eliminate funding for the Market Promotion Program

  -- Reduce funding for the Export Credit Guarantee Programs



   OPTION:
   U.S.  DEPARTMENT OF AGRICULTURE
   DAIRY PRICE SUPPORT PROGRAMU.S. 
   DEPARTMENT OF AGRICULTURE DAIRY
   PRICE SUPPORT PROGRAM
------------------------------------------------------ Appendix III:64

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Agriculture (House)

Primary agency            Department of Agriculture

Account                   Commodity Credit Corporation Fund (12-4336)

Spending type             Direct

Budget subfunction        Farm income stabilization

Framework theme           Reassess objectives
----------------------------------------------------------------------
To ensure long-term viability, the dairy industry will have to
increase its efforts to become more dependent on commercial
markets--particularly international markets.  A major factor that has
impeded the dairy industry's ability to more effectively expand and
compete in global markets has been the Price Support Program and the
Dairy Export Incentive Program, which encourages the production of
dairy products that do not always meet customers' requirements, and
often result in U.S.  market prices that exceed world prices.  For
example, the 1993 U.S.  market price for cheddar cheese was $1.28 per
pound, while the world price was $0.81 per pound.  The cost of dairy
support purchases was approximately $315 million in fiscal year 1993
at a support price of $10.10 per hundred-weight of milk equivalent,
which continues to be the support price today.  Furthermore, the
dairy program has influenced the U.S.  dairy industry to place more
emphasis on production rather than marketing. 

The Congress has taken steps to make the federal dairy program more
responsive to market forces, particularly by reducing the support
price.  However, a recent GAO report showed that U.S.  dairy prices
still exceed world prices, limiting the price competitiveness of U.S. 
dairy products in the world market.  To counteract this situation,
the Congress established the Dairy Export Incentive Program, which
subsidizes exports of dairy products and cost about $135 million in
fiscal year 1993. 

GAO has recommended making the dairy program more responsive to
market forces by tying the support price to the market, thereby
effectively reducing the support price.  USDA reported that it has
been estimated that the support price would have to be reduced to
between $6 and $7 per hundred-weight to achieve significant exports
of U.S.  dairy products.  GAO has also advocated that support prices
be lowered gradually to allow producers who have made production
decisions based on the program a period of time to adjust to the new
prices. 

To address these issues, the Congress may wish to reduce the dairy
support price by $0.80 annually over five years, beginning in fiscal
year 1995.  This would eliminate the need for the Dairy Export
Incentive Program and the producer assessments supporting the
program. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   120     263     289     257     252
Outlays                            120     263     289     257     252
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:64.1

Dairy Industry:  Potential for and Barriers to Market Development
(GAO/RCED-94-19, December 21, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:64.2

John W.  Harman, (202) 512-5138



   OPTION:
   MILK MARKETING ORDERSMILK
   MARKETING ORDERS
------------------------------------------------------ Appendix III:65

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Agriculture (House)

Primary agency            Department of Agriculture

Account                   Commodity Credit Corporation Fund (12-4336)

Spending type             Direct

Budget subfunction        Farm income stabilization

Framework theme           Reassess objectives
----------------------------------------------------------------------
The major objectives of federal dairy policies have been to ensure an
adequate supply of milk and to support dairy farmers' incomes.  Two
interrelated programs to accomplish these objectives are milk
marketing orders and price supports.  Milk is the only commodity with
both order pricing and price support programs. 

Marketing orders set minimum prices that must be paid for milk for
fluid use, based on the manufacturing grade price plus differentials
that are unique to each of the 38 federal milk marketing orders.  GAO
has reported that the premise for federal milk marketing orders is
outdated.  A need no longer exists to encourage and maintain a
locally produced supply of milk.  Milk is now produced in all regions
of the country, and technologies are available to transfer it, either
as fluid or in a form to be later reconstituted as fluid, should
local shortages develop. 

Given the change in underlying conditions for this program, the
Congress may wish to consider reducing the federal role in milk
pricing by taking actions such as phasing out the pricing provisions
of the milk marketing orders.  The probable effect of this change
would be reduced purchases under the federal price support program as
farmers cut production in response to reduced prices.  Eliminating
these provisions could also ultimately reduce the price of dairy
products to consumers. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   149     166     173     119      62
Outlays                            149     166     173     119      62
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:65.1

Milk Marketing Orders:  Options for Change (GAO/RCED-88-9, March 21,
1988). 


      GAO CONTACT
---------------------------------------------------- Appendix III:65.2

John W.  Harman, (202) 512-5138



   OPTION:
   U.S.  DEPARTMENT OF AGRICULTURE
   CROP PRICE SUPPORTSU.S. 
   DEPARTMENT OF AGRICULTURE CROP
   PRICE SUPPORTS
------------------------------------------------------ Appendix III:66

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Agriculture (House)

Primary agency            Department of Agriculture

Account                   Commodity Credit Corporation Fund (12-4336)

Spending type             Direct

Budget subfunction        Farm income stabilization

Framework theme           Redefine beneficiaries
----------------------------------------------------------------------
The Commodity Credit Corporation has supported the incomes of farmers
since the 1930s.  Concerned about large payments to farm operators
and the overall cost of federal farm programs, the Congress
established an annual limit on farm payments of $50,000 per person in
1970.  Persons are broadly defined to be individuals, members of
joint operations, or entities such as limited partnerships,
corporations, associations, trusts, and estates.  Payment limits
again became a significant issue in the mid-1980s when individuals
reorganized their farming operations to receive larger total federal
payments. 

In 1987, legislative amendments allowed a person to receive up to
$100,000 of farm payments per year.  These amendments, intended to
tighten the payment limit requirements and reduce program costs, have
had a very limited effect because

  -- farmers were allowed to reorganize their operations, within a
     specified time period, to avoid reductions in total payments;

  -- USDA required only 50 percent of a corporation's ownership to
     provide significant contributions of personal labor or active
     personal management to meet the requirement that the corporation
     be actively engaged in farming; and

  -- farmers were allowed to qualify for payments from up to three
     eligible entities. 

If the Congress wants to further tighten payment limits as a means to
reduce program costs, one option would be to limit payments to
$50,000 per individual and only provide benefits to individuals
actively engaged in farming.  This limit would apply whether the
payments are earned from the individual's own operations or are
attributed to them as owners in one or more entities. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    51      91     106     105     104
Outlays                             51      91     106     105     104
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:66.1

Agriculture Payments:  Number of Individuals Receiving 1990
Deficiency Payments and the Amounts (GAO/RCED-92-163FS, April 27,
1992). 

Agriculture Payments:  Effectiveness of Efforts to Reduce Farm
Payments Has Been Limited (GAO/RCED-92-2, December 5, 1991). 

Farm Payments:  Basic Changes Needed to Avoid Abuse of the $50,000
Payment Limit (GAO/RCED-87-176, July 20, 1987). 


      GAO CONTACT
---------------------------------------------------- Appendix III:66.2

John W.  Harman, (202) 512-5138



   OPTION:
   FARM LANDS ELIGIBLE FOR
   DEFICIENCY PAYMENTSFARM LANDS
   ELIGIBLE FOR DEFICIENCY
   PAYMENTS
------------------------------------------------------ Appendix III:67

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Agriculture (House)

Primary agency            Department of Agriculture

Account                   Commodity Credit Corporation Fund (12-4336)

Spending type             Direct

Budget subfunction        Farm income stabilization

Framework theme           Improve efficiency
----------------------------------------------------------------------
In the Food, Agriculture, Conservation, and Trade Act of 1990, the
Congress provided farmers with greater ability to respond to market
signals by allowing them to plant crops other than their designated
program crops on up to 25 percent of their base acres.  This
flexibility was one of the principal elements in the overall strategy
of the 1990 farm legislation aimed at improving U.S.  competitiveness
in the international agriculture market.  The Agricultural
Reconciliation Act of 1990 reduced government expenditures for
agriculture programs by providing for the elimination of income
support payments on 15 percent of base acres, even when the
designated program crops are planted on these acres.  Taken together,
these laws enacted provisions which are commonly called "flex acres."

GAO has reported on a number of options for increasing the use of
flex acres, all of which would require legislative change.  Options
include (1) increasing the number of normal flex acres ineligible for
deficiency payments beyond the current 15-percent level, (2)
increasing the number of optional flex acres, with corresponding
decreases in deficiency payments, for those acres planted in
alternative crops, or (3) permitting farmers to grow alternative
crops on more than 25 percent of their base acres while continuing to
receive deficiency payments on 75 percent of the acres.  While the
first option would clearly reduce government costs, the second and
third options could also reduce costs as farmers increase their use
of optional flex acres.  All three options would allow farmers to
participate in USDA's commodity programs while continuing to increase
their incentive to respond to the needs of the marketplace. 

One approach to implement the first option, above, would be to raise
the proportion of each farmer's base acreage ineligible for
deficiency payments from 15 percent to 25 percent. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   444     781     927     915     892
Outlays                            444     781     927     915     892
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:67.1

Commodity Programs:  Flex Acres Enhance Farm Operations and Market
Orientation (GAO/RCED-94-76, December 30, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:67.2

John W.  Harman, (202) 512-5138



   OPTION:
   RICE PROGRAMRICE PROGRAM
------------------------------------------------------ Appendix III:68

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Agriculture (House)

Primary agency            Department of Agriculture

Account                   Commodity Credit Corporation Fund
                          (12-4336)

Spending type             Direct

Budget subfunction        Farm income stabilization

Framework theme           Reassess objectives
----------------------------------------------------------------------
Despite legislative reforms in 1985 and 1990 to reduce the government
costs and increase the U.S.  share of the world rice market, overall
government costs have remained high--averaging $1 billion per year
between 1986 and 1992.  And, government payments as a percentage of
producers' total rice revenues nearly doubled from 27 percent in 1982
through 1984 to 50 percent in 1992.  On average, the government
payments were about 7 percent above producers' full cost of
production between 1988 and 1990.  Moreover, the U.S.  share of the
world rice market dropped from 24 percent in 1980 to 15 percent in
1992. 

GAO has reported that government costs remain high because of (1)
continued high deficiency payments, (2) the addition of the marketing
loan provision in 1985 that allows producers to repay their loans at
either the loan rate or USDA's calculated world price, whichever is
lower, and (3) several export promotion initiatives. 

In light of these problems, the Congress may wish to consider ways to
move rice producers towards greater market orientation.  To reduce
producer dependency, the Congress could lower the target price,
incorporate marketing loan gains into the deficiency payment
calculation, eliminate the 50/85 program, and reduce export
assistance.  The 50/85 program allows producers to plant 50 percent
of their rice acres and receive deficiency payments on 85 percent of
their acres.  The Congress may also want to consider implementation
options such as phasing out payments to producers over a number of
years. 

To illustrate the savings from a market-based approach, the following
table shows the savings that could be achieved if Congress chose to
eliminate the availability of the 50/85 program for rice producers. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     6      10      19      33      27
Outlays                              6      10      19      33      27
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:68.1

Rice Program:  Government Support Needs to Be Reassessed
(GAO/RCED-94-88, May 26, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:68.2

John W.  Harman, (202) 512-5138



   OPTION:
   PEANUT PROGRAMPEANUT PROGRAM
------------------------------------------------------ Appendix III:69

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Agriculture (House)

Primary agency            Department of Agriculture

Account                   Commodity Credit Corporation Fund
                          (12-4336)

Spending type             Direct

Budget subfunction        Farm income stabilization

Framework theme           Reassess objectives
----------------------------------------------------------------------
Since the Great Depression of the 1930s, USDA has administered a
program to control the supply of U.S.  peanuts and between 1982 and
1989 the peanut program has guaranteed producers a minimum price for
their crops that substantially exceeds the world market price. 
However, peanut farming, like other agricultural operations, has
undergone massive changes since that time.  Smaller farms have been
consolidated to form larger-scale operations resulting in fewer farms
with greater amounts of peanut quota.  For example, in 1991, fewer
than 22 percent of the U.S.  peanut producers controlled over 80
percent of the quota.  Thus, the peanut program has provided
substantial benefits to a small number of producers who hold most of
the quota.  GAO has reported that from 1982 to 1992, the annual quota
support price averaged $697 per ton, while the estimated cost of
producing peanuts averaged $463 per ton, this difference resulted in
an average minimum net return of 51 percent to producers.  Moreover,
because the quota support price is required to increase each year
when costs go up, but not decrease when costs go down, the gap
between quota support prices and costs has generally increased over
time.  GAO also found that 68 percent of all quota owners in 1988,
who held 56 percent of the quota, rented their quotas to others. 

GAO has raised a concern that most costs of the peanut program are
paid for by U.S.  consumers.  Economic studies and GAO's analysis
estimate that the peanut program adds, on average, anywhere from $314
million to $513 million each year to consumers' costs of buying
peanuts.  About 76 to 88 percent of the cost is transferred directly
to producers as income, and the remaining portion represents a social
welfare loss that reflects inefficiencies in the program's use or
allocation of resources. 

USDA spends millions of dollars yearly to operate the peanut program. 
In supporting the peanut program from 1986 through 1990, USDA
incurred average annual costs of $34.4 million. 

GAO has recommended that the Congress restructure the peanut support
program by making it more responsive to market forces.  GAO believes
that this change could achieve savings to the government and
consumers. 

However, CBO did not develop a 5-year estimate of savings for this
option.  CBO noted that the world market price for commodities
fluctuates considerably.  In addition, the effects of any such
changes in the peanut program on other commodities and programs are
difficult to measure. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:69.1

Peanut Program:  Changes Are Needed to Make the Program Responsive to
Market Forces (GAO/RCED-93-18, February 8, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:69.2

John W.  Harman, (202) 512-5138



   OPTION:
   REDUCE OR ELIMINATE FUNDING FOR
   THE MARKET PROMOTION
   PROGRAMREDUCE OR ELIMINATE
   FUNDING FOR THE MARKET
   PROMOTION PROGRAM
------------------------------------------------------ Appendix III:70

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Agriculture (House)

Primary agency            Department of Agriculture

Accounts                  Commodity Credit Corporation Fund
                          (12-4336)

Spending type             Direct

Budget subfunction        Farm income stabilization

Framework theme           Redefine beneficiaries
----------------------------------------------------------------------
The Market Promotion Program (MPP) is an export promotion program
that subsidizes overseas promotional activities for U.S. 
agricultural products.  The MPP was authorized under the 1990 Food,
Agriculture, Conservation, and Trade Act to assist U.S.  agricultural
exporters, particularly those faced with unfair trading practices
abroad.  Payments are made to partially offset the costs of market
building and commodity promotion undertaken by state-related, private
nonprofit, and private profit-making firms.  The Foreign Agricultural
Service (FAS) operates MPP through 65 not-for-profit associations
that either run the programs themselves or pass funds through to
other entities. 

FAS has no assurance that MPP funds are supporting additional
promotional activities rather than simply replacing company/industry
funds.  Moreover, FAS has not provided adequate guidance or oversight
in targeting MPP funds to smaller and new-to-export industries which
are less likely to supplant them. 

In fiscal year 1995, MPP funding was reduced to $84.5 million from
the budgeted level of $110 million.  The Congress also encouraged
USDA to better target assistance and to promote greater participation
from small companies and other entities.  The results of this
direction are not yet known.  In addition, this type of promotion is
among the few unaffected by the GATT Uruguay Round.  Nevertheless,
additional future savings could be achieved if the Congress further
reduced or eliminated the program. 

Based on our examinations of the MPP since its inception, GAO
believes that the program should target small, generic new-to-export
companies and not extend assistance to large companies.  Further, we
believe that participants should be graduated out of the program
within 5 years.  With these changes, Congress could cut MPP funding
by an additional $35 million, to a $50 million level for fiscal years
1996 through 2000. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     7      50      60      60      60
Outlays                              7      50      60      60      60
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:70.1

International Trade:  Changes Needed to Improve Effectiveness of the
Market Promotion Program (GAO/GGD-93-125, July 7, 1993). 

U.S.  Department of Agriculture:  Improvements Needed in Market
Promotion Program (GAO/T-GGD-93-17, March 25, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:70.2

Allan I.  Mendelowitz, (202) 512-4812



   OPTION:
   REDUCE FUNDING FOR THE EXPORT
   CREDIT GUARANTEE PROGRAMS
   REDUCE FUNDING FOR THE EXPORT
   CREDIT GUARANTEE PROGRAMS
------------------------------------------------------ Appendix III:71

------------------------  --------------------------------------------
Authorizing committees    Agriculture, Nutrition and Forestry (Senate)
                          Agriculture (House)

Primary agency            Department of Agriculture

Accounts                  Commodity Credit Corporation Loans Program
                          Account (12-1336)
                          Commodity Credit Corporation Fund
                          (12-4336)

Spending type             Direct

Budget subfunction        Farm income stabilization

Framework theme           Reassess objectives
----------------------------------------------------------------------
Under the U.S.  Department of Agriculture (USDA), the Export Credit
and Intermediate Export Credit Guarantee Programs are major
agricultural export promotion programs.  The main objective of these
programs is to increase U.S.  agricultural exports.  Based on
legislative requirements, USDA makes a total of $5.7 billion in
government loan guarantees available each year to foreign country
buyers of U.S.  agricultural commodities. 

GAO has reported that since the programs began in the 1980s, and as
of May, 1993, the government had paid out approximately $4.2 billion
because of loan repayment defaults by foreign country buyers.  Past
operations of the programs have incurred high costs because USDA had
provided a large amount of guarantees to high-risk countries, such as
Iraq and the former Soviet Union.  Guarantees had been extended to
such high-risk countries because of market development reasons and
foreign policy considerations.  Extending guarantees and increasing
exposure to new and existing high-risk participants will result in
higher program costs. 

GAO is unaware of any empirical evidence that demonstrates that the
export credit guarantee programs resulted in increased agricultural
exports.  Also, there is a history of poor management control of
these programs, principally because USDA officials viewed the export
credit guarantee programs as "commercial" programs that are subject
to the normal controls that exist for commercial sales transactions. 

Through legislative direction and other encouragement, USDA has taken
some action to improve management of the programs, but additional
steps are still necessary.  Thus, from this perspective, the Congress
may wish to reduce the programs' budgets. 

To illustrate how savings would be achieved, the Congress could
choose to reduce lending authority to $3.3 billion, about $750
million less than assumed in CBO's baseline.  The estimate of savings
assumes that the entire reduction would derive from lowering the
value of loan guarantees for sales to the world's most risky
borrowers receiving guarantees.  Congress may wish to consider
whether such beneficiary countries might be more appropriately
assisted with food aid programs.  However, this would offset some or
all of the savings cited in the following table. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                  -229     244     230     222     214
Outlays                           -229     244     230     222     214
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:71.1

U.S.  Department Of Agriculture:  Issues Related to the Export Credit
Guarantee Programs (GAO/T-GGD-93-28, May 6, 1993). 

Loan Guarantees:  Export Credit Guarantee Programs' Costs Are High
(GAO/GGD-93-45, December 22, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:71.2

Allan I.  Mendelowitz, (202) 512-4812



   370 COMMERCE AND HOUSING CREDIT
------------------------------------------------------ Appendix III:72

  -- National Oceanic Atmospheric Administration research fleet
     modernization

  -- Centralize servicing for Rural Housing and Community Development
     Service's single-family housing loans

  -- Opportunities to reduce the cost of the 2000 decennial census



   OPTION:
   NATIONAL OCEANIC ATMOSPHERIC
   ADMINISTRATION RESEARCH FLEET
   MODERNIZATIONNATIONAL OCEANIC
   ATMOSPHERIC ADMINISTRATION
   RESEARCH FLEET MODERNIZATION
------------------------------------------------------ Appendix III:73

------------------------  --------------------------------------------
Authorizing committees    Commerce, Science and Transportation
                          (Senate)
                          Commerce (House)

Appropriations            Commerce, Justice, State and the Judiciary
subcommittees             and Related Agencies (Senate and House)

Primary agency            Department of Commerce

Account                   Fleet Modernization, Shipbuilding and
                          Conversion (13-1457)

Spending type             Discretionary

Budget subfunction        Other advancement of commerce

Framework theme           Improve efficiency
----------------------------------------------------------------------
In 1993, we reported on the National Oceanic and Atmospheric
Administration's (NOAA) fleet modernization plan.  As GAO said, the
plan calls for replacing NOAA's existing fleet of old and
technologically obsolete ships that support NOAA's programs in
fisheries research, oceanographic research, and hydrographic charting
and mapping.  NOAA's modernization plan envisions the need for 24 new
or refurbished vessels over a 15-year period at an estimated cost of
$1.9 billion (in fiscal year 1995 dollars). 

Studies by GAO, the Vice President's National Performance Review, and
others have recommended that NOAA experiment with greater use of
private sector vessel services as potentially cost-effective
alternatives to continued reliance on NOAA vessels.  In response,
NOAA is taking action to experiment with vessel contracting and
chartering alternatives and to assess the results of these
experiments in the context of fleet modernization needs and costs. 
If experience with contracting and chartering alternatives shows that
leasing is a cost-effective alternative to NOAA vessels, future costs
associated with NOAA's modernization plans could be reduced. 
However, CBO cannot develop a savings estimate at this time because
the costs of leasing have not been determined. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:73.1

Research Fleet Modernization:  NOAA Needs to Consider Alternatives to
the Acquisition of New Vessels (GAO/RCED-94-170, August 3, 1994). 

Ocean Research Vessels:  NOAA Fleet Modernization Plan (GAO/T-
RCED-94-52, October 21, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:73.2

James Duffus, III (202) 512-7756



   OPTION:
   CENTRALIZE SERVICING FOR RURAL
   HOUSING AND COMMUNITY
   DEVELOPMENT SERVICE'S
   SINGLE-FAMILY HOUSING LOANS
   CENTRALIZE SERVICING FOR RURAL
   HOUSING AND COMMUNITY
   DEVELOPMENT SERVICE'S
   SINGLE-FAMILY HOUSING LOANS
------------------------------------------------------ Appendix III:74

------------------------  --------------------------------------------
Authorizing committees    Banking, Housing and Urban Affairs (Senate)
                          Banking and Financial Services (House)

Appropriations            Agriculture, Rural Development, and Related
subcommittees             Agencies (Senate and House)

Primary agency            Department of Agriculture

Accounts                  Multiple

Spending type             Discretionary

Budget function           Mortgage Credit

Framework theme           Improve efficiency
----------------------------------------------------------------------
The Rural Housing and Community Development Services (RHCDS) makes
housing and farm loans to rural Americans who cannot otherwise obtain
them on reasonable terms.\1 RHCDS services about 675,000
single-family housing borrowers via some 1,700 county offices. 
Servicing single-family housing loans accounts for about 35 percent
of the work load in these offices.  An additional 90,000 loans are
administered by a loan servicing company from a central location. 

The private sector has used centralized servicing of housing loans
for many years to reduce servicing costs.  Under centralized
servicing, the servicing rights to loans are sold and the purchasing
organization collects monthly payments, establishes escrows for
property taxes and insurance, manages delinquencies, and provides
credit counseling on the lender's behalf. 

One option to reduce RHCDS administrative costs would be to expand in
house RHCDS centralized servicing and reduce servicing in county
offices.  RHCDS borrowers could still obtain loans under current
arrangements, but loan servicing would be performed at a separate,
central location.  Borrowers would receive the same services provided
by the private sector loan servicing industry by phone or mail--as
well as services unique to RHCDS, such as periodic review of interest
credit agreements, application of moratoriums, and appeals.  Another
option would be private sector contracting.  Alternatively, a
combination of these means could be used--allowing the public and
private sectors to compete for loan servicing privileges. 

To illustrate the savings that could be achieved from this option,
GAO has found that centralizing these services could result in
closing 742 county offices unable to support 2 staff years.  Closing
these offices would produce about $171 million in outlay saving from
the associated full-time employee reductions in fiscal years 1999 and
2000 as shown in the table that follows. 



                           Five-Year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                     0       0       0      64      85
Outlays                              0       0       0      57      85

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     0       0       0      75     104
Outlays                              0       0       0      67     104
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\1 RHCDS was formed from the rural housing section of Farmers Home
Administration (FmHA) and the Community Facilities Division of the
Rural Development Administration. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:74.1

U.S.  Department of Agriculture:  Centralized Servicing for FmHA
Single-Family Housing Loans (GAO/RCED-93-231BR, September 23, 1994). 

U.S.  Department of Agriculture:  Centralized Servicing for FmHA
Single-Family Housing Loans (GAO/T-RCED-94-121, February 9, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:74.2

Judy A.  England-Joseph, (202) 512-7631



   OPTION:
   OPPORTUNITIES TO REDUCE THE
   COST OF THE 2000 DECENNIAL
   CENSUSOPPORTUNITIES TO REDUCE
   THE COST OF THE 2000 DECENNIAL
   CENSUS
------------------------------------------------------ Appendix III:75

------------------------  --------------------------------------------
Authorizing committees    Governmental Affairs (Senate)
                          Government Reform and Oversight (House)

Appropriations            Commerce, Justice, State, and the Judiciary
subcommittees             and Related Agencies (Senate and House)

Primary agency            Department of Commerce

Account                   Periodic Censuses and Programs (13-0450)

Spending type             Discretionary

Budget subfunction        Other advancement of commerce

Framework theme           Improve efficiency
----------------------------------------------------------------------
Since 1992, GAO reports and testimonies have identified opportunities
to reduce the cost of the 2000 Decennial Census without decreasing
accuracy.  The Census Bureau estimated that using the 1990
census-taking approach without modification could cost about $4.8
billion in current dollars for the 2000 Decennial Census. 

GAO believes the Census Bureau should pursue several cost-saving
options currently being evaluated in the Census Bureau's 1995 Census
Test.  Census Bureau estimates suggest that the use of these options
could result in savings of about $1 billion for the 2000 Decennial
Census.  These options are as follows: 

  -- Promoting a higher mail response rate by simplifying and
     streamlining the census questionnaire and using a strategy of
     multiple mail contacts.  A simplified, more user-friendly
     questionnaire could promote better response rates by reducing
     the time and effort needed for respondents to understand and
     complete the form.  Additionally, tests have shown that the use
     of multiple contacts, such as targeted reminder cards and second
     mailings improve response rates. 

  -- Using the Postal Service to identify vacant and invalid
     addresses during the mailing of questionnaires to avoid costly
     and unnecessary follow-up efforts.  In order to maximize
     savings, the Census Bureau must ascertain the earliest point at
     which vacant and invalid housing units are accurately classified
     to eliminate futile follow-up on them. 

  -- Gathering data on only a sample of those households not
     responding by mail, rather than attempting to contact them all
     in person.  Savings estimates would vary according to the
     initial percentage of households responding by mail and the
     sampling rate and method selected.  The Census Bureau is
     contemplating following-up on approximately a 30-percent sample. 

The Census Bureau estimates that it could have saved between $700
million and $800 million of the $2.6 billion that it spent on the
1990 Decennial Census if it had incorporated the procedures listed
above.  Almost all of these savings would have occurred in fiscal
year 1990.  With inflation and workload adjustments, this figure
should be somewhat higher for fiscal year 2000. 

In addition, by eliminating or reducing costly labor-intensive
address list operations through greater reliance on the Postal
Service and local communities, the Census Bureau estimates that it
could save as much as $188 million for the 2000 Census.  This
cooperative effort will be permissible under 1995 legislation (Public
Law 103-430).  To realize these savings, the Census Bureau estimates
that it will incur costs of about $5.1 million in each of fiscal
years 1995, 1996, and 1997.  However, thereafter, the Bureau will
generate net savings of $13.5 million in fiscal year 1998, between
$129.4 million and $179.4 million in fiscal year 1999, and another
$10.8 million in fiscal year 2000. 

The dollar amounts above are Census Bureau estimates.  The Census
Bureau will have to spend several million each year to prepare for
the changes.  The Census Bureau should require $950 million less in
budget authority to accomplish the 2000 decennial census than it
would without implementing this proposal.  Because of the unique
nature of the census, a cyclical program with the majority of
spending occurring once every 10 years, estimates against a fiscal
year 1995 frozen baseline would be inappropriate.  CBO estimates that
using sampling for nonresponse follow-up and incorporating other
changes for the 2000 Decennial Census could result in the following
savings. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    -5      -5      -5      -5     950
Outlays                             -5      -5      -5      -5     846
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:75.1

Decennial Census:  1995 Test Census Presents Opportunities to
Evaluate New Census-Taking Methods (GAO/T-GGD-94-136, September 27,
1994). 

Decennial Census:  Promising Proposals, Some Progress, But Challenges
Remain (GAO/T-GGD-94-80, January 26, 1994). 

Decennial Census:  Test Design Proposals Are Promising, But
Fundamental Reform Is Still at Risk (GAO/T-GGD-94-12, October 7,
1993). 

Decennial Census:  Focused Action Needed Soon to Achieve Fundamental
Breakthroughs (GAO/T-GGD-93-32, May 27, 1993). 

Decennial Census:  Fundamental Reform Jeopardized by Lack of Progress
(GAO/T-GGD-93-6, March 2, 1993). 

Transition Series:  Commerce Issues (GAO/OCG-93-12TR, December 1992). 

Decennial Census:  1990 Results Show Need for Fundamental Reform
(GAO/GGD-92-94, June 9, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:75.2

William M.  Hunt, (202) 512-8676



   400 TRANSPORTATION
------------------------------------------------------ Appendix III:76

  -- Eliminate or transfer Interstate Commerce Commission functions

  -- Cargo preference laws:  their costs and effects

  -- Increase federal fees paid by foreign-flagged cruise ships

  -- Increase state share of state-supported intercity rail passenger
     service

  -- Reduce or eliminate Amtrak subsidies

  -- Targeting military airport program funds within the national
     airport system

  -- Enhance Department of Transportation's oversight of its
     university research



   OPTION:
   ELIMINATE OR TRANSFER
   INTERSTATE COMMERCE COMMISSION
   FUNCTIONSELIMINATE OR TRANSFER
   INTERSTATE COMMERCE COMMISSION
   FUNCTIONS
------------------------------------------------------ Appendix III:77

------------------------  --------------------------------------------
Authorizing committees    Commerce, Science and Transportation
                          (Senate)
                          Transportation and Infrastructure (House)

Appropriations            Transportation (Senate and House)
subcommittees

Primary agency            Interstate Commerce Commission

Account                   Salaries and Expenses (30-0100)

Spending type             Discretionary

Budget subfunction        Ground transportation

Framework theme           Reassess objectives
----------------------------------------------------------------------
GAO testified both last year and earlier this year on the Interstate
Commerce Commission's (ICC) remaining rail and motor carrier
regulatory activities and discussed options for eliminating some
functions while transferring others to different agencies.  GAO noted
that while the ICC's rail regulatory responsibilities were widely
viewed as necessary, much of the resources devoted to trucking
regulatory activities, most notably tariff and operating certificate
filings, seemed unnecessary in a largely deregulated environment and
could be eliminated.  The Congress adopted GAO's position in this
regard and legislation was enacted to eliminate most of these
activities and downsize the agency.  ICC's budget for fiscal year
1995 was reduced about $13.5 million as a result of these changes. 

Other ICC activities, we found more problematic.  The remaining
trucking activities could be continued at ICC or transferred to
another federal agency such as the Department of Transportation or
the Federal Trade Commission, but the budgetary savings would likely
be minimal.  There was widespread agreement among shippers and
carriers that there was a continuing need to adjudicate rail disputes
and protect the interests of captive rail shippers in market
dominance situations.  Remaining rail responsibilities could be
merged with the Federal Maritime Commission and merger review
activities could be transferred to the Department of Justice. 

One option the Congress may want to consider would eliminate all
remaining motor carrier functions, except safety and insurance
activities, which would be transferred.  The Congress may also want
to transfer ICC's rail and merger activities to other federal
agencies, such as the Department of Transportation and the Justice
Department.  While GAO believes that efficiencies could be achieved
through these transfers, future cost reductions would depend on which
functions are continued and at what level of effort.  CBO estimates
that eliminating remaining regulation of motor carriers, except in
the areas of safety and insurance, would achieve the following
savings. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                     6       9       9       9       9
Outlays                              5       9       9       9       9

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                     6      10      11      11      11
Outlays                              5      10      11      11      11
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:77.1

Interstate Commerce Commission:  Key Issues Need to be Addressed in
Determining Future of ICC's Regulatory Functions (GAO/T-RCED-94-261,
July 12, 1994). 

Interstate Commerce Commission:  Transferring ICC's Rail Regulatory
Responsibilities May Not Achieve Desired Results (GAO/T-RCED-94-222,
June 9, 1994). 

Trucking Transportation:  Information on Handling of Undercharge
Claims (GAO/RCED-93-208FS, August 30, 1993). 

Trucking Deregulation:  Proposed Sunset of ICC's Trucking Regulatory
Responsibilities (GAO/RCED-87-107, April 23, 1987). 


      GAO CONTACT
---------------------------------------------------- Appendix III:77.2

Kenneth M.  Mead, (202) 512-2834



   OPTION:
   CARGO PREFERENCE LAWS:  THEIR
   COSTS AND EFFECTS CARGO
   PREFERENCE LAWS:  THEIR COSTS
   AND EFFECTS
------------------------------------------------------ Appendix III:78

------------------------  --------------------------------------------
Authorizing committees    Commerce, Science and Transportation
                          (Senate)
                          Transportation and Infrastructure (House)

Appropriations            Multiple
subcommittees

Primary agency            Multiple

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Water transportation

Framework theme           Reassess objectives
----------------------------------------------------------------------
Cargo preference laws require that certain government-owned or
financed cargo shipped internationally be carried on U.S.-flagged
vessels.  This guarantees a minimum amount of business for the U.S. 
merchant fleet.  This promotes other sectors of the maritime industry
because U.S.-flagged vessels are required by law to be crewed by U.S. 
mariners, are generally required to be built in U.S.  shipyards, and
are encouraged to be maintained and repaired in U.S.  shipyards. 

However, because U.S.-flagged vessels often charge higher rates to
transport cargo than foreign-flagged vessels, cargo preference laws
increase the government's transportation costs.  Four federal
agencies--the Departments of Defense, Agriculture, and Energy, and
the Agency for International Development--are responsible for more
than 99 percent, by tonnage, of government cargo subject to cargo
preference laws.  Cargo preference laws increased these federal
agencies' transportation costs by an estimated $578 million per year
in fiscal years 1989 through 1993 because U.S.-flagged vessels
generally charge more to carry cargo than their foreign-flagged
counterparts.  The average is about $710 million per year when the
costs associated with the Persian Gulf War are included. 

The effect of cargo preference laws on the U.S.  merchant marine
industry is mixed.  On one hand, the share of international
oceanborne cargo carried by U.S.  vessels has declined despite cargo
preference laws because most oceanborne international cargo is not
subject to cargo preference laws.  On the other hand, these laws
appear to have a substantial impact on the U.S.  merchant marine
industry by providing incentive for vessels to remain in the U.S. 
fleet.  In the absence of preference cargo, the equivalent of up to
two-thirds, by tonnage, of the 165 U.S.-flagged vessels engaged in
international trade would leave the fleet, either by reflagging to
achieve cost savings or by ceasing to operate if they are not
competitive.  This would directly impact about 6,000 U.S.  shipboard
jobs. 

To summarize, if the Congress eliminated cargo preference laws,
federal agencies would save hundreds of millions of dollars yearly,
but the U.S.  fleet would be significantly smaller and shipboard jobs
would be lost.  If the laws were eliminated, the following savings
could be achieved.\1



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                   555     555     555     555     555
Outlays                            410     525     545     545     550

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   580     595     605     620     635
Outlays                            430     560     590     610     625
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\1 The termination of cargo preference requirements for all
government-sponsored cargoes would probably cause additional defaults
on outstanding loans guaranteed by the Maritime Administration.  CBO
estimates that such defaults would increase mandatory spending by
between $4 million and $30 million over the next several years. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:78.1

Management Reform:  Implementation of the National Performance
Review's Recommendations (GAO/OCG-95-1, December 5, 1994). 

Maritime Industry:  Cargo Preference Laws--Their Estimated Costs and
Effects, (GAO/RCED-95-34, November 30, 1994). 

Cargo Preference:  Effects of U.  S.  Export-Import Cargo Preference
Laws on Exporters, (GAO/GGD-95-2BR, October 31, 1994). 

Cargo Preference Requirements:  Objectives Not Significantly Advanced
When Used in U.  S.  Food Aid Programs, (GAO/GGD-94-215, September
29, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:78.2

Kenneth M.  Mead, (202) 512-2834



   OPTION:
   INCREASE FEDERAL FEES PAID BY
   FOREIGN-FLAGGED CRUISE
   SHIPSINCREASE FEDERAL FEES PAID
   BY FOREIGN-FLAGGED CRUISE SHIPS
------------------------------------------------------ Appendix III:79

------------------------  --------------------------------------------
Authorizing committees    Multiple

Primary agency            Multiple

Spending type             Direct

Framework theme           Redefine beneficiaries
----------------------------------------------------------------------
The multibillion dollar passenger cruise market in the United States
is almost exclusively served by foreign-flagged cruise vessels.  With
the exception of two, there are no oceangoing U.S.-flagged cruise
vessels of any substantial size.  Access to the U.S.  market is,
therefore, a very lucrative privilege, which is made even more so
because the vessels and their crews pay virtually no corporate or
personal U.S.  income tax. 

To ensure adequate shoreside facilities and that the safety, health,
and economic welfare of U.S.  passengers and property, and our
immigration laws are adequately safeguarded, the federal government
has enacted laws and dispersed responsibility for their
administration and enforcement throughout several departments and
agencies of the federal government.  This raises the question of
whether the foreign-flagged cruise vessels, which are enjoying
substantial profits as a result of their monopoly, are paying their
fair share of the cost to the federal government of ensuring that
this extremely valuable U.S.  market operates safely and in
accordance with our laws and regulations. 

GAO has reported that seven agencies provide services to
foreign-flagged cruise vessels.  All but two of the agencies'
revenues, in the form of charges for these services, were about equal
to or exceeded their costs to provide the services.  However, the
Coast Guard spent about $1.4 million dollars to provide such services
as vessel safety inspections, pollution prevention, port safety,
marine investigations, and search and rescue, and charged no fees in
fiscal year 1993.  The Immigration and Naturalization Service (INS)
spent about $7.3 million dollars on passenger inspections but
collected only about $700,000 because passengers are exempt from its
fee when arriving at a port of entry in the U.S.  on a cruise
originating in Canada, Mexico, a territory or possession of the
United States, or any adjacent island. 

The Congress may wish to extend fees for these services to the
remaining agencies.  The table that follows reflects the revenues
that would result if the Congress enacted legislation (1) authorizing
the Coast Guard to charge fees for its services and (2) lifting the
Immigration and Naturalization Service exemption. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Added receipts
Option: Coast Guard fees           0.4     1.1     1.4     1.4     1.4
Option: Lifting INS Exemption       38      38      38      38      38
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:79.1

None


      GAO CONTACT
---------------------------------------------------- Appendix III:79.2

Kenneth M.  Mead, (202) 512-2834



   OPTION:
   INCREASE STATE SHARE OF
   STATE-SUPPORTED INTERCITY RAIL
   PASSENGER SERVICEINCREASE STATE
   SHARE OF STATE-SUPPORTED
   INTERCITY RAIL PASSENGER
   SERVICE
------------------------------------------------------ Appendix III:80

------------------------  --------------------------------------------
Authorizing committees    Commerce, Science and Transportation
                          (Senate) Transportation and Infrastructure
                          (House)

Appropriations            Transportation (Senate and House)
subcommittees

Primary agency            Department of Transportation

Account                   Grants to National Railroad Passenger
                          Corporation (69-0704)

Spending type             Discretionary

Budget subfunction        Ground transportation

Framework theme           Redefine beneficiaries
----------------------------------------------------------------------
The Rail Passenger Service Act allows Amtrak to initiate and/or
operate intercity rail service, known as 403(b) service, that is
financially supported by the states.  As of September 1994, Amtrak
had contracts with 8 states to operate this service over 15 routes.\2
In fiscal year 1993, section 403(b) service accounted for about 14
percent of Amtrak's ridership.  Under the provisions of the Rail
Passenger Service Act, the states pay 45 percent of section 403(b)
service operating losses in the first year of operation and 65
percent of these losses in subsequent years.  For service that began
prior to 1989, states reimburse Amtrak for short-term avoidable
losses, while for service that began after 1989, states reimburse
Amtrak for long-term avoidable losses.  States also pay 50 percent of
the capital equipment costs (primarily depreciation and interest)
associated with section 403(b) service.  Any costs (capital or
operating) not paid by states are absorbed by Amtrak. 

In fiscal year 1993, Amtrak absorbed about $82 million in losses on
section 403(b) services.  This included about $78 million in
operating costs and $4 million in capital costs.  Amtrak absorbed
such costs as heavy maintenance and overhaul of cars and locomotives,
accident repairs, and an allocated portion of fixed costs (e.g., yard
and station operation and various overhead costs).  The individual
states paid about $26 million.  Amtrak absorbs other costs from the
service as well.  For example, Amtrak's use of equipment for section
403(b) service precludes its use on other intercity routes where
there could be equipment shortages.  Amtrak is not reimbursed for
these lost opportunity costs. 

Although the savings will be relatively minor in comparison to
Amtrak's overall losses, the Congress may want to increase the state
share of existing or new 403(b) service losses and Amtrak has
expressed a willingness to do so.  For example, currently
participating states are responsible for paying a percentage of
either short-term or long-term avoidable losses.  If participating
states were all required to reimburse Amtrak for fully-allocated
losses, GAO estimates that the states' reimbursement would increase
by about $82 million in the first year (using fiscal year 1994 data). 
If the federal subsidy to Amtrak were reduced by a comparable amount,
the following savings would apply. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                    82      82      82      82      82
Outlays                             82      82      82      82      82

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    82      85      88      91      94
Outlays                             82      85      88      91      94
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\2 These states were Alabama, California, Illinois, Michigan,
Missouri, New York, North Carolina, and Wisconsin. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:80.1

Intercity Passenger Rail:  Amtrak's Financial and Operating
Conditions Threaten Its Longterm Viability (GAO/RCED-95-71, February
6, 1995). 


      GAO CONTACT
---------------------------------------------------- Appendix III:80.2

Kenneth M.  Mead, (202) 512-2834



   OPTION:
   REDUCE OR ELIMINATE AMTRAK
   SUBSIDIESREDUCE OR ELIMINATE
   AMTRAK SUBSIDIES
------------------------------------------------------ Appendix III:81

------------------------  --------------------------------------------
Authorizing committees    Commerce, Science and Transportation
                          (Senate)
                          Transportation and Infrastructure (House)

Appropriations            Transportation (Senate and House)
subcommittees

Primary agency            Department of Transportation

Account                   Grants to National Railroad Passenger
                          Corporation (69-0704)

Spending type             Discretionary

Budget subfunction        Ground transportation

Framework theme           Reassess objectives
----------------------------------------------------------------------
Amtrak's financial condition has rapidly deteriorated, creating a
situation that could seriously affect Amtrak's ability to provide
high-quality passenger rail service nationwide.  Amtrak and the
federal government need to make key long-term decisions concerning
the quality and extent of passenger rail service and the government's
commitment to subsidize such operations.  Recognizing Amtrak's need
for financial support, the Congress has provided significant funding
since Amtrak began operating in 1971.  Since 1990, however, Amtrak's
federal subsidy has not covered the gap between operating expenses
and revenues.  Total operating deficits have exceeded federal
operating subsidies by $175 million.  This imbalance occurred because
passenger revenues have been lower than projected while expenses have
been higher than expected.  Furthermore, over the past 8 years,
Amtrak has steadily reduced its working capital by $371 million. 

Over the next few years, Amtrak will face difficult and costly
challenges that could impede its financial recovery.  At the same
time, Amtrak faces few opportunities to substantially increase
revenues.  The challenges include (1) maintaining its aging passenger
cars, (2) modernizing the Beech Grove, Indiana, repair facility,
which services all equipment used outside the Northeast Corridor, (3)
modernizing its locomotive and passenger car fleet, acquiring
high-speed trains, and continuing rail improvements in the Northeast
Corridor, (4) negotiating, by 1996, new operating agreements with the
freight railroads, which own about 97 percent of the track over which
Amtrak operates, (5) negotiating labor issues and work rules with
Amtrak's union employees, and (6) incurring higher costs for employee
health benefits and environmental clean-up. 

To address its financial and operating problems, in December 1994,
Amtrak announced plans to cut expenses by restructuring its route
network and improving productivity.  However, even if fully
implemented, these actions will not solve Amtrak's longer-term
problems.  Revenues will continue to fall short of expenses on most
routes; and Amtrak projects that operating expenses will exceed
operating revenues and the federal subsidy by $1.3 billion between
1996 and the year 2000.  If Amtrak is to continue nationwide
operations at the present level, enhance the quality and reliability
of its service, and improve its overall financial condition, it will
require substantial operating and capital funding.  In European
countries where competitive conditions are more conducive to rail
travel, intercity rail passenger service has received substantial
public funding.  In the United States, only a few well-traveled
routes may ever generate sufficient revenues to cover operating
costs. 

If substantially increasing the level of federal funding for Amtrak,
especially for capital investments, is not possible in today's
budgetary environment, then now may be the time for the Congress to
consider refocusing Amtrak's efforts and reducing its current route
system, retaining service in locations where Amtrak can carry the
largest number of passengers in the most cost-effective manner.  The
Congress could consider establishing a temporary commission similar
to the military base closure commission to restructure Amtrak's
operations and reduce the route network so that efficient and quality
service can be provided within the available funding from all
sources--federal, state and local, and private. 

Savings estimates can not be made until specific proposals are
developed regarding changes in Amtrak operations and routes.  These
estimates cannot be made because restructuring proposals would affect
the amount of the reduction in federal funding for Amtrak's capital,
operating, and Northeast corridor activities. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:81.1

Intercity Passenger Rail:  Financial and Operating Conditions
Threaten Amtrak's Long-term Viability (GAO/RCED-95-71, February 6,
1995). 

Amtrak:  Key Decisions Need to Be Made in the Face of Deteriorating
Financial Condition (GAO/T-RCED-94-186, April 13, 1994). 

Amtrak:  Deteriorated Financial Condition and Costly Future
Challenges (GAO/T-RCED-94-145, March 23, 1994). 

Amtrak:  Financial Condition Has Deteriorated and Future Costs Make
Recovery Difficult (GAO/T-RCED-94-155, March 17, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:81.2

Kenneth M.  Mead, (202) 512-2834



   OPTION:
   TARGETING MILITARY AIRPORT
   PROGRAM FUNDS WITHIN THE
   NATIONAL AIRPORT
   SYSTEMTARGETING MILITARY
   AIRPORT PROGRAM FUNDS WITHIN
   THE NATIONAL AIRPORT SYSTEM
------------------------------------------------------ Appendix III:82

------------------------  --------------------------------------------
Authorizing committees    Science, Commerce and Transportation
                          (Senate)
                          Transportation and Infrastructure (House)

Primary agency            Department of Transportation

Account                   Grants-in-aid for airports (Airport and
                          Airway Trust Fund) (69-8106)

Spending type             Discretionary/Direct

Budget subfunction        Air transportation

Framework theme           Improve efficiency
----------------------------------------------------------------------
The Airport Improvement Program (AIP), the nation's multibillion
dollar program for planning and improving its airport infrastructure,
includes legislatively established funding categories for specific
uses.  One such category--the Military Airport Program (MAP)--was
established in 1990 to assist current and former military airports
located in congested metropolitan areas in converting to viable
civilian airports. 

However, 9 of the 12 airports selected by the Federal Aviation
Administration (FAA) to participate in the MAP do not meet key
legislatively established program goals.  Five of the airports are
not located in congested air traffic areas and are unlikely to
increase capacity, either in major metropolitan areas or systemwide. 
Nine airports selected had already been operating as joint or
civilian airports for 10 or more years, and many of these already had
the types of facilities in place that the program was designed to
develop. 

The Congress could suspend participation in MAP or limit
participation to those airports (1) that are located in FAA-defined
congested areas and (2) where first civilian use occurred after the
1988 and later base closure and realignment processes.  If the
Congress did not wish airports participating in MAP to receive AIP
funding in lieu of MAP funding, it would need to specify this. 
However, because any or all of these actions could result in a
redirection rather than a reduction in AIP spending, the Congress
would also need to reduce the contract authority and obligation
limitation for the AIP to achieve savings.  Given past problems in
selecting airports that meet legislatively-established criteria, one
option the Congress could consider is eliminating the MAP.  The
following estimate assumes a reduction in AIP funding of 2.5 percent
each year, which is about the amount that corresponds to MAP funding. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                    55      57      59      61      63
Outlays                              7      22      29      33      35

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    55      57      59      61      63
Outlays                              7      23      31      36      39
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:82.1

Airport Improvement Program:  The Military Airport Program Has Not
Achieved Intended Impact (GAO/RCED-94-209, June 30, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:82.2

Kenneth M.  Mead, (202) 512-2834



   OPTION:
   ENHANCE DEPARTMENT OF
   TRANSPORTATION'S OVERSIGHT OF
   ITS UNIVERSITY RESEARCHENHANCE
   DEPARTMENT OF TRANSPORTATION'S
   OVERSIGHT OF ITS UNIVERSITY
   RESEARCH
------------------------------------------------------ Appendix III:83

------------------------  --------------------------------------------
Authorizing committees    Commerce, Science and Transportation
                          (Senate)
                          Transportation and Infrastructure (House)

Appropriations            Transportation (Senate and House)
subcommittees

Primary agency            Department of Transportation

Accounts                  Multiple

Spending type             Discretionary

Budget subfunction        Ground, air, water, and other transportation

Framework theme           Improve efficiency
----------------------------------------------------------------------
The Department of Transportation (DOT) conducts a variety of research
to enhance safety, mobility, environmental quality, efficiency, and
economic growth in the nation's transportation system.  The results
of DOT's research programs include prototypes of systems, new
operating procedures, data used to focus policy decisions, and
regulations.  Within DOT several offices are responsible for the
oversight of research and development activities.  In addition, each
of DOT's operating administrations are responsible for reviewing and
monitoring its own research to ensure that the university awards'
objectives are met and the costs are appropriate. 

While DOT's spending on research at universities has grown
significantly between fiscal years 1988 and 1993, DOT does not have
an integrated plan to ensure that sponsored research is needed to
meet departmental goals.  In addition, since each of DOT's eight
operating administrations conducts and tracks its own research, there
is no effective mechanism to ensure that duplicative and/or
unnecessary research is not conducted by more than one
administration.  Finally, a lack of oversight on some university
awards led to overcharges of almost $450,000 and unpaid cost-sharing
totalling $3 million in a sample of awards reviewed in detail.  More
effective planning and management of the research program could
reduce costs by limiting duplicate research and ensuring that
recipients follow award guidelines on allowable costs and cost
sharing. 

GAO has recommended that DOT complete the development of a
departmentwide database to track the purpose and costs associated
with each university research award and evaluate the operating
administrations' processes to ensure that they have adequate policies
and procedures to carry out their responsibilities for monitoring
awards. 

CBO does not disagree that improved monitoring and oversight of DOT's
university research can reduce outlays.  GAO findings of overcharges
and unpaid cost sharing for a sample of grants suggest that the
Congress could slow DOT's university research spending by reducing
appropriations until improvements in necessary planning and
management processes are made.  However, savings from this option
would depend on which among many small accounts are reduced and the
amounts of these reductions. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:83.1

Department of Transportation:  University Research Activities Need
Greater Oversight (GAO/RCED-94-175, May 13, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:83.2

Kenneth M.  Mead, (202) 512-2834


   450 COMMUNITY AND REGIONAL
   DEVELOPMENT
------------------------------------------------------ Appendix III:84

  -- Reappraise rural development programs



   OPTION:
   REAPPRAISE RURAL DEVELOPMENT
   PROGRAMSREAPPRAISE RURAL
   DEVELOPMENT PROGRAMS
------------------------------------------------------ Appendix III:85

----------------------------------  ----------------------------------
Authorizing committees              Agriculture, Nutrition, and
                                    Forestry (Senate)
                                    Agriculture (House)
                                    Small Business (House)

Appropriations subcommittees        Agriculture, Development, and
                                    Related Agencies (Senate)
                                    Agriculture, Rural Development,
                                    Food and Drug Administration, and
                                    Related Agencies (House)

Primary agency                      Department of Agriculture
                                    Department of Housing and Urban
                                    Development
                                    Department of Commerce
                                    Environmental Protection Agency
                                    Small Business Administration

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Area and regional development

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Since 1989 GAO reports and testimonies has commented on problems in
federal rural development programs.  Most recently we found that
approximately 689 federal programs provide rural development
assistance in the United States.  The web of federal policies and
regulations that accompany these programs makes the delivery of
assistance inefficient.  The programs are complex and narrowly
focused, generally making them difficult and costly to use.  The
programs are an inefficient surrogate for a single federal policy for
economic development in rural areas. 

To improve the effectiveness and efficiency of federal assistance to
rural areas the Congress may wish to consider program consolidations
where these are appropriate.  It is difficult to estimate the savings
that would be achieved from program consolidations because savings
would depend in large part on the programs the Congress consolidates
and the extent to which overlapping or duplicative activities could
be eliminated.  However, the President has proposed in his fiscal
year 1996 budget to authorize U.S.  Department of Agriculture (USDA)
state directors to shift funds between 14 existing USDA rural
development loan and grant programs, which would remain separate. 

Using the proposed baseline in the President's fiscal year 1996
budget the administration reported that $42 million in administrative
savings could be achieved from this change due to accompanying
reductions in USDA headquarters' FTEs.  CBO's estimate of cost
savings--using fiscal year 1995 data--would be achieved over 5 years
and are reflected in the table below. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                    11      13      15      16      17
Outlays                             11      13      14      16      17

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    15      20      24      29      33
Outlays                             14      19      24      28      33
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:85.1

Rural Development:  Patchwork of Federal Programs Needs to Be
Reappraised (GAO/RCED-94-165, July 28, 1994). 

Rural Development:  Profile of Rural Areas (GAO/RCED-93-40FS, April
29, 1993). 

Rural Development:  America Faces Many Challenges (GAO/RCED-93-35,
November 20, 1992). 

Rural Development:  Federal Programs That Focus on Rural America and
Its Economic Development (GAO/RCED-89-56BR, January 19, 1989). 


      GAO CONTACT
---------------------------------------------------- Appendix III:85.2

John W.  Harman (202) 512-5138



   500 EDUCATION, TRAINING,
   EMPLOYMENT, AND SOCIAL SERVICES
------------------------------------------------------ Appendix III:86

  -- Employment and training programs



   OPTION:
   EMPLOYMENT AND TRAINING
   PROGRAMSEMPLOYMENT AND TRAINING
   PROGRAMS
------------------------------------------------------ Appendix III:87

----------------------------------  ----------------------------------
Authorizing committees              Multiple

Appropriations subcommittees        Labor, Health and Human Services,
                                    and Education (Senate and House)

Primary agencies                    Multiple

Accounts                            Multiple

Spending type                       Discretionary/Direct

Budget subfunction                  Training and employment

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The challenges posed by increased global competition and a changing
economy call for a renewed commitment to invest in the American
workforce.  The federal government's effort to meet this commitment
has been to increase investment in a wide array of programs that
target people experiencing barriers to employment and to add other
new programs that target particular groups.  Since 1992 GAO has
issued 9 reports and testimonies commenting on federal employment and
training programs.  Most recently, GAO identified a total of 163
federal programs and funding streams providing employment and
training assistance.  These programs are spread across 15 departments
and independent agencies with a total budget of about $20 billion. 

GAO's analysis of programs that target the economically disadvantaged
showed that those programs had similar goals, often served the same
categories of people, and provided many of the same services using
separate, yet parallel, delivery structures.  This overlap can add
unnecessary administrative costs at each level of
government--federal, state, and local. 

The amount of any savings from consolidating programs will depend on
how many programs are included, the degree and kind of reductions,
and the level of federal involvement.  To illustrate the potential
for savings from consolidating employment and training programs, one
option would be to consolidate the following programs for the
economically disadvantaged:  Job Training Partnership Act (JTPA) IIA
Training Services for the Disadvantaged Adult, JTPA IIA State
Education Programs, JTPA IIA Incentive Grants, Job Opportunities and
Basic Skills Program, Food Stamp Employment and Training, Family
Self-Sufficiency Program, Vocational Education--Basic State Programs,
Educational Opportunity Centers, and Student Literacy and Mentoring
Corps.  A second option could consolidate the following programs for
dislocated workers:  JTPA Economic Dislocation and Worker Adjustment
Assistance (EDWAA) (substate allotment), JTPA EDWAA (governor's
discretionary), JTPA EDWAA (Secretary's discretionary), JTPA Defense
Conversion Adjustment Program, JTPA Clean Air Employment Transition
Assistance, JTPA Defense Diversification, Trade Adjustment
Assistance--Workers, Vocational Education--Demonstration Centers for
the Training of Dislocated Workers, and the Transition Assistance
Program. 

Consolidating similar employment and training programs would result
in administrative efficiencies to the states as well as improved
opportunities to reduce fragmentation and increase effectiveness in
service delivery.  In consolidating programs, the Congress would also
want to consider the implications for federal agency workloads and
responsibilities.  In anticipation of the benefits states will
receive, funding for the programs included could be reduced 10
percent each year as part of the consolidation.  Savings from the
consolidations are shown in the two sets of tables below which
separately identify direct and discretionary spending. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Option: Disadvantaged adults
----------------------------------------------------------------------

Direct spending
----------------------------------------------------------------------

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   120     120     120     120     120
Outlays                            100     110     110     110     110
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Option: Disadvantaged adults
----------------------------------------------------------------------

Discretionary spending
----------------------------------------------------------------------

Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                   210     210     210     210     210
Outlays                            120     190     210     220     230

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   210     220     220     230     240
Outlays                            120     190     210     220     230
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Option: Dislocated workers
----------------------------------------------------------------------

Direct spending
----------------------------------------------------------------------

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    30      30      30      30
Outlays                             20      30      30      30
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Option: Dislocated workers
----------------------------------------------------------------------

Discretionary spending
----------------------------------------------------------------------

Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                   130     130     130     130
Oulays                              70     130     130     130

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   130     140     140     150
Outlays                             70     130     140     140
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:87.1

Multiple Employment Training Programs:  Major Overhaul Is Needed to
Create a More Efficient, Customer-Driven System (GAO/T-HEHS-95-70,
February 6, 1995). 

Multiple Employment Training Programs:  Major Overhaul Is Needed to
Reduce Costs, Streamline the Bureaucracy, and Improve Results
(GAO/T-HEHS-95-53, January 10, 1995). 

Multiple Employment Training Programs:  Overlap in Programs Raises
Questions About Efficiency (GAO/HEHS-94-193, July 11, 1994). 

Multiple Employment Training Programs:  Major Overhaul Is Needed
(GAO/T-HEHS-94-109, March 3, 1994). 

Multiple Employment Training Programs:  Overlapping Programs Can Add
Unnecessary Administrative Costs (GAO/HEHS-94-80, January 28, 1994). 

Multiple Employment Training Programs:  Conflicting Requirements
Hamper Delivery of Services (GAO/HEHS-94-78, January 28, 1994). 

Multiple Employment Programs:  National Employment Training Strategy
Needed (GAO/T-HRD-93-27, June 18, 1993). 

Multiple Employment Programs (GAO/HRD-93-26R, June 15, 1993). 

Multiple Employment Programs (GAO/HRD-92-39R, July 24, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:87.2

Linda G.  Morra, (202) 512-7014



   550 HEALTH
------------------------------------------------------ Appendix III:88

  -- Overall strategy to address prescription drug fraud and Medicaid
     fraud

  -- Medicaid:  States use illusory approaches to shift program costs
     to the federal government

  -- Medicaid formula:  fairness could be improved

  -- Adopt automated drug utilization reviews



   OPTION:
   OVERALL STRATEGY TO ADDRESS
   PRESCRIPTION DRUG FRAUD AND
   MEDICAID FRAUDOVERALL STRATEGY
   TO ADDRESS PRESCRIPTION DRUG
   FRAUD AND MEDICAID FRAUD
------------------------------------------------------ Appendix III:89

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Grants to States for Medicaid (75-
                                    0512)

Spending type                       Direct

Budget subfunction                  Health care services

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Medicaid program typically includes prescription drugs in its
covered services, and diversion of these medications has been a
problem for at least a decade.  Such diversion can involve
pharmacists routinely adding drugs to legitimate prescriptions,
keeping the extras for themselves or for sale to others; clinics
providing inappropriate prescriptions to Medicaid recipients who
trade them for cash or merchandise or have them filled and market the
drugs; and entrepreneurs who provide recipients with abusable drugs
in exchange for subsequent illicit use of their Medicaid recipient
numbers.  Participants in drug diversion schemes therefore frequently
face added charges of fraud, false claims, or other related
violations of state or federal law. 

The financial incentives for diverting drugs are substantial and
apply to both controlled and noncontrolled substances.  Legal
controlled drugs--those with significant potential for physical or
psychological harm--are appealing because they are relatively cheap
and chemically pure compared to illicit drugs.  Profits from street
sales can amount to several thousand percent of initial investment. 
One drug costing the pharmacy less than 50 cents per pill sold on the
street for $85 per pill.  Noncontrolled drugs, also, have recently
become popular targets for diversion because they are comparatively
easier to obtain and are particularly desirable if obtained under an
insurance program--such as Medicaid--requiring little or no
copayment.  With no or minimal outlay on the part of the recipient,
the street price--while typically lower than the pharmacy price and
thus attractive to buyers--is entirely profit. 

Medicaid accounts for 80 percent of all federal spending on
prescription drugs.  By 1996, Medicaid's drug benefit is expected to
cost $10 billion.  While precise dollar losses due to diversion--as
with all fraud--are impossible to identify, New York State officials
estimate that, in 1990, these losses represented about 10 percent of
the state's total Medicaid spending for prescription drugs. 

States have various initiatives under way to curb Medicaid
prescription drug diversion but are hampered by insufficient
resources, lengthy and frequently unproductive investigations, and
the prevalence of repeat offenders and resilient schemes.  GAO
believes that the Health Care Financing Administration should assume
an active leadership role in orchestrating and encouraging states'
efforts and fostering the development and implementation of
preventive measures.  HHS generally agrees with the GAO findings and
recommendation but believes it is not feasible unless new staff
resources can be identified and allocated. 

The Congress should encourage HHS to take a stronger role.  If states
curbed these losses by even a small percentage, future Medicaid costs
would be reduced substantially.  However, CBO cannot develop an
estimate for this option until specific strategies are identified. 
Moreover, savings would be net of the additional resources required
to curb fraudulent activities. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:89.1

Medicaid:  A Program Highly Vulnerable to Fraud (GAO/T-HEHS-94-106,
February 25, 1994). 

Medicaid Drug Fraud:  Federal Leadership Needed to Reduce Program
Vulnerabilities (GAO/HRD-93-118, August 2, 1993). 

Medicaid Prescription Drug Diversion:  A Major Problem, But State
Approaches Offer Some Promise (GAO/T-HRD-92-48, July 29, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:89.2

Sarah F.  Jaggar, (202) 512-7119



   OPTION:
   MEDICAID:  STATES USE ILLUSORY
   APPROACHES TO SHIFT PROGRAM
   COSTS TO THE FEDERAL
   GOVERNMENTMEDICAID:  STATES USE
   ILLUSORY APPROACHES TO SHIFT
   PROGRAM COSTS TO THE FEDERAL
   GOVERNMENT
------------------------------------------------------ Appendix III:90

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Commerce (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Grants to States for Medicaid (75-
                                    0512)

Spending type                       Direct

Budget subfunction                  Health care services

Framework theme                     Reassess objectives
----------------------------------------------------------------------
GAO has raised a concern that Michigan, Texas, and Tennessee have
used illusory financing approaches to obtain about $800 million in
federal Medicaid funds without effectively committing their share of
matching funds.  Under these approaches, facilities that received
increased Medicaid payments from the states, in turn, paid the states
almost as much as they received.  Consequently, the states realized
increased revenue that was used to reduce their state Medicaid
contributions, fund other health care needs, and supplement general
revenue funding. 

The practices that involve payments to state-owned facilities will be
restricted by Omnibus Budget Reconciliation Act of 1993 provisions
that limit such payments to unreimbursed Medicaid and uninsured
costs.  However, states can continue to make payments to local
government-owned facilities, including payments that exceed costs,
and have the facilities return the payments to the states.  States
are not required to justify the need for increased reimbursements,
nor is the Health Care Financing Administration required to verify
that monies are used for the purpose for which they were obtained. 

GAO believes that the Medicaid program should not allow states to
benefit from illusory arrangements and that Medicaid funds should
only be used to help cover the costs of medical care incurred by
those medical facilities that provide the care.  GAO believes the
Congress should enact legislation to minimize the likelihood that
states can develop arrangements whereby providers return Medicaid
payments to the states, thus effectively reducing the state's share
of Medicaid funding.  This legislation should prohibit Medicaid
payments that exceed costs to any government-owned facility. 

Savings are difficult to estimate for this option because national
data on these practices are not readily available.  In addition,
Medicaid spending is influenced by the use of waivers from federal
requirements, which allows states to alter Medicaid financing
formulas.  Future requests and use of waivers by states are
uncertain. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:90.1

Medicaid:  States Use Illusory Approaches to Shift Program Costs to
the Federal Government (GAO/HEHS-94-133, August 1, 1994). 

Medicaid:  The Texas Disproportionate Share Program Favors Public
Hospitals (GAO/HRD-93-86, March 30, 1993). 


      GAO CONTACT
---------------------------------------------------- Appendix III:90.2

Sarah F.  Jaggar, (202) 512-7119



   OPTION:
   MEDICAID FORMULA:  FAIRNESS
   COULD BE IMPROVEDMEDICAID
   FORMULA:  FAIRNESS COULD BE
   IMPROVED
------------------------------------------------------ Appendix III:91

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Commerce (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Grants to States for Medicaid (75-
                                    0512)

Spending type                       Direct

Budget subfunction                  Health care services

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The Medicaid program provides medical assistance to current and
recent beneficiaries of the Aid to Families with Dependent Children
(AFDC) program, low-income people who receive Supplemental Security
Income, and certain other low-income individuals.  The federal share
of the program costs varies with the per capita income of the state. 
High-income states pay a larger share of the benefits than low-income
states.  By law the federal share can be no less than 50 percent and
no more than 83 percent. 

Since 1986, GAO has issued numerous reports and testimonies in which
we identify ways in which the fairness of federal grant formulas
could be improved.  With respect to Medicaid GAO believes the
fairness of the matching formula could be improved by replacing the
per capita income factor with the number of people living below the
official poverty line and the total taxable resources of the state,
and by reducing the minimum federal share to 40 percent.  These
changes could reduce federal reimbursements by reducing the federal
share in states providing the most generous benefits that have the
fewest low-income people in need and a greater ability to fund
benefits from state resources.  It also could redirect federal
funding to states with the highest concentration of people in poverty
and the least capability of funding these needs from state resources. 
To illustrate the savings that could be achieved from changes in the
Medicaid formula, CBO estimates that if the minimum federal share
were reduced to 40 percent, the following savings could be achieved. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                 4,600   5,100   5,700   6,200   6,900
Outlays                          4,600   5,100   5,700   6,200   6,900
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:91.1

Medicaid Formula:  Fairness Could Be Improved (GAO/T-HRD-91-5,
December 7, 1990). 


      GAO CONTACT
---------------------------------------------------- Appendix III:91.2

Sarah F.  Jaggar, (202) 512-7119



   OPTION:
   ADOPT AUTOMATED DRUG
   UTILIZATION REVIEWSADOPT
   AUTOMATED DRUG UTILIZATION
   REVIEWS
------------------------------------------------------ Appendix III:92

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Commerce (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Grants to States for Medicaid (75-
                                    0512)

Spending type                       Direct

Budget subfunction                  Health care services

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Amendments to Title XIX of the Social Security Act required states to
implement drug utilization review (DUR) programs in the Medicaid
programs by January 1, 1993.  Under DUR, states must review Medicaid
prescriptions to (1) determine whether they are appropriate,
medically necessary, and not likely to result in adverse medical
reactions and (2) identify fraud, waste, and abuse.  Reviews must be
performed prospectively (before prescriptions are filled) and
retrospectively (on a quarterly basis after prescriptions are
filled). 

The amendments do not require states to use statewide automated
systems to implement prospective reviews, although at the time of
GAO's review about two-thirds of the states had or were planning to
acquire these systems.  Automated systems for prospective DUR reviews
reduce Medicaid program costs in two ways:  (1) by cancelling
prescriptions that are inappropriate drug therapy or are instances of
waste, fraud and/or abuse and (2) by reducing hospitalizations due to
adverse drug reactions (which account for from 3 percent to 28
percent of Medicaid hospitalizations).  Automated systems are also
cost-effective from the states' perspective.  For example, Maryland's
total one-time costs for system acquisition were about $165,000, and
its initial 10-month operating costs were about $472,000.  In
contrast, data show that the value of Medicaid prescriptions
cancelled during this period exceeded $6.7 million. 

Although most states and the District of Columbia either operate or
plan to implement automated prospective DUR system within the next
few years, about one-third have no plans to acquire these systems. 
The Health Care Financing Administration could influence the
remaining states to do so by providing additional information about
system use and benefits.  If these remaining states were required to
acquire the systems, savings would result from lower Medicaid grant
payments. 

CBO could not prepare a 5-year estimate of savings at this time
without more complete national data on Medicaid prescriptions.  For
example, initial GAO work shows that having the DUR system resulted
in millions of dollars in cancellations of prescriptions which could
have been inappropriate or fraudulent or which presented possible
adverse medical reactions.  However, since the automated systems are
relatively new, data are not yet available to show precisely how many
of these cancellations resulted in budgetary savings. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:92.1

Prescription Drugs:  Automated Prospective Review Systems Offer
Potential Benefits for Medicaid (GAO/AIMD-94-130, August 5, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:92.2

Frank W.  Reilly, (202) 512-6252



   570 MEDICARE
------------------------------------------------------ Appendix III:93

  -- Teaching hospitals' Medicare payments

  -- Medicare payment safeguards

  -- Medicare payments for high technology procedures

  -- Change the health maintenance organization rate-setting method
     for Medicare



   OPTION:
   TEACHING HOSPITALS' MEDICARE
   PAYMENTSTEACHING HOSPITALS'
   MEDICARE PAYMENTS
------------------------------------------------------ Appendix III:94

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Commerce (House)
                                    Ways and Means (House)

Appropriations subcommittees        Labor, Health and Human Services,
                                    and Education (Senate and House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Federal Hospital Insurance Trust
                                    Fund Account (20-8005)

Spending type                       Direct

Budget subfunction                  Medicare

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Medicare's Prospective Payment System pays hospitals with graduate
medical education programs at rates higher than those other hospitals
receive for treating the same conditions.  The higher payments are to
compensate for the higher costs teaching hospitals incur, which are
thought to be due to such factors as increased diagnostic testing,
increased number of procedures performed, and higher staffing ratios. 
The teaching adjustment is based on the ratio of interns and
residents per bed and currently is set at a 7.65-percent increase in
payments for each 0.1 increment in the ratio. 

In 1989, GAO found that the present adjustment factor was too high
because it did not explicitly consider all relevant teaching hospital
costs and did not accurately measure all cost factors.  Based on its
analysis, GAO found that the adjustment should be no higher than 6.26
percent and could be as low as 3.73 percent.  The 6.26-percent rate
would better measure factors explicitly recognized by the current
formula.  The 3.73-percent rate expands on the current formula to
reflect additional factors that affect teaching hospital costs. 

CBO's analysis of Medicare's indirect medical education payments
discusses rates of 6 percent and 3 percent.  Savings for those rates
are reflected in the following table. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Option: Reduce to 6-percent adjustment factor
----------------------------------------------------------------------
Outlays                            930   1,120   1,200   1,280   1,360

Option: Reduce to 3-percent adjustment factor
----------------------------------------------------------------------
Outlays                          2,600   3,150   3,350   3,600   3,800
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:94.1

Medicare:  Indirect Medical Education Payments Are Too High
(GAO/HRD-89-33, January 5, 1989). 


      GAO CONTACT
---------------------------------------------------- Appendix III:94.2

Sarah F.  Jaggar, (202) 512-7119



   OPTION:
   MEDICARE PAYMENT
   SAFEGUARDSMEDICARE PAYMENT
   SAFEGUARDS
------------------------------------------------------ Appendix III:95

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Commerce (House)
                                    Ways and Means (House)

Appropriations subcommittees        Labor, Health and Human Services
                                    and Education (Senate and House)

Primary agency                      Department of Health and Human
                                    Services

Accounts                            Federal Hospital Insurance Trust
                                    Fund
                                    (20-8005)
                                    Federal Supplementary Medical
                                    Insurance Trust Fund (20-8004)
                                    Program Management (75-0511)

Spending type                       Discretionary/Direct

Budget subfunctions                 Health and Medicare

Framework theme                     Improve efficiency
----------------------------------------------------------------------
GAO has issued many reports on the problem of high Medicare costs,
and we have identified ways in which costs could be reduced. 
Recently, we reported that when Medicare pays contractors to process
claims, one of the contractors' responsibilities is to ensure that
Medicare only pays claims for covered services that are medically
necessary and appropriate and for which Medicare is the primary
payer.  Such activities are referred to as program safeguards. 

The funding that contractors receive to review each claim has
declined by over 20 percent since 1989.  In response, contractors
apply fewer or less stringent payment controls, and claims are paid
that otherwise would not be.  Historically, payment safeguards have
returned $10 in savings for each dollar expended on them.  GAO
believes additional program safeguard funding is necessary to better
protect the program against erroneous payments. 

Although CBO does not disagree that increasing program safeguards can
reduce Medicare outlays, it does not make budget estimates of such
savings.  This is because it is difficult to establish a clear
connection between increases in administrative activities and savings
that might accrue through changes in the operations of the program. 
In addition, even if such a connection can be established, the
magnitude of savings attributable to such changes is not certain
enough for budget scorekeeping purposes. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:95.1

Medicare:  High Spending Growth Calls for Aggressive Action
(GAO/T-HEHS-95-75, February 6, 1995). 

Medicare Claims:  High Risk Series (GAO/HR-95-8, February 1995). 

Medicare:  Adequate Funding and Better Oversight Needed to Protect
Benefit Dollars (GAO/T-HRD-94-59, November 12, 1993). 

Medicare:  Further Changes Needed to Reduce Program and Beneficiary
Costs (GAO/HRD-91-67, May 15, 1991). 

Medicare:  Cutting Payment Safeguards Will Increase Program Costs
(GAO/T-HRD-89-06, February 28, 1989). 

Medicare and Medicaid:  Budget Issues (GAO/T-HRD-87-1, January 29,
1987). 


      GAO CONTACT
---------------------------------------------------- Appendix III:95.2

Sarah F.  Jaggar, (202) 512-7119



   OPTION:
   MEDICARE PAYMENTS FOR HIGH
   TECHNOLOGY PROCEDURESMEDICARE
   PAYMENTS FOR HIGH TECHNOLOGY
   PROCEDURES
------------------------------------------------------ Appendix III:96

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Commerce (House)
                                    Ways and Means (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Federal Supplementary Medical
                                    Insurance Trust Fund (20-8004)

Spending type                       Direct

Budget subfunction                  Medicare

Framework theme                     Improve efficiency
----------------------------------------------------------------------
When new medical technologies first come into use, costs are often
high because of such factors as initial capital expenditures and low
utilization rates.  Medicare payment rates are normally set during
this period.  Over time, the costs related to a particular technology
often go down as equipment is improved, utilization increases, and
experience with the technology results in efficiencies.  However,
Medicare does not have a process for routinely and systematically
assessing these factors and its payment rates often remain at the
original high levels. 

Over the years, the Congress has reacted to the identification of
specific overpaid procedures and services by legislatively reducing
rates.  For example, payments have been reduced for overpriced
surgeries, selected items of durable medical equipment, and
intraocular lenses.  GAO believes that establishment of a systematic
process for periodically evaluating the reasonableness of Medicare
payment rates as technologies mature would result in significant
program savings. 

Savings have not been estimated because this option encompasses all
procedures that are now or will be described as mature.  Any savings
would depend on the particular technologies for which Medicare
payment rates are reduced. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:96.1

Medicare:  Excessive Payments Support the Proliferation of Costly
Technology (GAO/HRD-92-59, May 27, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:96.2

Sarah F.  Jaggar, (202) 512-7119



   OPTION:
   CHANGE THE HEALTH MAINTENANCE
   ORGANIZATION RATE-SETTING
   METHOD FOR MEDICARECHANGE THE
   HEALTH MAINTENANCE ORGANIZATION
   RATE-SETTING METHOD FOR
   MEDICARE
------------------------------------------------------ Appendix III:97

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Federal Supplementary Medical
                                    Insurance Trust Fund (20-8004)

Spending type                       Discretionary/Direct

Budget subfunction                  Medicare

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Hoping to take advantage of the potential cost savings associated
with health maintenance organizations (HMO), Congress created the
Medicare risk contract program.  Under this program, HMOs are paid a
flat fee (or capitation rate) for each Medicare beneficiary enrolled. 
Capitation rates are set at 95 percent of the estimated average cost
per Medicare beneficiary in the fee-for-service sector, adjusted for
enrollees' demographic factors--age, sex, Medicaid eligibility, and
whether or not the enrollee is in an institution such as a nursing
home.  These risk adjustments are designed to reduce "favorable
selection," which occurs when HMO enrollees are healthier than
Medicare beneficiaries in the fee-for-service sector. 

The risk contract program has not achieved its goal of reducing
Medicare costs because the Health Care Financing Administration's
(HCFA) risk adjustment methodology has proved insufficient to prevent
HMOs from benefiting from favorable selection.  Because the healthier
HMO enrollees are more than 5 percent less expensive to care for than
comparable fee-for-service beneficiaries, HCFA has paid HMOs more for
beneficiaries' treatment than it would have spent had those same
beneficiaries remained in the fee-for-service sector. 

GAO identified four alternative risk adjustment mechanisms
that--unlike HCFA's current system--would adjust payments based on
the health status of enrollees.  For example, one of these risk
adjustors (clinical indicators) would adjust capitation rates for the
presence or absence of a particular chronic health condition, such as
heart disease or cancer.  Any of these four risk adjustment methods
could reduce favorable selection and allow Medicare to achieve cost
savings under the risk contract program.  GAO recommended that HCFA
conduct demonstration projects on each of these options to gather
more practical risk adjustment experience. 

A 5-year estimate of savings cannot be developed at this time. 
Insufficient data have been collected to determine the specific
impact of proposed risk assessment methods on Medicare costs and on
HMO participation in the risk contract program. 


      RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:97.1

Medicare:  Changes to HMO Rate-Setting Method Are Needed to Reduce
Program Costs (GAO/HEHS-94-119, September 2, 1994). 


      GAO CONTACT
---------------------------------------------------- Appendix III:97.2

Sarah F.  Jaggar, (202) 512-7119



   600 INCOME SECURITY
------------------------------------------------------ Appendix III:98

  -- Fees for non-Aid to Families with Dependent Children child
     support enforcement services

  -- Automated child support enforcement systems

  -- Funding for state automated welfare systems

  -- Unified risk-based food safety system

  -- Consolidation of U.S.  Department of Agriculture food assistance
     programs



   OPTION:
   FEES FOR NON-AID TO FAMILIES
   WITH DEPENDENT CHILDREN CHILD
   SUPPORT ENFORCEMENT
   SERVICESFEES FOR NON-AID TO
   FAMILIES WITH DEPENDENT
   CHILDREN CHILD SUPPORT
   ENFORCEMENT SERVICES
------------------------------------------------------ Appendix III:99

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Family Support Payments to States
                                    (75-1501)

Spending type                       Direct

Budget subfunction                  Other income security

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The purpose of the Child Support Enforcement Program is to strengthen
state and local efforts to obtain child support for both families
eligible for Aid to Families with Dependent Children (AFDC) and
non-AFDC families.  The services provided to clients include locating
noncustodial parents, establishing paternity, and collecting ongoing
and delinquent child support payments.  From fiscal year 1984 through
1993, non-AFDC caseloads and costs have risen 302 percent and 520
percent, respectively.  States have exercised their discretion to
charge only minimal application and service fees and, thus, are doing
little to recover the federal government's 66-percent share of
program costs.  In fiscal year 1993, for example, state fee practices
returned $31 million of the $985 million spent to provide non-AFDC
services. 

Since 1992, GAO has reported on opportunities to defray some of the
costs of child support programs.  Based on this work, we believe that
mandatory application fees should be dropped and that states should
charge a minimum percentage service fee on successful collections for
non-AFDC families.  Application fees are administratively burdensome,
and a service fee would ensure that families are charged only when
the service has been successfully performed. 

If the Congress wishes to fully recover the administrative costs of
the program, a 15-percent service fee on collections for non-AFDC
families would be necessary.  States could charge a 15-percent
service fee for collection for non-AFDC cases.  The following savings
assume states would be able to implement this option beginning
October 1, 1995. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   800     870     940   1,010   1,090
Outlays                            800     870     940   1,010   1,090
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:99.1

Child Support Enforcement:  Families Could Benefit From Stronger
Enforcement Program (GAO/HEHS-95-2, December 27, 1994). 

Child Support Enforcement:  Federal Efforts Have Not Kept Pace With
Expanding Program (GAO/T-HEHS-94-209, July 20, 1994). 

Child Support Enforcement:  Opportunity to Defray Burgeoning Federal
and State Non-AFDC Costs (GAO/HRD-92-91, June 5, 1992). 


      GAO CONTACT
---------------------------------------------------- Appendix III:99.2

Jane L.  Ross, (202) 512-7215



   OPTION:
   AUTOMATED CHILD SUPPORT
   ENFORCEMENT SYSTEMSAUTOMATED
   CHILD SUPPORT ENFORCEMENT
   SYSTEMS
----------------------------------------------------- Appendix III:100

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of Health and Human
                                    Services

Account                             Family Support Payments to States
                                    (75-1501)

Spending type                       Direct

Budget subfunction                  Other income security

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Department of Health and Human Services' (HHS) Office of Child
Support Enforcement (OCSE) oversees states' efforts to develop
automated systems for the Child Support Enforcement Program. 
Established for both Aid to Families with Dependent Children (AFDC)
and non-AFDC clients, this program is directed at locating parents
not supporting their children, establishing paternity, obtaining
court orders for the amounts of money to be provided, and collecting
these amounts from noncustodial parents.  Achievement of Child
Support Enforcement Program goals depends on the effective planning,
design, and operation of automated systems.  The federal government
provides enhanced funding to develop these automated child support
enforcement systems by paying up to 90 percent of states' development
costs.  The states estimate it will cost over $1.2 billion to develop
these systems. 

The 90-percent federal funding participation rate is limited to
expenditures through fiscal year 1995.  Thereafter, the federal
government will reimburse states' costs to develop and operate these
systems at the 66-percent rate established for administrative
expenses.  Despite past problems such as lack of OCSE oversight and
its limited action to correct known problems with state systems, all
states indicate their system development will be complete in time to
meet this deadline.  However, it is doubtful all states will meet
this deadline. 

Most of the increased child support collections estimated by the
states due to their automated systems are for non-AFDC clients.  The
non-AFDC clients will benefit from these increased collections but
pay little towards the cost of administering their cases. 
Expenditures for non-AFDC cases totaled over $985 million for fiscal
year 1993.  The Congress provided the states broad discretion to help
defray costs of providing these services for non-AFDC clients, but
most states charge only minimal application fees of less than $25 and
few states charge optional fees for federal and state offsets. 

GAO work shows that beginning in fiscal year 1996, the states could
spend up to $300 million annually to operate automated systems for
child support enforcement, including $198 million of federal funds. 
Given the states' broad discretion to help defray costs, the Congress
could choose to reduce the federal funding participation rate for
development and operation of automated child support enforcement
systems from 66 percent to the 50- percent rate now common for such
costs in other programs, such as AFDC and Food Stamps.  CBO estimates
that doing so would produce savings of $72 million each year as shown
in the table below. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    72      72      72      72      72
Outlays                             72      72      72      72      72
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:100.1

Child Support Enforcement:  Timely Action Needed to Correct System
Development Problems (GAO/IMTEC-92-46, August 13, 1992). 

Child Support Enforcement:  Opportunity to Defray Burgeoning Federal
and State Non-AFDC Costs (GAO/HRD-92-91, June 5, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:100.2

Frank W.  Reilly, (202) 512-6252



   OPTION:
   FUNDING FOR STATE AUTOMATED
   WELFARE SYSTEMSFUNDING FOR
   STATE AUTOMATED WELFARE SYSTEMS
----------------------------------------------------- Appendix III:101

----------------------------------  ----------------------------------
Authorizing committees              Agriculture (Senate and House)
                                    Finance (Senate)
                                    Ways and Means (House)

Appropriations subcommittees        Labor, HHS, Education and Related
                                    Agencies (Senate)
                                    Agriculture (House)

Primary agency                      Departments of Agriculture and
                                    Health and Human Services

Account                             Multiple

Spending type                       Discretionary/Direct

Budget subfunction                  Food and nutrition; other income
                                    security

Framework theme                     Improve efficiency
----------------------------------------------------------------------
From 1984 to 1992, federal agencies contributed over $6.8 billion,
and $1.8 billion prior to 1984, to help fund development and
operation of automated information systems for welfare and
welfare-related programs.  These programs include:  Aid to Families
with Dependent Children (AFDC), Medicaid, Food Stamps, Child Support
Enforcement, Job Opportunities and Basic Skills Training (JOBS),
Child Care, and Child Welfare Services and Foster Care/Adoption
Assistance.  The Department of Health and Human Services (HHS)
administers all of these programs except Food Stamps, which the
Department of Agriculture (USDA) administers.  As part of their
program administration responsibilities, these departments are to
monitor the development of automated information systems to ensure
that the systems meet federal requirements. 

Ineffective oversight of state-developed systems has led to millions
of dollars being spent on systems that do not work and/or do not meet
federal requirements.  For example, one state spent $51 million on a
system that could not be implemented as planned because important
user requirements were not incorporated into its original design. 
Although most states are developing integrated systems incorporating
three welfare programs (AFDC, Medicaid, and Food Stamps), HHS and
USDA each spend time and money to independently review state systems,
which results in contradictory directions given to different states. 
Moreover, even though millions of dollars have been spent, the
benefits of these systems in reducing administrative costs and
mistakes have not been determined. 

Many states operate separate systems for separate programs even
though the welfare clients the programs serve are often the same.  In
addition, many states are now in the process of upgrading or
replacing existing systems or developing or planning to develop new
systems, which they estimate could cost at least $2.2 billion from
1993 to 1999. 

Savings could be achieved and the usefulness of state automated
systems improved if problems were identified and corrected early in
the system development process.  In addition, more of these systems
could be integrated, with the federal government providing model
systems to further reduce development costs.  If it chooses, the
Congress could slow HHS' and USDA's development funding to reflect
the anticipated savings resulting from early detection of problems in
the system development process, greater system integration, and
greater use of models to guide state development efforts.  However, a
savings estimate for this option cannot be developed at this time. 
This is because yearly data on states' future spending for automated
systems development in the affected welfare and welfare-related
programs are not available. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:101.1

Automated Welfare Systems:  Historical Costs and Projections
(GAO/AIMD-94-52FS, February 25, 1994). 

Welfare Programs:  Ineffective Federal Oversight Permits Costly
Automated System Problems (GAO/IMTEC-92-29, May 27, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:101.2

Frank W.  Reilly, (202) 512-6252



   OPTION:
   UNIFIED RISK-BASED FOOD SAFETY
   SYSTEMUNIFIED RISK-BASED FOOD
   SAFETY SYSTEM
----------------------------------------------------- Appendix III:102

----------------------------------  ----------------------------------
Authorizing committees              Agriculture, Nutrition, and
                                    Forestry (Senate)
                                    Agriculture (House)

Appropriations subcommittees        Agriculture, Rural Development,
                                    and Related Agencies (Senate)
                                    Agriculture, Rural Development,
                                    Food and Drug Administration, and
                                    Related Agencies (House)

Primary agency                      Department of Agriculture

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunction                  Other income security

Framework theme                     Improve efficiency
----------------------------------------------------------------------
GAO has issued more than 10 reports and testimonies on food safety
issues.  This work leads us to conclude that the federal system to
ensure the safety and quality of the nation's food--at an annual cost
of $1 billion a year--is inefficient and outdated and does not
adequately protect the consumer against food-borne illness.  GAO has
reported that as many as 12 different agencies administering over 35
different laws oversee food safety.  As a result, the current food
safety system suffers from overlapping and duplicative inspections,
poor coordination, inefficient allocation of resources, and outdated
inspection procedures. 

One option that might be considered to improve the effectiveness,
efficiency, and uniformity of the federal food safety system would be
the consolidation of activities in a new single food safety agency. 
This agency would administer a uniform set of food safety laws and
implement a food inspection system.  GAO has recommended the
establishment of a system based on the Hazard Analysis and Critical
Control Point system (HACCP).  A HACCP-based system relies on
building safety into food production.  The current federal food
safety system is not HACCP-based and tries to ensure food safety
primarily through end-product testing.  GAO has recommended that
responsibility for implementing HACCP-based systems be delegated to
the industry, with the government retaining an oversight role.  GAO
believes that this will result in cost savings to the government by
eliminating some federal food inspections. 

However, a 5-year estimate of savings cannot be developed at this
time.  The amount of any savings from consolidating food inspection
programs will depend on how many programs are included, the degree
and kind of reductions, and the level of federal involvement.  In
addition, the amount of savings will depend on the extent to which
administrative cost savings are used to offset overall program costs. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:102.1

Food Safety:  Fundamental Changes Needed to Improve Monitoring of
Unsafe Chemicals in Food (GAO/T-RCED-94-311, September 28, 1994). 

Food Safety:  Changes Needed to Minimize Unsafe Chemicals in Food
(GAO/RCED-94-192, September 26, 1994). 

Food Safety:  A Unified, Risk-Based Food Safety System Needed
(GAO/T-RCED-94-223, May 25, 1994). 

Meat Safety:  Inspectors' Ability to Detect Harmful Bacteria Is
Limited (GAO/T-RCED-94-228, May 24, 1994). 

Food Safety:  Risk-Based Inspections and Microbial Monitoring Needed
for Meat and Poultry (GAO/RCED-94-110, May 19, 1994). 

Food Safety:  Risk-Based Inspections and Microbial Monitoring Needed
for Meat and Poultry (GAO/T-RCED-94-189, April 19, 1994). 

Meat Safety:  Inspection System's Ability to Detect Harmful Bacteria
Remain Limited (GAO/T-RCED-94-123, February 10, 1994). 

Food Safety:  A Unified Risk-Based System Needed to Enhance Food
Safety (GAO/T-RCED-94-71, November 4, 1993). 

Food Safety:  Building a Scientific, Risk-Based Meat and Poultry
Inspection System (GAO/T-RCED-93-22, March 16, 1993). 

Food Safety:  Inspection of Domestic and Imported Meat Should Be
Risk-Based (GAO/RCED-93-10, February 18, 1993). 

Food Safety and Quality:  Uniform, Risk-based Inspection System
Needed to Ensure Safe Food Supply (GAO/RCED-92-152, June 26, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:102.2

John W.  Harman, (202) 512-5138



   OPTION:
   CONSOLIDATION OF U.S. 
   DEPARTMENT OF AGRICULTURE FOOD
   ASSISTANCE
   PROGRAMSCONSOLIDATION OF U.S. 
   DEPARTMENT OF AGRICULTURE FOOD
   ASSISTANCE PROGRAMS
----------------------------------------------------- Appendix III:103

----------------------------------  ----------------------------------
Authorizing committees              Agriculture, Nutrition, and
                                    Forestry (Senate)
                                    Agriculture (House)
                                    Economic and Educational
                                    Opportunities (House)

Primary agency                      Department of Agriculture

Account                             Emergency Food Assistance Program
                                    (12-3635)

Spending type                       Direct

Budget subfunction                  Farm income stabilization

Framework theme                     Improve efficiency
----------------------------------------------------------------------
GAO first reported on the need to improve federal food assistance
programs in 1978.  More recently, we have said that nearly all
federal domestic food assistance is provided under the U.S. 
Department of Agriculture's 14 food assistance programs.  These
programs have been established by a series of congressional acts and
amendments since the mid-1940s.  The 14 programs provide food and
food-related assistance to about 39 million persons, including
infants and children, the disabled, pregnant and breast-feeding
women, and the elderly.  The federal cost of providing food
assistance has dramatically increased from about $664 million in
fiscal year 1967 to an estimated $37 billion in fiscal year 1994. 

The multiple program approach used to provide food assistance has
created a complex administrative structure involving different
nutritional goals and funding schemes and encompassing various
combinations of federal, state, and local agencies that, for the most
part, dispense food benefits independently.  This complex
administrative structure, based on separate authorizing legislation
and regulations, causes possible overlaps of benefits and functions,
inconsistent administrative procedures, and confusion for applicants
who attempt to find out what programs are available to them.  As a
result, the current multiprogram approach may not be the most
effective way of providing federal food assistance. 

To illustrate how savings could be achieved, consolidating three
commodity food assistance programs--The Emergency Food Assistance
Program (TEFAP), Soup Kitchens/Food Banks (SKFB) and Commodity
Supplemental Food Program (CSFP)--would streamline federal, state,
and local administration of the food assistance programs that rely on
USDA commodities.  Currently, TEFAP and SKFB can provide similar
commodities for use in households through food pantries.  Combining
these three programs would give states more flexibility to target
resources more effectively.  At the same time, a consolidated
commodity distribution program would continue to support USDA's price
support and surplus removal activities.  It would also continue to
(1) provide an outlet for commodities if surpluses arise and (2) make
commodities available to help victims of natural disasters. 

In anticipation of the increased flexibility and reduced
administrative burdens states would gain from consolidating the
programs, the Congress may want to consider eliminating some funding
currently provided the states for administering the programs.  The
table below reflects the savings that could be achieved from this
option. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    41      43      44      46      47
Outlays                             37      43      44      46      47
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:103.1

Food Assistance Programs (GAO/RCED-95-115R, February 28, 1995). 

Food Assistance:  USDA's Multiprogram Approach (GAO/RCED-94-33,
November 24, 1993). 

Food Assistance:  Nutritional Conditions and Program Alternatives in
Puerto Rico (GAO/RCED-92-114, July 21, 1992). 

Federal Domestic Food Assistance Programs--A Time for Assessment and
Change (CED-78-113, June 13, 1978). 


      GAO CONTACT
--------------------------------------------------- Appendix III:103.2

John W.  Harman, (202) 512-5138



   650 SOCIAL SECURITY
----------------------------------------------------- Appendix III:104

  -- Social Security continuing disability reviews



   OPTION:
   SOCIAL SECURITY CONTINUING
   DISABILITY REVIEWSSOCIAL
   SECURITY CONTINUING DISABILITY
   REVIEWS
----------------------------------------------------- Appendix III:105

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Appropriations subcommittees        Labor, Health and Human Services,
                                    and Education (Senate and House)

Primary agency                      Department of Health and Human
                                    Services

Accounts                            Federal Disability Insurance Trust
                                    Fund
                                    (20-8007)
                                    Federal Hospital Insurance Trust
                                    Fund (20-8005)
                                    Federal Supplementary Medical
                                    Insurance Trust Fund (20-8004)
                                    Federal Old-Age and Survivors
                                    Insurance Trust Fund (20-8006)

Spending type                       Discretionary/Direct

Budget subfunctions                 Social Security and Medicare

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Between 1987 and 1993, the Social Security Administration (SSA)
completed less than half the disability reviews required by law. 
Such reviews often find that Disability Income beneficiaries are no
longer disabled and may be removed from the rolls.  According to SSA,
the lack of continuing disability reviews in 1990 through 1993 will
cost the trust funds about $1.4 billion through 1997. 

While SSA has taken steps to improve the payoff from the disability
reviews it does perform, GAO believes that SSA should continue to
examine ways to increase the number of such reviews and to make
existing reviews more efficient.  Although CBO does not disagree that
increasing disability reviews can reduce outlays, it does not make
budget estimates of such savings.  This is because it is difficult to
establish a clear connection between increases in administrative
activities and savings that might accrue through changes in the
operations of a program.  In addition, even if such a connection can
be established, the magnitude of savings attributable to such changes
is not certain enough for budget scorekeeping purposes. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:105.1

Social Security:  New Continuing Disability Review Process Could Be
Enhanced (GAO/HEHS-94-118, June 27, 1994). 

Social Security:  Increasing Number of Disability Claims and
Deteriorating Service (GAO/HRD-94-11, November 10, 1993). 

Social Security Disability:  SSA Needs to Improve Continuing
Disability Program (GAO/HRD-93-109, July 8, 1993). 

Social Security:  SSA's Processing of Continuing Disability Reviews
(GAO/T-HRD-93-9, March 9, 1993). 


      GAO CONTACT
--------------------------------------------------- Appendix III:105.2

Jane L.  Ross, (202) 512-7215



   700 VETERANS BENEFITS AND
   SERVICES
----------------------------------------------------- Appendix III:106

  -- Cost sharing for veterans' long-term care

  -- Construction of veterans' medical care facilities

  -- Veterans' disability compensation for non-service connected
     diseases



   OPTION:
   COST SHARING FOR VETERANS'
   LONG-TERM CARECOST SHARING FOR
   VETERANS' LONG-TERM CARE
----------------------------------------------------- Appendix III:107

----------------------------------  ----------------------------------
Authorizing committees              Veterans' Affairs (Senate and
                                    House)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (Senate and House)

Primary agency                      Department of Veterans Affairs

Account                             Medical Care (36-0160)

Spending type                       Discretionary

Budget subfunction                  Hospital and medical care for
                                    veterans

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
State veterans' homes recover as much as 50 percent of the costs of
operating their facilities through charges to veterans receiving
services.  Similarly, Oregon recovers about 14 percent of the costs
of nursing home care provided under its Medicaid program through
estate recoveries.  In fiscal year 1990, the Department of Veterans
Affairs (VA) offset less than one-tenth of 1 percent of its costs
through beneficiary copayments. 

Potential recoveries appear to be greater within the VA system than
under Medicaid.  Home ownership is significantly higher among VA
hospital users than among Medicaid nursing home recipients, and
veterans living in VA nursing homes generally contribute less toward
the cost of their care than do Medicaid recipients, allowing veterans
to build larger estates. 

The Congress may wish to consider increasing cost sharing for VA
nursing home care by (1) adopting cost-sharing requirements similar
to those imposed by most state veterans' homes and (2) implementing
an estate recovery program similar to those operated by many states
under their Medicaid programs.  If VA recovered either 25 percent or
50 percent of its costs of providing nursing home and domiciliary
care through a combination of cost sharing and estate recoveries, the
savings shown in the following table would apply. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------

Option: Recovery of 25 percent of costs
----------------------------------------------------------------------
Budget authority                   247     171      49    -137    -415
Outlays                            243     182      67    -110    -374

Option: Recovery of 50 percent of costs
----------------------------------------------------------------------
Budget authority                   633     493     411     287     102
Outlays                            637     500     423     305     129
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------

Option: Recovery of 25 percent of costs
----------------------------------------------------------------------
Budget authority                   296     321     362     424     517
Outlays                            294     318     356     415     503

Option: Recovery of 50 percent of costs
----------------------------------------------------------------------
Budget authority                   593     643     724     848    1033
Outlays                            589     635     712     830    1006
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:107.1

VA Health Care:  Potential for Offsetting Long-Term Care Costs
Through Estate Recovery (GAO/HRD-93-68, July 27, 1993). 

VA Health Care:  Offsetting Long-Term Care Cost By Adopting State
Copayment Practices (GAO/HRD-92-96, August 12, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:107.2

David P.  Baine, (202) 512-7101



   OPTION:
   CONSTRUCTION OF VETERANS'
   MEDICAL CARE
   FACILITIESCONSRUCTION OF
   VETERANS' MEDICAL CARE
   FACILITIES
----------------------------------------------------- Appendix III:108

----------------------------------  ----------------------------------
Authorizing committees              Veterans' Affairs (Senate and
                                    House)

Appropriations subcommittees        VA, HUD, and Independent Agencies
                                    (Senate and House)

Primary agency                      Department of Veterans Affairs

Account                             Construction (36-0110)

Spending type                       Discretionary

Budget subfunction                  Hospital and medical care for
                                    veterans

Framework theme                     Reassess objectives
----------------------------------------------------------------------
Annually, Department of Veterans Affairs (VA) spends about $500
million on construction of medical care facilities.  Currently, VA is
planning to build new hospitals in Honolulu, Hawaii; East Central
Florida; and northern California.  Construction of additional VA
capacity would add to the surplus of hospital beds that already
exists in many of the communities where VA plans to build hospitals. 
Many states, including Florida and Hawaii, are implementing or
considering health care reforms that would ensure health insurance
coverage for virtually all residents, including veterans.  Where such
universal health care coverage is adopted, the demand for VA hospital
care could decrease by about 50 percent, and demand for outpatient
care could decrease by about 40 percent. 

The Congress may wish to limit construction of additional VA health
care facilities until reforms of health care financing systems, both
nationally and in individual states, and VA eligibility take shape. 
If the Congress limits both major and minor projects, CBO estimates
that the following savings could be achieved. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                   422     416     412     408     402
Outlays                             19      73     149     197     248

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   423     442     448     463     478
Outlays                             19      75     154     240     323
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:108.1

Veterans' Health Care:  Potential Effects of Health Care Reforms on
VA's Major Construction Program (GAO/HRD-T-93-19, May 6, 1993). 

Veterans' Health Care:  Potential Effects of Health Financing Reforms
on Demand for VA Services (GAO/HRD-T-93-12, March 31, 1993). 

Veterans' Health Care:  Potential Effects of Health Reforms on VA
Construction (GAO/T-HRD-93-7, March 3, 1993). 

VA Health Care:  Actions Needed to Control Major Construction Cost
(GAO/HRD-93-75, February 26, 1993). 

Transition Series:  Veterans' Affairs Issues (GAO/OCG-93-21TR,
December 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:108.2

David P.  Baine, (202) 512-7101



   OPTION:
   VETERANS' DISABILITY
   COMPENSATION FOR NON-SERVICE
   CONNECTED DISEASESVETERANS'
   DISABILITY COMPENSATION FOR
   NON-SERVICE CONNECTED DISEASES
----------------------------------------------------- Appendix III:109

----------------------------------  ----------------------------------
Authorizing committees              Veterans' Affairs (Senate and
                                    House)

Primary agency                      Department of Veterans Affairs

Account                             Compensation (36-0153)

Spending type                       Direct

Budget subfunction                  Income security for veterans

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
During 1986, VA paid approximately $1.7 billion in disability
compensation payments to veterans with diseases neither caused nor
aggravated by military service.  In 1994 CBO reported that about
250,000 veterans were receiving about $1.5 billion annually in VA
compensation for these diseases.  GAO's study of five countries shows
that they do not compensate veterans under these circumstances. 

The Congress may wish to reconsider whether such diseases should be
compensated as service-connected disabilities.  If disability
compensation payments to veterans with non-service connected,
disease-related disabilities were eliminated in future cases, the
following savings would apply. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    38      79     124     172     225
Outlays                             34      71     119     167     244
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:109.1

Disabled Veterans Programs:  U.S.  Eligibility and Benefit Types
Compared With Five Other Countries (GAO/HRD-94-6, November 24, 1993). 

VA Benefits:  Law Allows Compensation for Disabilities Unrelated to
Military Service (GAO/HRD-89-60, July 31, 1989). 


      GAO CONTACT
--------------------------------------------------- Appendix III:109.2

David P.  Baine, (202) 512-7101



   750 ADMINISTRATION OF JUSTICE
----------------------------------------------------- Appendix III:110

  -- Justice's use of private counsel to collect civil debt



   OPTION:
   JUSTICE'S USE OF PRIVATE
   COUNSEL TO COLLECT CIVIL
   DEBTJUSTICE'S USE OF PRIVATE
   COUNSEL TO COLLECT CIVIL DEBT
----------------------------------------------------- Appendix III:111

----------------------------------  ----------------------------------
Authorizing committees              Judiciary (Senate and House)
                                    Governmental Affairs (Senate)
                                    Government Reform and Oversight
                                    (House)

Appropriations subcommittees        Commerce, Justice, State, and
                                    Judiciary (Senate)
                                    Commerce, Justice, State (House)

Primary agency                      Department of Justice

Account                             Salaries and expenses, General
                                    legal activities (15-0128)

Spending type                       Discretionary

Budget function                     Federal litigative and judicial
                                    activities

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Many GAO reports have documented the problems of civil fines and
penalties and the collection of these debts.  As GAO has reported
over the years the volume of nontax delinquent civil debt cases in
U.S.  Attorney Offices (USAO) has fluctuated.  Case overload in some
offices resulted in delays in working civil debt collection cases,
which had a negative effect on collection efforts.  As a result, in
1986 the Congress authorized a private counsel debt collection pilot
program which allows the Attorney General to contract with private
counsel firms in up to 15 jurisdictions to litigate and collect these
debts.  Private firms are paid on a contingency fee basis. 

USAOs and private attorneys have handled different sizes and types of
civil debt cases, making assessments of their relative cost
effectiveness unclear.  However, private counsel firms have cost
effectively collected debts that would otherwise have gone
uncollected and have been successful in reducing case backlogs.  For
example, from implementation of the pilot program through fiscal year
1992, private counsel firms in seven districts collected $9.2 million
at a cost of $2.4 million and closed 9,728 cases.  As of September
30, 1992, these firms continued to work on 15,791 cases.  The
fluctuating nature of the caseload seems to make the flexibility of a
contractual arrangement more desirable than hiring permanent USAO
collection staff. 

Because of the success of the pilot program and the flexibility it
provides in addressing debt collection, GAO believes that the
Congress should consider allowing the Attorney General to contract
with private counsel firms to collect delinquent nontax civil debt on
an as-needed basis in all districts.  Further, the requirement for
participation of a fixed number of firms in each district should be
dropped to allow the participation of only the number of firms needed
to do the work.  These actions would enhance debt collection efforts. 

CBO agrees that savings can be achieved through the use of private
counsel.  However, CBO could not prepare an estimate of savings from
this option without information upon which to base projections of
private counsel use by USAOs.  GAO work shows that in addition to the
seven pilot districts in its review, Justice contracted or planned to
contract with private counsel firms in five other districts to
address foreclosure cases.  The future need for private counsel in
the remaining 82 districts is uncertain. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:111.1

National Fine Center:  Expectations High, But Development Behind
Schedule (GAO/GGD-93-95, August 10, 1993). 

Justice Department:  Litigation and Collection of Civil Fines and
Penalties (GAO/GGD-88-23FS, January 7, 1988). 

Justice Department:  Impediments Faced in Litigating and Collecting
Debts Owed the Government (GAO/GGD-87-7BR, October 15, 1986). 

Debt Collection:  Billions Are Owed While Collection and Accounting
Problems Are Unresolved (GAO/AFMD-86-39, May 23, 1986). 

Justice Department:  Improved Management Processes Would Enhance
Justice's Operations (GAO/GGD-86-12, March 14, 1986). 

Financial Integrity:  Justice Made Progress But Further Improvements
Needed (GAO/GGD-86-9, October 31, 1985). 

After the Criminal Fine Enforcement Act Of 1984--Some Issues Still
Need to Be Resolved (GAO/GGD-86-02, October 10, 1985). 


      GAO CONTACT
--------------------------------------------------- Appendix III:111.2

Norman J.  Rabkin, (202) 512-3610



   800 GENERAL GOVERNMENT
----------------------------------------------------- Appendix III:112

  -- General Services Administration supply depot system

  -- The 1-dollar coin

  -- Judiciary's long-range space planning system



   OPTION:
   GENERAL SERVICES ADMINISTRATION
   SUPPLY DEPOT SYSTEMGENERAL
   SERVICES ADMINISTRATION SUPPLY
   DEPOT SYSTEM
----------------------------------------------------- Appendix III:113

----------------------------------  ----------------------------------
Authorizing committees              Governmental Affairs (Senate)
                                    Government Reform and Oversight
                                    (House)

Primary agency                      General Services Administration

Account                             General Supply Fund (47-4530)

Spending type                       Direct

Budget subfunction                  General property and records
                                    management

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The General Services Administration (GSA) has a multimillion dollar
supply system to help support federal agencies' mission needs.  As
part of this system, GSA buys and warehouses about 16,000 common-use
supply products and resells and ships them to federal agencies
through five depots.  An alternative method GSA uses is to have
supplies delivered directly from suppliers to federal agencies. 
Agencies pay less when supplies are delivered directly.  At the time
of GAO's most recent work, GSA marked up directly delivered products,
on average, 10 percent of product cost, while products stored and
shipped from GSA depots were marked up an average of 29 percent.  By
fiscal year 1995, GSA's markups had increased to 22 percent and 36
percent, respectively.  Although the cost difference between the two
delivery options has lessened in the intervening years for a variety
of reasons, including a changed methodology for calculating mark-ups,
the difference is still significant and reflects the higher costs
associated with maintaining and operating a large depot distribution
system. 

GAO's review showed that GSA directly delivered only an estimated $68
million of the estimated $800 million in sales that had potential for
direct delivery during the 12-month period ending on February 14,
1991.  This means that over 80 percent of depot sales had potential
to be supplied in this way.  The remaining depot sales were mostly
low-value, small-quantity orders which may have been uneconomical for
GSA to handle--more specifically it cost them more to provide the
materials than the customer paid.  Most of these orders could have
been purchased locally without going through GSA.  If GSA increased
direct delivery and encouraged agencies to purchase low-value,
small-quantity orders locally, it could significantly reduce needed
depot operations. 

Maintaining a large and costly depot distribution system may no
longer be a viable or necessary activity for the federal government. 
Consistent with this position, the Vice President's National
Performance Review recommended that supply inventories be reduced and
agencies be allowed to choose sources of supply.  In response, GSA is
studying its own and private-sector depot distribution costs to
identify where greater efficiency could be achieved.  In addition,
GSA (1) has drafted regulatory changes that, if implemented, will
permit agencies to use supply sources other than depots, (2) has
begun actions to identify logistic models that may provide other
sources of supply capable of providing items at reasonable costs, and
(3) has increased the use of commercial rather than
government-specific item descriptions, which should provide a clearer
link between the items agencies need and those available
commercially.  To the extent that GSA's efforts result in more
economical and efficient ways for agencies to obtain needed supplies
outside the depot system, GAO believes that there will be increased
opportunities to reduce or possibly even eliminate GSA's depot
system. 

One option that the Congress could consider would be to require
increased use of direct delivery for high-dollar value supplies and
only stocking items that are profitable.  After these changes are
implemented, GSA or the Congress could phase out GSA depots that are
no longer economically justifiable or needed.  If all the depots were
phased out, the following savings would result. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                    15      31      46      47      49
Outlays                             11      27      42      47      48
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:113.1

General Services Administration:  Increased Direct Delivery of
Supplies Could Save Millions (GAO/GGD-93-32, December 28, 1992). 

Transition Series:  General Services Issues (GAO/OCG-93-28TR,
December 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:113.2

J.  William Gadsby, (202) 512-8387



   OPTION:
   THE 1-DOLLAR COINTHE 1-DOLLAR
   COIN
----------------------------------------------------- Appendix III:114

----------------------------------  ----------------------------------
Authorizing committees              Banking, Housing, and Urban
                                    Affairs (Senate)
                                    Banking and Financial Services
                                    (House)

Primary agency                      Department of the Treasury

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
In 1993, GAO reported on cost savings associated with the 1-dollar
coin.  We said that because a dollar coin would have a longer life
and be more easily processed than a note, and because the seignorage
recognized reduces the amount of borrowing needed to finance the
deficit, substituting a dollar coin for a dollar note would yield
significant savings to the government.  Other countries have
demonstrated that public resistance to such a change can be managed
and overcome. 

The direct budgetary savings from this option are relatively small
during the CBO 5-year estimating period.  These savings, shown in the
table that follows, result from increases in payments of earnings by
the Federal Reserve Bank into miscellaneous receipts of the Treasury. 

Although not reflected in the table, there are other substantial
longer term savings due to the effects of seigniorage.  Seignorage is
the difference between the face value of the coin and its cost of
production, which includes the value of the metals contained in the
coin and the Mint's manufacturing and distribution costs.  Seignorage
is not considered part of the budget, but it does substitute for
borrowing from the public and, thus, lowers interest costs to the
government. 



                           Five-year Revenues

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Revenue gains                        0       0      20      30      50
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:114.1

1-Dollar Coin:  Reintroduction Could Save Millions If Properly
Managed (GAO/GGD-93-56, March 11, 1993). 

National Coinage Proposals:  Limited Public Demand for New Dollar
Coin or Elimination of Pennies (GAO/GGD-90-88, May 23, 1990). 


      GAO CONTACT
--------------------------------------------------- Appendix III:114.2

J.  William Gadsby, (202) 512-8387



   OPTION:
   JUDICIARY'S LONG-RANGE SPACE
   PLANNING SYSTEMJUDICIARY'S
   LONG-RANGE SPACE PLANNING
   SYSTEM
----------------------------------------------------- Appendix III:115

----------------------------------  ----------------------------------
Authorizing committees              Environment and Public Works
                                    (Senate) Transportation and
                                    Infrastructure (House)

Primary agency                      Administrative Office of the
                                    United States Courts

Account                             Federal Buildings Fund (47-4542)

Spending type                       Direct

Budget subfunction                  General property and records
                                    management

Framework theme                     Improve efficiency
----------------------------------------------------------------------
In 1988, the Administrative Office of the U.S.  Courts (AOC)
developed a long-range plan for space needs.  Based on 1992 space
projections by the AOC, GAO estimated that the total space
requirements for courts and related agencies would increase to about
36.9 million square feet over a 10-year period--a 97-percent
increase.  GAO found that AOC's planning process resulted in higher
estimates for court space than is warranted.  Using the judiciary's
$31 per square foot average cost for all court space, GAO showed that
the judiciary could save approximately $112 million annually, or $1.1
billion in constant dollars over a 10-year period, if the errors in
its planning process were corrected. 

The Congress should direct the judiciary to revise its planning
process for identifying long-range space needs.  Specifically, the
process should (1) treat all judicial districts consistently in terms
of assumptions between caseloads, staff, and space, (2) establish a
baseline of space needs for each district that reflects current
caseloads, and (3) increase the reliability of its estimates by using
an appropriate statistical methodology to project caseloads and by
reducing the level of subjectivity in the process.  Because of
uncertainty about the nature and extent of changes that might be made
to the planning process, a 5-year estimate of savings cannot be
developed for this option. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:115.1

Federal Judiciary Space:  Progress Is Being Made to Improve the
Long-Range Planning Process (GAO/T-GGD-94-146, May 4, 1994). 

Federal Judicial Space Follow-up (GAO/GGD-94-135R, April 22, 1994). 

Federal Judiciary Space:  Long-Range Planning Process Needs Revision
(GAO/T-GGD-94-1B, October 7, 1993). 

Federal Judiciary Space:  Long-Range Planning Process Needs Revision
(GAO/GGD-93-132, September 28, 1993). 


      GAO CONTACT
--------------------------------------------------- Appendix III:115.2

William M.  Hunt, (202) 512-8676



   MULTIPLE
----------------------------------------------------- Appendix III:116

  -- Premium payments to employees while on leave

  -- Global positioning system technology

  -- Reform or repeal the Davis-Bacon Act

  -- Better manage Department of Energy overtime costs

  -- Eliminate prefinancing funds for Department of Energy
     contractors

  -- Use uncosted obligations to offset future budget needs

  -- Federal agency credit management programs

  -- Formula-based grant programs



   OPTION:
   PREMIUM PAYMENTS TO EMPLOYEES
   WHILE ON LEAVEPREMIUM PAYMENTS
   TO EMPLOYEES WHILE ON LEAVE
----------------------------------------------------- Appendix III:117

----------------------------------  ----------------------------------
Authorizing committees              Multiple

Appropriations subcommittees        Multiple

Primary agency                      Multiple

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Office of Personnel Management has directed all federal agencies
to pay employees who are scheduled to work on Sundays at the Sunday
premium pay rate even if the employees take leave on Sunday.  The
directive became effective on May 27, 1993, and was based on a U.S. 
Claims Court interpretation of federal leave statutes that prohibit
an employee's pay from being diminished due to taking leave.  Prior
to this time, employees who took leave on Sunday were paid at their
basic pay rate for the leave rather than the Sunday premium rate of
the base rate plus 25 percent.  The Department of Transportation
(DOT), which paid $36.8 million for Sunday premium pay in fiscal year
1993, estimated that regularly paying the Sunday premium pay rate to
employees on leave would cost it an additional $6 million annually. 

The House Committee on Appropriations' Subcommittee on Transportation
and Related Agencies included a provision in the DOT fiscal year 1995
appropriation that precluded DOT from paying premium pay for Sundays
not actually worked.  The Congress could consider including similar
provisions in the appropriations for other agencies which pay Sunday
premium pay or alternatively revise the federal leave statutes to
require that the employees receive their base rate of pay when on
leave.  A 5-year estimate of savings cannot be developed at this
time.  This is because specific data concerning Sunday premium pay
are not currently centralized.  GAO expects to have these data in the
near future. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:117.1

None identified. 


      GAO CONTACT
--------------------------------------------------- Appendix III:117.2

Nancy R.  Kingsbury, (202) 512-5074



   OPTION:
   GLOBAL POSITIONING SYSTEM
   TECHNOLOGYGLOBAL POSITIONING
   SYSTEM TECHNOLOGY
----------------------------------------------------- Appendix III:118

----------------------------------  ----------------------------------
Authorizing committees              Multiple

Appropriations subcommittees        Multiple

Primary agency                      Multiple

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Many federal agencies are developing differential global positioning
system (DGPS) technology to provide more accurate satellite-based
positioning information for navigation, surveying, or mapping.  For
example, the Federal Aviation Administration is planning a national
DGPS network for aviation costing about $500 million and the Coast
Guard is installing a coastal and inland waterway DGPS marine
navigation system expected to cost about $18 million.  At least 22
other federal agencies have identified future DGPS applications, such
as automatic vehicle location, improved rail safety, and more
accurate mapping and surveying for highway construction or natural
resource inventory activities, among other uses. 

GAO found, however, that while some agencies have modified their DGPS
systems to permit use by other federal agencies, most federal
agencies were not developing joint DGPS technology or sharing
equipment.  This occurred because (1) federal agencies are not
required to coordinate their DGPS development and (2) the lead agency
for civil DGPS development--the Department of Transportation
(DOT)--has never received legislative or executive branch authority
to coordinate non-DOT agencies' use of DGPS. 

The Congress may want to consider directing the Office of Management
and Budget (OMB) to develop a stronger coordination mechanism for
managing future federal DGPS activities.  Such a mechanism would
require, among other things, that agencies justify why future DGPS
applications could not be met by other federal systems.  If the
Congress delayed spending until a coordination mechanism were
implemented or reduced appropriations to eliminate duplication,
future costs would be lower.  A 5-year estimate of savings cannot be
developed at this time.  This is because data on the amounts agencies
spend for these activities and the portion of spending that is
overlapping are not available. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:118.1

Global Positioning Technology:  Opportunities for Greater Federal
Agency Joint Development and Use (GAO/RCED-94-280, September 28,
1994). 


      GAO CONTACT
--------------------------------------------------- Appendix III:118.2

Kenneth M.  Mead, (202) 512-2834



   OPTION:
   REFORM OR REPEAL THE
   DAVIS-BACON ACTREFORM OR REPEAL
   THE DAVIS-BACON ACT
----------------------------------------------------- Appendix III:119

----------------------------------  ----------------------------------
Authorizing committees              Labor and Human Resources (Senate)
                                    Economic and Educational
                                    Opportunities (House)

Appropriations subcommittees        Labor, Health and Human Services,
                                    and Education (Senate and House)

Primary agency                      Department of Labor

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The Davis-Bacon Act requires that workers on federally-funded or
federally-assisted construction projects be paid wages at or above
levels determined by the Department of Labor to be prevailing in the
area.  The current dollar threshold for projects covered by
Davis-Bacon is $2,000, an amount that has not changed since 1935. 
Critics of the act believe that it inflates the costs of federally
funded construction projects. 

In 1979, GAO expressed major concerns about the accuracy of wage
determinations and its impact on federal construction costs.  As a
result of these concerns, GAO recommended that Davis-Bacon be
repealed.  While Davis-Bacon regulatory changes have addressed some
specific concerns raised in our 1979 report, other concerns remain,
most notably the potential for wage determinations to be based on low
quality data.  For example, wage determinations are completed with
response rates as low as 25 percent because Labor must depend on the
voluntary cooperation of contractors to respond to requests for wage
and benefit data.  In addition, Labor does not verify the data
received, even on a sample basis.  Finally, Labor reports that the
average age of a wage survey is more than 7 years. 

CBO has noted that repealing Davis-Bacon or raising the threshold
would increase employment opportunities for less-skilled workers. 
However, such changes also would lower the earnings of some
construction workers.  If the Congress repealed Davis-Bacon, the
following savings would apply. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                   390     410     420     430     440
Outlays                            150     430     600     690     770

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                   390     410     420     430     440
Outlays                            150     430     600     690     770
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:119.1

Changes to the Davis-Bacon Act Regulations and Administration
(GAO/HEHS-94-95R, February 7, 1994). 

The Davis-Bacon Act Should be Repealed (GAO/HRD-79-18, April 27,
1979). 


      GAO CONTACT
--------------------------------------------------- Appendix III:119.2

Linda G.  Morra, (202) 512-7014



   OPTION:
   BETTER MANAGE DEPARTMENT OF
   ENERGY OVERTIME COSTSBETTER
   MANAGE DEPARTMENT OF ENERGY
   OVERTIME COSTS
----------------------------------------------------- Appendix III:120

----------------------------------  ----------------------------------
Authorizing committees              Armed Services (Senate)
                                    Energy & Natural Resources
                                    (Senate)
                                    National Security (House)
                                    Commerce (House)

Appropriations subcommittees        Energy & Water Development (Senate
                                    and House)
                                    Interior (Senate and House)

Primary agency                      Department of Energy

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Department of Energy's (DOE) direct overtime costs for its
federal employees increased from $15.5 million in 1989 to $26.5
million in 1993, and its efforts to manage and minimize such costs
have been limited. 

As a result, DOE has (1) incurred costs for questionable overtime
work, such as driving DOE officials to the airport from their homes
on weekends, (2) not fully utilized compensatory time as a less
costly alternative to paid overtime, and (3) not consistently planned
annual leave to minimize the use of overtime.  In order to better
manage overtime and minimize costs, DOE should (1) ensure that the
types of work driving overtime costs are essential, (2) increase the
use of compensatory time as an alternative to paid overtime, and (3)
ensure that annual leave is planned to minimize the use of overtime. 
The Congress may wish to reduce DOE appropriations in anticipation of
changes in DOE's direct overtime costs practices.  The following
table illustrates the savings that could be realized over 5 years if
DOE reduced its overtime expenditures annually by 6 percent. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                     1       2       3       4       5
Outlays                              1       2       3       4       5

Savings from the 1995 funding level adjusted for inflati
----------------------------------------------------------------------
Budget authority                     1       2       3       4       6
Outlays                              1       2       3       4       6
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:120.1

Energy Management:  Department of Energy's Efforts to Manage Overtime
Costs Have Been Limited (GAO/RCED-94-282, September 27, 1994). 


      GAO CONTACT
--------------------------------------------------- Appendix III:120.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   ELIMINATE PREFINANCING FUNDS
   FOR DEPARTMENT OF ENERGY
   CONTRACTORS ELIMINATE
   PREFINANCING FUNDS FOR
   DEPARTMENT OF ENERGY
   CONTRACTORS
----------------------------------------------------- Appendix III:121

----------------------------------  ----------------------------------
Authorizing committees              Armed Services (Senate)
                                    Energy & Natural Resources
                                    (Senate)
                                    National Security (House)
                                    Commerce (House)

Appropriations subcommittees        Energy & Water Development (Senate
                                    and House)
                                    Interior (Senate and House)

Primary agency                      Department of Energy

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
At the end of fiscal year 1992, the Department of Energy (DOE) had
allowed its management and operating contractors to hold $219 million
in "prefinancing" funds, that is, amounts to be used to continue
operations in the event an appropriations act is not enacted at the
beginning of the next fiscal year.  This was based on DOE's belief
that the contractors needed assurances that their operations could
continue for at least 20 days and that there were no other funds
available to continue operations should a funding lapse occur. 

GAO believes that providing contractors prefinancing funds is
excessive and unnecessary.  DOE allows contractors to hold
prefinancing funds without sufficient analysis by DOE of (1) the
likely number of days contractors would be without funds if a funding
lapse occurred, (2) the activities for which funding needs to be
provided, and (3) the availability of other mechanisms to provide
funds during any such lapse.  Equally significant, DOE is providing
these funds to the contractors with their operating or construction
funds and not requiring that separate balances of prefinancing funds
be maintained.  DOE has since reduced the amounts of prefinancing. 
However, as of the end of fiscal year 1994, contractors still held
$32 million for prefinancing purposes.  Using these available funds
to meet current operating needs would enable the Congress to reduce
DOE appropriations by a similar amount.  A one-time savings of $32
million in fiscal year 1996 could be realized if prefinancing funds
were discontinued. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                    32       0       0       0       0
Outlays                             19      10       2       0       0

Savings from the 1995 funding level adjusted for inflati
----------------------------------------------------------------------
Budget authority                    32       0       0       0       0
Outlays                             19      10       2       0       0
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:121.1

DOE Management:  Funds for Maintaining Contractors' Operations Could
Be Reduced and Better Controlled (GAO/RCED-94-27, October 25, 1993). 


      GAO CONTACT
--------------------------------------------------- Appendix III:121.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   USE UNCOSTED OBLIGATIONS TO
   OFFSET FUTURE BUDGET NEEDSUSE
   UNCOSTED OBLIGATIONS TO OFFSET
   FUTURE BUDGET NEEDS
----------------------------------------------------- Appendix III:122

----------------------------------  ----------------------------------
Authorizing committees              Armed Services (Senate)
                                    Energy & Natural Resources
                                    (Senate)
                                    National Security (House)
                                    Commerce (House)

Appropriations subcommittees        Energy & Water Development
                                    (Senate and House)
                                    Interior (Senate and House)

Primary agency                      Department of Energy

Accounts                            Multiple

Spending type                       Discretionary

Budget subfunctions                 Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Uncosted obligations are budget authority that the Department of
Energy (DOE) has obligated to its contractors for goods and services
that have not yet been provided and for which costs have therefore
not been incurred.  At the end of fiscal year 1994, uncosted
obligations totaled about $8.4 billion for DOE-funded programs. 

Over the past several years, GAO has audited DOE's uncosted balances
and found amounts that were no longer needed for their original
purposes that could be used to offset future funding requirements. 
For example, a 1994 GAO review of two DOE program
areas--Environmental Restoration and Waste Management, and Defense
Programs--identified over $500 million in available funding for
fiscal year 1995.  DOE plans to use $620 million in uncosted
obligations to offset its fiscal year 1995 budget needs. 

GAO believes that additional uncosted funds are available because the
scope of our reviews so far has been limited to two major
accounts--Defense Programs and Environmental Management--that account
for about $4 billion in uncosted balances.  Other programs also hold
large balances.  Future appropriations could be reduced to reflect
these unused funds. 

The Congress may wish to consider rescinding fiscal year 1995
appropriations and/or reducing fiscal year 1996 appropriations to
reflect these unused funds.  Based upon our last two audits of DOE's
two accounts alone, reducing appropriations by $500 million in fiscal
year 1996 could achieve the following savings.\1



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Savings from the 1995 Defense Plan
----------------------------------------------------------------------
Budget authority                   500       0       0       0       0
Outlays                            300     164      37       0       0
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\1 The budget authority amount is a GAO estimate.  The corresponding
outlays are computed using CBO spendout rates. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:122.1

Energy Management:  Use of Uncosted Balances to Meet Budget Needs
(GAO/RCED-94-232FS, June 6, 1994). 


      GAO CONTACT
--------------------------------------------------- Appendix III:122.2

Victor S.  Rezendes, (202) 512-3841



   OPTION:
   FEDERAL AGENCY CREDIT
   MANAGEMENT PROGRAMSFEDERAL
   AGENCY CREDIT MANAGEMENT
   PROGRAMS
----------------------------------------------------- Appendix III:123

----------------------------------  ----------------------------------
Authorizing committees              Multiple

Appropriations subcommittees        Multiple

Primary agencies                    Multiple

Accounts                            Multiple

Spending type                       Discretionary/Direct

Budget subfunctions                 Multiple

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Federal agencies are expected to implement several loan origination,
account servicing, collection, and write-off initiatives specified by
the Office of Management and Budget (OMB) in its nine-point credit
management program. 

However, GAO has reported several times that agencies are not
adequately screening applicants for delinquent federal debt, and, in
some instances, are not using private collection firms in the normal
collection process.  GAO believes that not using these tools
contributes to delinquencies and adversely affects the government's
ability to make collectible loans and to collect on outstanding
loans.  In the fiscal year 1995 budget submission, OMB reported that
in fiscal year 1993, lending agencies wrote off about $2.7 billion of
direct loans and terminated for default over $8.4 billion of
guaranteed loans; for fiscal year 1994, OMB estimated that write-offs
will be about $1.3 billion and terminations about $9 billion. 

Although OMB has established a sound credit management program, and
both OMB and Treasury provide instruction to agencies on the use of
the nine-point credit management program tools, agencies are not
legislatively required to do so.  GAO believes that agencies' credit
management programs would be improved if the Congress required the
use of many of these initiatives. 

This option could be applied to some or all of the loans and debts of
many agencies.  Savings would depend on the extent to which agencies
adopt appropriate credit management tools. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:123.1

Federal Credit and Insurance Programs:  Actions That Could Minimize a
Growing Risk (GAO/T-AFMD-92-1, October 24, 1991). 

Guaranteed Loan Programs Are an Increasing Risk (GAO/T-AFMD-90-29,
September 18, 1990). 

Credit Management:  Deteriorating Credit Picture Emphasizes
Importance of OMB's Nine-Point Program (GAO/AFMD-90-12, April 16,
1990). 


      GAO CONTACT
--------------------------------------------------- Appendix III:123.2

Gregory M.  Holloway, (202) 512-9510



   OPTION:
   FORMULA-BASED GRANT
   PROGRAMSFORMULA-BASED GRANT
   PROGRAMS
----------------------------------------------------- Appendix III:124

----------------------------------  ----------------------------------
Authorizing committees              Multiple

Appropriations subcommittees        Multiple

Primary agencies                    Multiple

Accounts                            Multiple

Spending type                       Discretionary/Direct

Budget subfunctions                 Multiple

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
GAO has issued many reports over the past decade showing that the
distribution of federal grants to state and local governments is not
well-targeted to those jurisdictions with greatest programmatic needs
or lowest fiscal capacity to meet those needs.  As a result, program
recipients in areas with relatively lower needs and greater wealth
may enjoy a higher level of services than is available in harder
pressed areas, or the wealthier areas can provide the same level of
services at lower tax rates than harder pressed areas. 

At a time when federal domestic discretionary resources are
constrained, better targeting of grant formulas offers a strategy to
bring down federal outlays by concentrating reductions on wealthier
localities with fewer needs and greater capacity to absorb the cuts. 
At the same time, redesigned formulas could hold harmless the hardest
pressed areas, which are most vulnerable. 

Cuts in federal grants to states could be targeted by
disproportionately reducing federal funds to states with the
strongest tax bases and fewer needs.  Cuts in federal grants to local
governments could be targeted by either concentrating cuts on areas
with the strongest tax bases or by changing program eligibility to
restrict grant funding only to those places with lower fiscal
capacity or greatest programmatic needs. 

As an example, during the debate in 1986 over the termination of
General Revenue Sharing, GAO reported that a better targeted formula
and restricted eligibility could achieve a 50-percent cut in total
outlays, while maintaining or increasing federal funds to harder
pressed jurisdictions.  Recently, the administration proposed
reducing outlays for the Low Income Home Energy program by over $1.2
billion for fiscal year 1995 by targeting the formula to concentrate
remaining funds on states it views as having the greatest needs. 

An example that illustrates the potential of this type of option is a
10-percent reduction in the aggregate total of all closed-ended or
capped formula grant programs exceeding $1 billion.\2

This group includes over 70 percent of the dollars for such programs
but excludes some major open-ended formula reimbursement programs,
most notably Aid to Families with Dependent Children and Medicaid. 
The savings achieved through this option could serve as a benchmark
for overall savings from this approach but should not be interpreted
as a suggestion for across-the-board cuts.  Rather, the Congress may
wish to determine specific reductions on a program-by-program basis,
after examining the relative priority and performance of each grant
program. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Discretionary spending
----------------------------------------------------------------------

Savings from the 1995 funding level
----------------------------------------------------------------------
Budget authority                 2,430   2,430   2,430   2,430   2,430
Outlays                          1,740   3,390   3,990   4,210   4,370

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                 2,430   2,500   2,590   2,670   2,760
Outlays                          1,740   3,400   4,020   4,250   4,420
----------------------------------------------------------------------
Source:  Congressional Budget Office. 



                           Five-year Savings

                         (Dollars in millions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Direct spending
----------------------------------------------------------------------

Savings from the 1995 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority                 1,800   2,250   2,320   2,390   2,460
Outlays                             80     100     100     100     100
----------------------------------------------------------------------
Source:  Congressional Budget Office. 


--------------------
\2 In the transportation budget function, several very small
closed-ended grants could not be easily isolated in the baseline and
thus are included in the estimate. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:124.1

Medicaid:  Alternatives for Improving the Distribution of Funds to
States (GAO/HRD-93-112FS, August 20, 1993). 

Remedial Education:  Modifying Chapter 1 Formula Would Target More
Funds to Those Most in Need (GAO/HRD-92-16, March 28, 1992). 

Drug Treatment:  Targeting Aid to States Using Urban Population as
Indicator of Drug Use (GAO/HRD-91-17, November 27, 1990). 

Local Governments:  Targeting General Fiscal Assistance Reduces
Fiscal Disparities (GAO/HRD-86-113, July 24, 1986). 

Highway Funding:  Federal Distribution Formulas Should Be Changed
(GAO/RCED-86-114, March 31, 1986). 

Changing Medicaid Formula Can Improve Distribution of Funds to States
(GAO/GGD-83-27, March 9, 1983). 


      GAO CONTACT
--------------------------------------------------- Appendix III:124.2

Sarah F.  Jaggar, (202) 512-7119



   RECEIPTS
----------------------------------------------------- Appendix III:125

  -- Tax treatment of health insurance premiums

  -- Information reporting on forgiven debts

  -- Administration of the tax deduction for real estate taxes

  -- Corporate tax document matching

  -- Tax treatment of interest earned on life insurance policies and
     deferred annuities

  -- Federal agency reporting to the Internal Revenue Service

  -- Independent contractor tax compliance

  -- Deductibility of home equity loan interest

  -- Internal Revenue Service staff utilization

  -- Collecting gasoline excise taxes

  -- Computing excise tax bases

  -- Small-issue industrial development bonds and qualified mortgage
     bonds

  -- Improving compliance of sole proprietors

  -- Increase highway user fees on heavy trucks



   OPTION:
   TAX TREATMENT OF HEALTH
   INSURANCE PREMIUMSTAX TREATMENT
   OF HEALTH INSURANCE PREMIUMS
----------------------------------------------------- Appendix III:126

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
The current tax treatment of health insurance gives few incentives to
workers to economize on purchasing health insurance.  Employer
contributions for employee health protection are considered
deductible, ordinary, business expenses, and employer contributions
are not included in an employee's taxable income.  Some analysts
believe that the tax-preferred status of these benefits has
contributed to the overuse of health care services and large
increases in our nation's health care costs.  In addition, the
primary tax benefits accrue to those in high tax brackets who also
have above average incomes. 

Placing a cap on the amount of health insurance premiums that could
be excluded--that is including in a worker's income the amount over
the cap--could improve incentives and, to a lesser extent, tax
equity.  Alternatively, including health insurance premiums in income
but allowing a tax credit for some percentage of the premium would
improve equity since tax savings per dollar of premium would be the
same for all taxpayers.  Incentives could be improved for purchasing
low-cost insurance if the amounts given credits were capped. 

One specific option the Congress may wish to consider would be to tax
all employer-paid health insurance, while providing a refundable tax
credit of 20 percent of all premiums, with eligible premiums capped
at $360 and $170 per month for family coverage and individuals,
respectively.  This option recognizes the gain from changing the
treatment of insurance only for the individual income tax, not the
payroll tax.  The option is effective for payments of health
insurance premiums paid after December 31, 1995. 



                           Five-year Revenues

                         (Dollars in billions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Revenue gains                     24.9    -0.4    -0.2     0.1     0.6
----------------------------------------------------------------------
Source:  Joint Committee on Taxation. 

Note:  JCT provided its revenue estimates in billions of dollars. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:126.1

Tax Policy:  Effects of Changing Tax Treatment of Fringe Benefits
(GAO/GGD-92-43, April 7, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:126.2

Jennie S.  Stathis, (202) 512-5407



   OPTION:
   INFORMATION REPORTING ON
   FORGIVEN DEBTSINFORMATION
   REPORTING ON FORGIVEN DEBTS
----------------------------------------------------- Appendix III:127

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The Internal Revenue Code requires taxpayers to report forgiven debts
as income except under certain circumstances.  GAO reviewed taxpayer
compliance in reporting the Federal Deposit Insurance Corporation's
(FDIC) and Resolution Trust Corporation's (RTC) forgiven debt with
and without information reporting by these corporations to IRS. 

Information reporting increased taxpayer compliance.  For example,
without information reporting, 1 percent of taxpayers voluntarily
reported FDIC forgiven debts.  With reporting, 48 percent voluntarily
reported their forgiven debts.  With the information reports, IRS was
able to detect that another 20 percent had failed to report their
forgiven debts, yielding 68 percent of taxpayers eventually
complying. 

In 1993, the Congress required information reporting on forgiven
debts by FDIC, RTC, the National Credit Union Administration, credit
unions, certain banks, and federal agencies.  The Congress could
consider extending the requirement to other lending institutions. 
Revenues for this option are difficult to estimate due to
uncertainties about its effect on lending institution reporting
practices.  However, to illustrate potential savings from this
option, if the requirement were extended to finance companies, JCT
estimates revenue gains of under $50 million, assuming an effective
date of January 1, 1996. 



                           Five-year Revenues

                         (Dollars in billions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Revenue gains                       \a      \a      \a      \a      \a
----------------------------------------------------------------------
Source:  Joint Committee on Taxation. 

Note:  JCT provided its revenue estimates in billions of dollars. 

\a A gain of less than $50 million. 



      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:127.1

Tax Administration:  Information Returns Can Improve Reporting of
Forgiven Debts (GAO/GGD-93-42, February 17, 1993). 


      GAO CONTACT
--------------------------------------------------- Appendix III:127.2

Jennie S.  Stathis, (202) 512-5407



   OPTION:
   ADMINISTRATION OF THE TAX
   DEDUCTION FOR REAL ESTATE TAXES
   ADMINISTRATION OF THE TAX
   DEDUCTION FOR REAL ESTATE TAXES
----------------------------------------------------- Appendix III:128

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
IRS audits show that individuals overstated their real estate tax
deductions by about $1.5 billion nationwide in 1988.  GAO estimates
that this resulted in a nearly $300 million federal tax loss, which
would increase to about $400 million for 1992.  However, this may
understate lost revenues because GAO's review also found that IRS
auditors detected only about 29 percent of $127 million in overstated
deductions in three locations GAO reviewed.  Revenues could be lost
not only for the federal government, but also for the 31 states,
which in 1991 tied their itemized deductions to those used for
federal tax purposes. 

Two changes to the reporting of real estate cash rebates and real
estate taxes could reduce noncompliance and increase federal tax
collections.  First, the Congress could require that states report to
IRS, and to taxpayers on Form 1099's, cash rebates of real estate
taxes.  Second, the Congress could require that state and local
governments conform real estate tax statements to specifications
issued by IRS that would separate real estate taxes from
nondeductible fees, which are often combined on these statements. 
For estimation purposes, the proposals would be effective for rebates
issued after December 31, 1996 and for amounts reported on tax bills
after December 31, 1997.  Together, the proposals would increase
federal fiscal year revenues as shown in the table below. 



                           Five-year Revenues

                         (Dollars in billions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Revenue gains                        0      \a     0.1     0.2     0.2
----------------------------------------------------------------------
Source:  Joint Committee on Taxation. 

Note:  JCT provided its revenue estimates in billions of dollars. 

\a A gain of less than $50 million. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:128.1

Tax Administration:  Overstated Real Estate Tax Deductions Need To Be
Reduced (GAO/GGD-93-43, January 19, 1993). 


      GAO CONTACT
--------------------------------------------------- Appendix III:128.2

Jennie S.  Stathis, (202) 512-5407



   OPTION:
   CORPORATE TAX DOCUMENT
   MATCHINGCORPORATE TAX DOCUMENT
   MATCHING
----------------------------------------------------- Appendix III:129

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Internal Revenue Service (IRS) data show that corporate compliance
with tax laws has declined to an alarming degree.  IRS' document
matching program for payments to individuals has proven to be a
highly cost-effective way of bringing in billions of dollars in tax
revenues to the Treasury while at the same time boosting voluntary
compliance.  However, unlike payments to individuals, the law does
not require that information returns be submitted on most payments to
corporations. 

Generally using IRS' assumptions, GAO estimated the benefits and
costs for a corporate document matching program that would cover
interest, dividends, rents, royalties, and capital gains.  Assuming
that a corporate document matching program began in 1993, GAO
estimated that for years 1995-1999, IRS' annual costs would be about
$70 million and annual increased revenues about $1 billion.  This
estimate did not factor in compliance costs and changes in taxpayer
behavior.  Given continuing deficits, increased corporate
noncompliance, and declining audit coverage, the Congress may wish to
require a corporate document matching program. 

JCT has not developed an estimate of revenue gains from this
proposal.  JCT agrees that this option will result in increased
revenues, but those revenues will depend heavily on the scope of
coverage under an expanded information reporting system. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:129.1

Tax Administration:  Benefits of a Corporate Document Matching
Program Exceed the Costs (GAO/GGD-91-118, September 27, 1991). 


      GAO CONTACT
--------------------------------------------------- Appendix III:129.2

Jennie S.  Stathis, (202) 512-5407



   OPTION:
   TAX TREATMENT OF INTEREST
   EARNED ON LIFE INSURANCE
   POLICIES AND DEFERRED
   ANNUITIESTAX TREATMENT OF
   INTEREST EARNED ON LIFE
   INSURANCE POLICIES AND DEFERRED
   ANNUITIES
----------------------------------------------------- Appendix III:130

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Reassess objectives
----------------------------------------------------------------------
Interest earned on life insurance policies and deferred annuities,
known as "inside buildup," is not taxed as long as it accumulates
within the contract.  Although the deferred taxation of inside
buildup is similar to the tax treatment of income from some other
investments, such as capital gains, it differs from the policy of
taxing interest as it accrues on certain other investments like
certificates of deposit and original issue discount bonds. 

Not taxing inside buildup may have merit if it increases the amount
of insurance coverage purchased and the amount of income available to
retirees and beneficiaries.  However, the tax preference given life
insurance and annuities mainly benefits middle- and upper-income
people.  Coverage for low-income people is largely provided through
the Social Security System, which provides both insurance and annuity
protection. 

The Congress may want to reconsider granting preferential tax
treatment to inside buildup, weighing the social benefits against the
revenue forgone.  The Congress may wish to consider taxing the
interest earned on life insurance policies and deferred annuities. 
The table below reflects the estimated savings from this option,
effective for life insurance policies and annuities purchased after
December 31, 1995. 



                           Five-year Revenues

                         (Dollars in billions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Revenue gains                      4.5    12.9    16.8    20.6    23.2
----------------------------------------------------------------------
Source:  Joint Committee on Taxation. 

Note:  JCT provided its revenue estimates in billions of dollars. 



      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:130.1

Tax Policy:  Tax Treatment of Life Insurance and Annuity Accrued
Interest (GAO/GGD-90-31, January 29, 1990). 


      GAO CONTACT
--------------------------------------------------- Appendix III:130.2

Jennie S.  Stathis, (202) 512-5407



   OPTION:
   FEDERAL AGENCY REPORTING TO THE
   INTERNAL REVENUE SERVICEFEDERAL
   AGENCY REPORTING TO THE
   INTERNAL REVENUE SERVICE
----------------------------------------------------- Appendix III:131

----------------------------------  ----------------------------------
Authorizing committees              Governmental Affairs (Senate)
                                    Finance (Senate)
                                    Government Reform and Oversight
                                    (House)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
According to Internal Revenue Service (IRS) data, corporate tax
compliance decreased by 20 percentage points between 1980 and 1987. 
Information returns--reports provided to IRS by payers of interest,
dividends, or other tax-related information--have proven to be highly
cost-effective in generating billions of tax dollars from individual
taxpayers.  However, no such program exists for payments to
corporations.  IRS matches information return data to individuals'
tax returns, which induces individuals to voluntarily report income
and helps to identify those who do not.  Similar results might be
obtained from corporations. 

Federal agencies could help increase corporate tax compliance by
reporting their payments made to corporations for services.  Federal
agencies paid corporations about $61 billion for service contracts of
more than $25,000 in 1990. 

JCT has not developed an estimate of the revenue gains for this
proposal.  JCT does not disagree that improved reporting could
increase compliance. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:131.1

Tax Administration:  Federal Agencies Should Report Service Payments
Made to Corporations (GAO/GGD-92-130, September 22, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:131.2

Jennie S.  Stathis, (202) 512-5407



   OPTION:
   INDEPENDENT CONTRACTOR TAX
   COMPLIANCEINDEPENDENT
   CONTRACTOR TAX COMPLIANCE
----------------------------------------------------- Appendix III:132

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Common law rules for classifying workers as employees or independent
contractors are unclear and subject to conflicting interpretations. 
While recognizing this ambiguity, the Internal Revenue Service (IRS)
enforces tax laws and rules through employment tax examinations. 
Since 1989, 90 percent of these examinations had found misclassified
workers.  From October 1987 through December 1991, the average IRS
tax assessment relating to misclassified workers was $68,000. 

Establishing clear rules is difficult.  Nevertheless, taxpayers
need--and government is obligated to provide--clear rules for
classifying workers if businesses are to voluntarily comply.  In
addition, improved tax compliance could be gained by requiring
businesses to (1) withhold taxes from payments to independent
contractors and/or (2) file information returns with IRS on payments
made to independent contractors constituted as corporations.  Both
approaches have proven to be effective in promoting individual tax
compliance. 

During 1993, the Congress considered but rejected requiring
information reporting on payments made to some independent
contractors constituted as corporations.  The proposal--the service
industry noncompliance initiative or SINC--would have extended
current information reporting requirements for unincorporated
independent contractors to incorporated ones.  Thus, independent
contractors organized as either sole proprietors or corporations
would have been on equal footing.  And IRS would have had a less
intrusive means of ensuring their tax compliance. 

JCT did not provide an estimate for this option.  Estimating the
revenue gains from this option is difficult.  A previous estimate by
the JCT showed that the proposal increased revenues by about $400
million over 5 years.  In contrast, the Department of Treasury's
Office of Tax Analysis estimated a 5-year gain of about $5 billion. 
Estimates can vary widely depending on the definition of independent
contractor, the scope of coverage under an expanded information
reporting or withholding system, and assumptions about how much more
unreported income could be captured. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:132.1

Tax Administration:  Approaches for Improving Independent Contractor
Compliance (GAO/GGD-92-108, July 23, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:132.2

Jennie S.  Stathis, (202) 512-5407



   OPTION:
   DEDUCTIBILITY OF HOME EQUITY
   LOAN INTERESTDEDUCTIBILITY OF
   HOME EQUITY LOAN INTEREST
----------------------------------------------------- Appendix III:133

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of the Treasury

Spending type                       Direct

Framework theme                     Reassess objectives
----------------------------------------------------------------------
The term home equity borrowing or financing is usually applied to
mortgages other than the original loan used to acquire a home or to
any subsequent refinancing of that loan.  Interest is deductible on
up to $100,000 of home equity indebtedness and $1 million of
indebtedness used to acquire a home.  Home equity financing grew at
an average annual rate of about 20 percent between 1981 and 1991. 
Home equity financing is not limited to home-related uses and can be
used to finance additional consumption by borrowers. 

Use of mortgage-related debt to finance nonhousing assets and
consumption purchases through home equity loans could expose
borrowers to increased risk of losing their homes should they
default.  Equity concerns may exist because middle- and upper-income
taxpayers who itemize primarily take advantage of this tax
preference, and such an option is not available to people who rent
their housing. 

One way to address the issues concerning the amounts or uses of home
equity financing would be to limit mortgage interest deductibility to
the first $300,000 of indebtedness for the taxpayer's principal and
second residence.  Assuming an effective date of January 1, 1997,
this option would generate the following revenues. 



                           Five-year Revenues

                         (Dollars in billions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Revenue gains                      3.8     6.5     7.2     8.1     9.2
----------------------------------------------------------------------
Source:  Joint Committee on Taxation. 

Note:  JCT provided its revenue estimates in billions of dollars. 



      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:133.1

Tax Policy:  Many Factors Contributed to the Growth in Home Equity
Financing in the 1980s (GAO/GGD-93-63, March 25, 1993). 


      GAO CONTACT
--------------------------------------------------- Appendix III:133.2

Jennie S.  Stathis, (202) 512-5407



   OPTION:
   INTERNAL REVENUE SERVICE STAFF
   UTILIZATIONINTERNAL REVENUE
   SERVICE STAFF UTILIZATION
----------------------------------------------------- Appendix III:134

----------------------------------  ----------------------------------
Authorizing committees              Appropriations (Senate and House)
                                    Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
The allocation of IRS' collection staff has not been based on the
relative productivity of its collection programs.  Some of the more
productive programs, such as IRS automatic call sites, have not
reached their full potential because staff are assigned to less
productive field collection activities.  The productivity of
collection staff also varies greatly among collection locations. 

More emphasis on contacting delinquent taxpayers early using
telephone collection techniques and allocating staff based on
productivity should increase collections.  A rough GAO estimate
indicated that the reassignment of about 1,000 staff from field
collections--the least productive use of staff--to telephone
collections could increase collections by about $1.2 billion per
year.  In IRS' fiscal year 1995 appropriations, the Congress directed
IRS to utilize any additional collection staff for telephone
collections and not for field collections. 

Although CBO does not disagree that better utilization of IRS staff
can increase revenues, it does not make budget estimates of such
increases.  This is because it is difficult to establish a clear
connection between changes in staff allocations and revenue gains. 
In addition, even if such a connection can be established, the
magnitude of such gains attributable to reallocation is not certain
enough for budget scorekeeping purposes. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:134.1

Tax Administration:  New Delinquent Tax Collection Methods of IRS
(GAO/GGD-93-67, May 11, 1993). 

Tax Administration:  Improved Staffing of IRS' Collection Function
Would Increase Productivity (GAO/GGD-93-97, May 5, 1993). 

April 21, 1993, letter to the Honorable Steny H.  Hoyer, Chairman,
Subcommittee on Treasury, Postal Service, and General Government,
House Committee on Appropriations. 

Internal Revenue Service Receivables (GAO/HR-93-13, December 1992). 

Tax Administration:  IRS' System Used in Prioritizing Taxpayer
Delinquencies Can Be Improved (GAO/GGD-92-6, March 26, 1992). 

Tax Administration:  Efforts to Prevent, Identify, and Collect
Employment Tax Delinquencies (GAO/GGD-91-94, August 28, 1991). 


      GAO CONTACT
--------------------------------------------------- Appendix III:134.2

Jennie S.  Stathis, (202) 512-5407



   OPTION:
   COLLECTING GASOLINE EXCISE
   TAXESCOLLECTING GASOLINE EXCISE
   TAXES
----------------------------------------------------- Appendix III:135

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Although reliable statistical data do not exist to estimate gasoline
excise tax evasion, the Department of Transportation estimated in a
report to the Congress that such evasion amounted to about $500
million annually.  From a tax administration perspective, moving the
collection point for gasoline excise taxes from the terminal to the
refinery level may reduce tax evasion because (1) gasoline would
change hands fewer times before taxation, (2) refiners are presumed
to be more financially sound and have better records than other
parties in the distribution system, and (3) fewer taxpayers would be
involved.  However, industry representatives raise competitiveness
and cost-efficiency questions associated with moving the collection
point. 

In a May 1992 report, GAO suggested that the Congress explore the
level of gasoline excise tax evasion and, if it was found to be
sufficiently high, move tax collection to the point at which gasoline
leaves the refinery.  The amount of revenue that would be generated
from moving the collection point for gasoline excise taxes would
depend on the accuracy of the $500 million estimate of evasion and
how well the move curbed such evasion. 

JCT agrees that this option has the potential for increased revenue
but has not developed estimates of revenue gains. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:135.1

Tax Administration:  Status of Efforts to Curb Motor Fuel Tax Evasion
(GAO/GGD-92-67, May 12, 1992). 


      GAO CONTACT
--------------------------------------------------- Appendix III:135.2

Jennie S.  Stathis, (202) 512-5407



   OPTION:
   COMPUTING EXCISE TAX
   BASESCOMPUTING EXCISE TAX BASES
----------------------------------------------------- Appendix III:136

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Federal excise taxes are sometimes set at a fixed dollar amount per
unit of taxed good.  For example, alcoholic beverages are taxed at a
set rate per gallon or barrel, with the rate varying for different
types of beverages and differing concentrations of alcohol.  When set
in this manner, the real dollar value of the tax falls with
inflation. 

The real dollar value of these taxes can be maintained over time if
the tax is indexed for inflation or set as a percentage of the price
of the taxed product or service.  Tax policy issues would need to be
considered, and administrative difficulties may be encountered, but
they are not insurmountable.  Of the five excise taxes GAO studied in
1989, alcohol and tobacco taxes yielded over 99 percent of the
increased revenue that indexing would have generated.  The Congress
may wish to consider indexing excise tax rates for alcohol and
tobacco.  The table below reflects the estimated savings from this
option with an effective date of January 1, 1996. 



                           Five-year Revenues

                         (Dollars in billions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Revenue gains                      0.4     0.7     1.1     1.4     1.8
----------------------------------------------------------------------
Source:  Joint Committee on Taxation. 

Note:  JCT provided its revenue estimates in billions of dollars. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:136.1

Alcohol Excise Taxes:  Simplifying Rates Can Enhance Economic and
Administrative Efficiency (GAO/GGD-90-123, September 27, 1990). 

Tax Policy:  Revenue Potential of Restoring Excise Taxes to Past
Levels (GAO/GGD-89-52, May 9, 1989). 


      GAO CONTACT
--------------------------------------------------- Appendix III:136.2

Jennie S.  Stathis, (202) 512-5407



   OPTION:
   SMALL-ISSUE INDUSTRIAL
   DEVELOPMENT BONDS AND QUALIFIED
   MORTGAGE BONDSSMALL-ISSUE
   INDUSTRIAL DEVELOPMENT BONDS
   AND QUALIFIED MORTGAGE BONDS
----------------------------------------------------- Appendix III:137

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Department of the Treasury

Spending type                       Direct

Framework theme                     Reassess objectives
----------------------------------------------------------------------
Industrial development bonds (IDB), issued by state and local
governmental authorities, are used to help finance the creation or
expansion of manufacturing facilities.  Qualified mortgage bonds
(QMB), issued by state and local housing agencies, allow home buyers
to receive below-market rates on their mortgages.  Interest earned by
investors on IDBs and QMBs is exempt from federal income taxes. 

In 1993, the Congress made permanent the authority of state and local
governments to issue QMBs and IDBs.  However, GAO believes that the
achievement of public benefits from both IDBs and QMBs is
questionable. 

GAO found that (1) job creation attributed to IDB projects would
likely have occurred without issuance of the bonds in the three
states reviewed, (2) there is no evidence to support the contention
that IDBs achieve significant public benefits, such as providing
economic growth to depressed areas, and (3) most developers contacted
said that they would have proceeded with their projects in the
absence of IDBs.  Similarly, GAO found that QMBs (1) do little to
increase home ownership, (2) are usually provided to home buyers who
do not need them to obtain a conventional (unassisted) mortgage loan,
and (3) are not cost-effective. 

Both IDBs and QMBs could be better targeted.  For example, IDBs could
be focused on economically distressed areas or to start-up companies,
and QMBs could be directed toward home buyers who could not
reasonably qualify for unassisted conventional loans.  However,
because of evidence that neither IDBs nor QMBs are achieving their
intended benefits and in view of lost tax revenues, the Congress may
wish to consider repealing both provisions.  Estimated revenues
gained from eliminating QMBs and IDBs are shown in the table below. 



                           Five-year Revenues

                         (Dollars in billions)

                                  FY96    FY97    FY98    FY99    FY00
------------------------------  ------  ------  ------  ------  ------
Revenue gains                       \a     0.2     0.3     0.4     0.5
----------------------------------------------------------------------
Source:  Joint Committee on Taxation. 

Note:  JCT provided its revenue estimates in billions of dollars. 

\a A gain of less than $50 million. 


      RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:137.1

Industrial Development Bonds:  Achievement of Public Benefits Is
Unclear (GAO/RCED-93-106, April 22, 1993). 

Home Ownership:  Limiting Mortgage Assistance Provided to Owners With
High Income Growth (GAO/RCED-90-117, September 26, 1990). 

Home Ownership:  Targeting Assistance to Buyers Through Qualified
Mortgage Bonds (GAO/RCED-88-190BR, June 27, 1988). 

Home Ownership:  Mortgage Bonds Are Costly and Provide Little
Assistance to Those in Need (GAO/RCED-88-111, March 28, 1988). 


      GAO CONTACT
--------------------------------------------------- Appendix III:137.2

Judy A.  England-Joseph, (202) 512-7631



   OPTION:
   IMPROVING COMPLIANCE OF SOLE
   PROPRIETORSIMPROVING COMPLIANCE
   OF SOLE PROPRIETORS
----------------------------------------------------- Appendix III:138

----------------------------------  ----------------------------------
Authorizing committees              Finance (Senate)
                                    Ways and Means (House)

Primary agency                      Internal Revenue Service

Spending type                       Direct

Framework theme                     Improve efficiency
----------------------------------------------------------------------
Sole proprietors have a disproportionate share of noncompliance.\3
Although they account for just 13 percent of individual taxpayers,
sole proprietors accounted for about 40 percent of the unreported
income on 1988 tax returns filed by individuals.  Noncompliance in
reporting sole proprietor income by a majority of the estimated 13
million sole proprietors creates an estimated tax gap of $34 billion
a year.  To date, IRS efforts to improve compliance among these
taxpayers have not yielded significant improvements. 

GAO analyzed the noncompliance of the 10 least compliant sole
proprietor industries in the 1988 Taxpayer Compliance Management
Program (TCMP).\4 The TCMP data show that sole proprietors are less
compliant, file more complex returns, appear to be intentionally
noncompliant more often, and tend to be better off financially than
nonbusiness taxpayers.  Also, sole proprietors are less likely to
prepare their own returns.  GAO reviewed the IRS audit workpapers for
two market segments with significant noncompliance--the trucking
industry and auto body shops--to identify the causes of
noncompliance. 

IRS can address the overall noncompliance problem of sole
proprietorships by developing a system for managing and monitoring
all of its sole proprietor compliance projects.  IRS' TCMP data can
be used to help identify projects that would address the most
noncompliant sole proprietor market segments on a nationwide basis
and analyze the underlying causes of noncompliance.  IRS, then, can
work with specific industry groups.  For example, IRS could increase
compliance by encouraging better recordkeeping in the trucking
industry, and better information returns reporting by insurance
companies on payments made to auto body shops.  As GAO's work showed,
if IRS used TCMP data more effectively, and targeted IRS compliance
activities to affected industries, then tax collections would
increase. 

Because of uncertainties about the nature and impact of any new
system IRS might adopt, JCT could not estimate the revenue gains
directly attributable to this proposal. 


--------------------
\3 The term sole proprietors refers to self-employed individuals
other than farmers. 

\4 This program generates compliance data through rigorous audits of
randomly selected tax returns. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:138.1

Tax Administration:  IRS Can Better Pursue Noncompliant Sole
Proprietors (GAO/GGD-94-175, August 2, 1994). 


      GAO CONTACT
--------------------------------------------------- Appendix III:138.2

Jennie S.  Stathis, (202) 512-5407



   OPTION:
   INCREASE HIGHWAY USER FEES ON
   HEAVY TRUCKSINCREASE HIGHWAY
   USER FEES ON HEAVY TRUCKS
----------------------------------------------------- Appendix III:139

----------------------------------  ----------------------------------
Authorizing committees              Science, Commerce, and
                                    Transportation (Senate)
                                    Transportation and Infrastructure
                                    (House)

Primary agency                      Department of Transportation

Spending type                       Direct

Framework theme                     Redefine beneficiaries
----------------------------------------------------------------------
To develop and maintain highways, the Federal Highway Administration
(FHWA) collects user fees.  In fiscal year 1993, FHWA collected over
$18.5 billion from four user fees:  fuel taxes, a heavy vehicle use
tax, a new vehicle excise tax, and an excise tax on heavy tires.  In
1982, FHWA reported that heavy trucks underpaid by about 50 percent
their fair share relative to the pavement damage that they caused. 
FHWA also reported that lighter trucks were overpaying by between 30
and 70 percent (depending on weight), and automobiles were overpaying
by 10 percent. 

To increase highway revenues and to respond to the FHWA study, the
Congress in 1982 passed the first major increase in federal highway
use taxes since 1956.  To increase revenues, the Congress raised
gasoline and diesel taxes from 4 to 9 cents per gallon.  To improve
equity, the Congress mandated that the ceiling for the heavy vehicle
use tax be increased from $240 a year to $1,900 a year by 1989.  In
response to the concerns of the trucking industry about the new tax
structure, the Congress again revised the system in the Deficit
Reduction Act of 1984.  Under the act, the ceiling for the heavy
vehicle use tax was lowered from $1,900 to $550 a year.  To ensure
that this action was revenue neutral, the Congress raised the tax on
diesel fuel from 9 cents to 15 cents per gallon. 

As we recommended in June 1994, FHWA is conducting a formal cost
allocation study to determine whether all highway users are paying
their fair share of federal highway costs.  If this study finds that
heavy trucks underpay their share, one solution could be to base the
truck's fees on vehicle weight and distance traveled--a method
currently employed by six states.  The precise revenue gain from this
action would depend on the type and amount of user fee increases. 
Increasing fuel taxes, the heavy vehicle use tax, the new vehicle
excise tax, and the excise tax on heavy tires would generate
additional revenues.  For example, in fiscal year 1993, heavy truck
operators paid about $630 million in heavy vehicle use taxes. 
Raising the ceiling on this fee from $550 to $1,900 per user could
raise between $800 million and $1 billion. 

JCT does not disagree that this option could yield revenue.  However,
an estimate of revenue gains is not available at this time. 


      RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:139.1

Highway User Fees:  Updated Data Needed to Determine Whether All
Users Pay Their Fair Share (GAO/RCED-94-181, June 7, 1994). 


      GAO CONTACT
--------------------------------------------------- Appendix III:139.2

Kenneth M.  Mead, (202) 512-2834


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV


   ACCOUNTING AND INFORMATION
   MANAGEMENT DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix IV:1

Margaret T.  Wrightson, Assistant Director
Deborah A.  Colantonio, Evaluator-in-Charge
Mary P.  Giovinazzo, Senior Evaluator
Maureen M.  Berner, Evaluator
Janet C.  Eackloff, Evaluator


*** End of document. ***