Addressing the Deficit: Updating the Budgetary Implications of Selected
GAO Work (Letter Report, 06/28/96, GAO/OCG-96-5).
GAO provided updated information on spending reduction and revenue gain
options that stemmed from key findings in GAO work, focusing on the: (1)
analytical framework for considering individual options; and (2)
estimates of budgetary savings or revenue gains of each option, where
available.
GAO found that: (1) the reported spending and revenue options could be
used to reduce the deficit or to free up funds for other programs; (2)
although the reported options were derived from its existing body of
work, they are similar to other deficit reduction proposals; and (3) the
analytical framework for considering deficit reduction options focused
on reassessing objectives, redefining beneficiaries, and improving
efficiency.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: OCG-96-5
TITLE: Addressing the Deficit: Updating the Budgetary Implications
of Selected GAO Work
DATE: 06/28/96
SUBJECT: Budget deficit
Deficit reduction
Fiscal policies
Budget cuts
Budget outlays
Budget administration
Spending legislation
Cost control
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Cover
================================================================ COVER
Report to the Congress
June 1996
ADDRESSING THE DEFICIT - UPDATING
THE BUDGETARY IMPLICATIONS OF
SELECTED GAO WORK
GAO/OCG-96-5
Addressing the Deficit
(935167)
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
CDR - continuing disability review
CSFP - Commodity Supplemental Food Program
CVP - Central Valley Project
DFAS - Defense Finance and Accounting Service
DGPS - differential global positioning system
DI - Disability insurance
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 - Environment Protection Agency
FAIR - Federal Agricultural Improvement and Reform Act of 1996
FAA - Federal Aviation Administration
FAS - Foreign Agricultural Service
FDIC - Federal Deposit Insurance Corporation
FHWA - Federal Highway Administration
FY - fiscal year
GAO - General Accounting Office
GSA - General Services Administration
HACCP - Hazard Analysis and Critical Control Point system
HCFA - Health Care Financing Administration
HHS - Department of Health and Human Services
HMO - health maintenance organization
HUD - Department of Housing and Urban Development
IDB - industrial development bond
IFAD - International Fund for Agricultural Development
INS - Immigration and Naturalization Service
IRS - Internal Revenue Service
JCT - Joint Committee on Taxation
JTPA - Job Training Partnership Act
MAP - Military Airport Program
MR - Imagnetic resonance imaging
MTMC - Military Traffic Management Command
MWR - morale, welfare, and recreation
NASA - National Aeronautics and Space Administration
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
QMB - qualified mortgage bond
RFE/RL - Radio Free Europe/Radio Liberty
RHCDS - Rural Housing and Community Development Service
RTC - Resolution Trust Corporation
SBU - strategic business unit
SKFB - Soup Kitchen/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
VA - Department of Veterans Affairs
VOA - Voice of America
Letter
=============================================================== LETTER
B-272225
June 28, 1996
To the President of the Senate and
the Speaker of the House of Representatives
In several previous reports,\1 we have discussed the 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.
It updates our previous work in this area\2 with new information and
systematically identifies in a single document the budgetary
implications of selected program reforms discussed in our work, but
not yet implemented or enacted. As in our previous reports and
testimony, all of the options are based on key findings and issues
developed in our reviews and evaluations.
For this year's report, we updated 96 of the 120 spending reduction
and revenue gain options that appeared in last year's report. As
discussed below, appendix IV lists the 24 options from last year's
report that were not updated because of congressional or agency
action that took into consideration GAO's work on the issues.
The updated narrative descriptions of the options 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 each represents one way to address, in a budgetary
context, some of the significant problems identified in our reviews
of federal policies and programs. The Congress has many available
options for dealing with the deficit. 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.
To update each option, we reviewed events over the past year and
identified congressional, agency, and other actions that affected the
substantive content of the option and/or its likely savings.
Budgetary savings estimates for the updated options were again
developed by the Congressional Budget Office (CBO) and estimates of
revenue gains were developed by the Joint Committee on Taxation
(JCT). Where estimates are not provided, a brief explanation and
discussion is included with the option.
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 free up 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 direct spending 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.
As in our previous reports and testimonies, we have provided for
congressional consideration an analytical framework of individual
options (appendix II). The framework is organized around the
following 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.
As mentioned above, appendix IV describes in some detail actions that
have been taken over the last year in accordance with the findings
and conclusions of our work. For example, the Department of Energy
has taken steps to eliminate contractor prefinancing, terminate
procurement of nuclear waste containers, and improve property
management controls at its facilities. Examples in the area of
national defense include the Department of Defense's decision to
terminate the Hunter Joint Tactical Unmanned Aerial Vehicle program,
reductions in Army inventories of spare and repair parts at
Divisions, and reductions in overall force size and readiness levels
of the Ready Reserve Force. Other examples of such options include
termination of the Interstate Commerce Commission, establishment of a
new fee system for communications right-of-way based on population,
and centralization of loan servicing at the Department of
Agriculture's Rural Housing and Community Development Services.
Although we derived the updated 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 February 1995 CBO
report, Reducing the Deficit: Spending and Revenue Options, some
have been included in House and Senate Budget Resolution proposals
over the past 2 years, and some can be found in the President's March
1996 submission, Budget of the United States Government, Fiscal Year
1997--Appendix. Our report next year will include both new options\3
as well as updates of existing options.
We are sending copies of this report to the appropriate congressional
committees and to 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 V.
Charles A. Bowsher
Comptroller General
of the United States
--------------------
\1 The Deficit and the Economy: An Update of Long-Term Simulations
(GAO/AIMD/OCE-95-119, April 26, 1995); 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).
\2 Deficit Reduction: Opportunities to Address Long-Standing
Government Performance Issues (GAO/T-OCG-95-6, September 13, 1995);
Addressing The Deficit: Budgetary Implications of Selected GAO Work
for Fiscal Year 1996 (GAO/OCG-95-2, March 15, 1995); and Addressing
The Deficit: Budgetary Implications of Selected GAO Work
(GAO/OCG-94-3, March 11, 1994).
\3 For example, our recently released report Defense Infrastructure:
Budget Estimates for 1996-2001 Offer Little Savings for Modernization
(GAO/NSIAD-96-131, April 4, 1996) contained several new options for
reduced spending.
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. The options are presented in
appendix III. The options are organized 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, options with cost or revenue
estimates were updated by CBO and JCT. As in last year's report, 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 1996 appropriations increased for projected
inflation. A second estimate is of savings compared to the
fiscal year 1996 appropriations in nominal terms (held constant
for the next 4 years).
-- For defense discretionary spending programs, estimates are of
savings compared to the 1996 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 the Balanced Budget and Emergency Deficit Control
Act of 1985, as amended, proceeds from asset sales are not counted in
determining compliance with the discretionary spending limits or the
pay-as-you-go (PAYGO) requirements established under the Budget
Enforcement Act (BEA). 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 scored 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 whose 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 decision-makers 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 for less skilled workers, the Congress could
consider GAO's option to reduce the scope of or repeal Davis-Bacon.
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 that 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.
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, it uses a
centralized procurement system. GAO's option offers a way to reduce
future costs by adapting DOE procurements to EPA's more efficient
processes.
Also in keeping with the efficiency theme, GAO has identified more
than 150 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 these 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 as well as increase
efficiencies in service delivery. 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
This appendix 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
Framework
Option title Budget function BEA category theme
---------------------------- ------------------ -------------- --------------
Improved material management 050-National Discretionary Improve
can reduce shipyard costs defense efficiency
Reduce Army's unfilled war 050-National Discretionary Improve
reserve requirements by defense efficiency
using other inventory items
Defense infrastructure 050-National Discretionary Improve
defense efficiency
Potential reductions to the 050-National Discretionary Improve
fiscal year 1997 defense defense efficiency
operation and maintenance
budget
Continental air defense 050-National Discretionary Improve
defense efficiency
Carrier battle group 050-National Discretionary Improve
expansions and upgrades defense efficiency
Army's Comanche helicopter 050-National Discretionary Reassess
defense objectives
F-22 fighter 050-National Discretionary Reassess
defense objectives
MK-48 advanced capability 050-National Discretionary Reassess
torpedo propulsion system defense objectives
Reassess defense conversion 050-National Discretionary Reassess
spending defense objectives
Improve controls over 050-National Discretionary Improve
payments to defense defense efficiency
contractors
Defense inventories 050-National Discretionary Improve
defense efficiency
Use prime vendors to supply 050-National Discretionary Improve
high-volume clothing and defense efficiency
textile items
Restructure defense 050-National Discretionary Improve
transportation defense efficiency
Reduce excess capacity and 050-National Discretionary Improve
increase cost-effectiveness defense efficiency
of depot maintenance program
Use of innovative commercial 050-National Discretionary Improve
practices to supply defense efficiency
electronics items to
maintenance and repair
facilities
Consolidate the separate 050-National Discretionary Improve
military exchange stores defense efficiency
Copayments for care in 050-National Discretionary Redefine
military hospitals defense beneficiaries
Administering defense health 050-National Discretionary Improve
care defense efficiency
Centralize Department of 050-National Discretionary Improve
Energy's procurement of defense efficiency
laboratory testing services
Restructure the Department 050-National Discretionary Reassess
of Energy's national defense objectives
laboratories
Negotiate more realistic 050-National Discretionary Reassess
environmental agreements defense objectives
Food aid: reduce or 150-International Discretionary/ Reassess
eliminate funding for Public affairs direct objectives
Law 480 Title I Program
U.S. contribution to the 150-International Discretionary Reassess
International Fund for affairs objectives
Agricultural Development
Shortwave radio 150-International Discretionary Reassess
modernization program affairs objectives
TV Marti 150-International Discretionary Reassess
affairs objectives
Sell high-value property in 150-International Discretionary Reassess
Tokyo affairs objectives
Space Station 250-General Discretionary Reassess
science, space and objectives
technology
Recover clean coal 270-Energy Discretionary Reassess
technology funds objectives
Privatize Uranium Enrichment 270-Energy Direct Reassess
Program objectives
Privatize the Naval 270-Energy Discretionary Improve
Petroleum Reserve-1 efficiency
Consolidate Strategic 270-Energy Discretionary Improve
Petroleum Reserve efficiency
Federal land policies 300-Natural Direct Improve
resources and efficiency
environment
Collaborative federal land 300-Natural Discretionary Improve
management approach resources and efficiency
environment
Federal timber sales 300-Natural Discretionary Improve
resources and efficiency
environment
Charge fair market value for 300-Natural Direct Improve
natural resources resources and efficiency
environment
Recreation fees at federal 300-Natural Direct Improve
sites resources and efficiency
environment
Hardrock mining royalties 300-Natural Direct Improve
resources and efficiency
environment
Natural resources revenue 300-Natural Discretionary Improve
sharing resources and efficiency
environment
Federal water policies 300-Natural Direct Improve
resources and efficiency
environment
Water transfers 300-Natural Direct Improve
resources and efficiency
environment
Pollution fees and taxes 300-Natural Direct Improve
resources and efficiency
environment
Hazardous waste cleanup cost 300-Natural Discretionary Improve
recovery resources and efficiency
environment
Nuclear waste disposal fees 300-Natural Direct Improve
resources and efficiency
environment
Reduce or eliminate funding 350-Agriculture Direct Redefine
for the Market Access beneficiaries
Program
Reduce funding for the 350-Agriculture Direct Reassess
Export Credit Guarantee objectives
Programs
National Oceanic and 370-Commerce and Discretionary Improve
Atmospheric Administration housing credit efficiency
research fleet modernization
Opportunities to reduce the 370-Commerce and Discretionary Improve
cost of the 2000 decennial housing credit efficiency
census
Cargo preference laws: their 400- Discretionary Reassess
costs and effects Transportation objectives
Increase federal fees paid 400- Direct Redefine
by foreign-flagged cruise Transportation beneficiaries
ships
Increase state share of 400- Discretionary Redefine
state-supported intercity Transportation beneficiaries
rail passenger service
Reduce or eliminate Amtrak 400- Discretionary Reassess
subsidies Transportation objectives
Target military airport 400- Discretionary/ Improve
program funds within the Transportation direct efficiency
national airport system
Enhance Department of 400- Discretionary Improve
Transportation's oversight Transportation efficiency
of its university research
Employment and training 500-Education, Discretionary/ Improve
programs training, direct efficiency
employment and
social services
Overall strategy to address 550-Health Direct Improve
prescription drug fraud and efficiency
Medicaid fraud
Medicaid: States use 550-Health Direct Reassess
illusory approaches to shift objectives
program costs to the federal
government
Medicaid formula: fairness 550-Health Direct Reassess
could be improved objectives
Adopt automated drug 550-Health Direct Improve
utilization reviews efficiency
Teaching hospitals' Medicare 570-Medicare Direct Improve
payments efficiency
Medicare payment safeguards 570-Medicare Discretionary/ Improve
direct efficiency
Medicare payments for high 570-Medicare Direct Improve
technology procedures efficiency
Change the health 570-Medicare Discretionary/ Improve
maintenance organization direct efficiency
rate-setting method for
Medicare
Fees for non-Aid to Families 600-Income Direct Redefine
with Dependent Children security beneficiaries
child support enforcement
services
Automated child support 600-Income Direct Improve
enforcement systems security efficiency
Funding for state automated 600-Income Discretionary/ Improve
welfare systems security direct efficiency
Unified risk-based food 600-Income Discretionary Improve
safety system security efficiency
Consolidation of U.S. 600-Income Discretionary/ Improve
Department of Agriculture security direct efficiency
food assistance programs
Social Security continuing 650-Social Discretionary/ Improve
disability reviews Security direct efficiency
Cost-sharing for veterans' 700-Veterans Discretionary Redefine
long-term care benefits and beneficiaries
services
Veterans' disability 700-Veterans Direct Redefine
compensation for non- benefits and beneficiaries
service connected diseases services
Justice's use of private 750- Discretionary Improve
counsel to collect civil Administration of efficiency
debt justice
General Services 800-General Direct Improve
Administration supply depot government efficiency
system
The 1-dollar coin 800-General Direct Improve
government efficiency
Judiciary's long-range space 800-General Direct Improve
planning system government efficiency
Premium payments to Multiple Discretionary Improve
employees while on leave efficiency
Global positioning system Multiple Discretionary Improve
technology efficiency
Reform or repeal the Davis- Multiple Discretionary/ Reassess
Bacon Act direct objectives
Better manage Department of Multiple Discretionary Improve
Energy overtime costs efficiency
Use uncosted obligations to Multiple Discretionary Improve
offset future budget needs efficiency
Federal agency credit Multiple Discretionary/ Improve
management programs direct efficiency
Formula-based grant programs Multiple Discretionary/ Redefine
direct beneficiaries
Tax treatment of health Receipts Direct Redefine
insurance premiums beneficiaries
Information reporting on Receipts Direct Improve
forgiven debts efficiency
Administration of the tax Receipts Direct Improve
deduction for real estate efficiency
taxes
Corporate tax document Receipts Direct Improve
matching efficiency
Tax treatment of interest Receipts Direct Reassess
earned on life insurance objectives
policies and deferred
annuities
Federal agency reporting to Receipts Direct Improve
the Internal Revenue Service efficiency
Independent contractor tax Receipts Direct Improve
compliance efficiency
Deductibility of home equity Receipts Direct Reassess
loan interest objectives
Internal Revenue Service Receipts Direct Improve
staff utilization efficiency
Collecting gasoline excise Receipts Direct Improve
taxes efficiency
Computing excise tax bases Receipts Direct Improve
efficiency
Small-issue industrial Receipts Direct Reassess
development bonds and objectives
qualified mortgage bonds
Improving compliance of sole Receipts Direct Improve
proprietors efficiency
Increase highway user fees Receipts Direct Redefine
on heavy trucks beneficiaries
--------------------------------------------------------------------------------
050 NATIONAL DEFENSE
------------------------------------------------------- Appendix III:1
-- 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 1997 defense operation
and maintenance budget
-- Continental air defense
-- Carrier battle group expansions and upgrades
-- Army's Comanche helicopter
-- F-22 fighter
-- 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
-- Restructure the Department of Energy's national laboratories
-- Negotiate more realistic environmental agreements
OPTION:
IMPROVED MATERIAL MANAGEMENT
CAN REDUCE SHIPYARD
COSTSIMPROVED MATERIAL
MANAGEMENT CAN REDUCE SHIPYARD
COSTS
------------------------------------------------------- Appendix III:2
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
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 for the Navy's shipyard
repair material investment. A cost estimate was not developed for
this option because the amount of the reductions would depend on the
extent to which the Navy implements our recommendations in a given
budget year.
RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:2.1
Navy Supply: Improved Material Management Can Reduce Shipyard Costs
(GAO/NSIAD-94-181, July 27, 1994).
GAO CONTACT
----------------------------------------------------- Appendix III:2.2
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:3
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
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 1996, 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 1996 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:3.1
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:3.2
Mark E. Gebicke, (202) 512-5140
OPTION:
DEFENSE INFRASTRUCTUREDEFENSE
INFRASTRUCTURE
------------------------------------------------------- Appendix III:4
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
National Security (House)
Primary agency Department of Defense
Accounts Multiple
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
----------------------------------------------------------------------
GAO has reported that as DOD realigns and downsizes, 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, infrastructure areas and processes accounted for
$160 billion of the $254 billion fiscal year 1994 Defense budget and
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 fully estimated until a
comprehensive consolidation and downsizing plan is specified.
However, in an April 1996 report, GAO identified some specific
options for reducing defense infrastructure spending.
RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:4.1
Defense Infrastructure: Budget Estimates for 1996-2001 Offer Little
Savings for Modernization (GAO/NSIAD-96-131, April 4, 1996).
Defense Infrastructure: Enhancing Performance Through Better
Business Practices (GAO/T-NSIAD/AIMD-95-126, March 23, 1995).
Depot Maintenance: Issues in Allocating Workload Between the Public
and Private Sectors (GAO-T-NSIAD-94-161, April 12, 1994).
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).
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:4.2
David R. Warren, (202) 512-8412
OPTION:
POTENTIAL REDUCTIONS TO THE
FISCAL YEAR 1997 DEFENSE
OPERATION AND MAINTENANCE
BUDGETPOTENTIAL REDUCTINS TO
THE FISCAL YEAR 1997 DEFENSE
OPERATION AND MAINTENANCE
BUDGET
------------------------------------------------------- Appendix III:5
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
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 including training,
purchasing of spare and repair parts, and civilian personnel.
GAO analysis of selected O&M requests for fiscal year 1996 showed
that the budget for that year could have been reduced by $4.9 billion
without damaging defense operations and capabilities. The largest
potential reductions, each for over $500 million, were associated
with depot maintenance, 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 $481
million was associated with real property maintenance.
The Congress may wish to consider the potential opportunity for
savings when formulating fiscal year 1997 appropriations for
operation and maintenance accounts.
Based on GAO's analysis regarding potential savings in the fiscal
year 1996 O&M budget, the Congress may wish to consider reductions of
a similar magnitude, $4.9 billion, when formulating fiscal year 1997
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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 Defense Plan
----------------------------------------------------------------------
Budget authority 4,900 0 0 0 0
Outlays 3,714 916 157 54 20
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:5.1
1996 DOD Budget: Potential Reductions to Operation and Maintenance
Programs (GAO/NSIAD-95-200BR, September 26, 1995).
1995 Budget: Potential Reductions to the Operation and Maintenance
Programs (GAO/NSIAD-94-246BR, September 6, 1994).
GAO CONTACT
----------------------------------------------------- Appendix III:5.2
Mark E. Gebicke, (202) 512-5140
OPTION:
CONTINENTAL AIR
DEFENSECONTINENTAL AIR DEFENSE
------------------------------------------------------- Appendix III:6
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
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 (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 antidrug 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. If the dedicated continental air defense force and mission
were eliminated, the following savings could be achieved.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 Defense Plan
----------------------------------------------------------------------
Budget authority 238 489 504 519 535
Outlays 189 424 479 505 525
----------------------------------------------------------------------
Note: The Defense Department's 1997 plan reduces the number of
dedicated continental air defense Air National Guard aircraft from
150 to 90. Under the 1997 plan, potential savings over the period
1997 through 2001 would be reduced to $1,456 million in budget
authority savings ($829 million less than under the option above) and
$1,350 million in outlay savings ($772 million less than under the
option above).
Source: Congressional Budget Office.
RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:6.1
Continental Air Defense: A Dedicated Force Is No Longer Needed
(GAO/NSIAD-94-76, May 3, 1994).
GAO CONTACT
----------------------------------------------------- Appendix III:6.2
Richard A. Davis, (202) 512-3504
OPTION:
CARRIER BATTLE GROUP EXPANSIONS
AND UPGRADESCARRIER BATTLE
GROUP EXPANSIONS AND UPGRADES
------------------------------------------------------- Appendix III:7
---------------------------------- ----------------------------------
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 from $1.7 billion to $2
billion (in fiscal year 1996 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 1997, the following
savings could be achieved.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 Defense Plan
----------------------------------------------------------------------
Budget authority 346 714 740 767 795
Outlays 259 585 677 730 769
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCT
----------------------------------------------------- Appendix III:7.1
Navy Carrier Battle Groups: The Structure and Affordability of the
Future Force (GAO/NSIAD-93-74, February 25, 1993).
GAO CONTACT
----------------------------------------------------- Appendix III:7.2
Richard A. Davis, (202) 512-3504
OPTION:
ARMY'S COMANCHE
HELICOPTERARMY'S COMANCHE
HELICOPTER
------------------------------------------------------- Appendix III:8
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
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
----------------------------------------------------------------------
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 $50 billion, with an estimated program
unit cost of about $39 million. Anticipated cost increases and other
unresolved technical risks indicate that future cost growth is
likely. In December 1994, the Secretary of Defense decided to
restructure the Comanche program reducing program cost by about $2
billion for fiscal years 1996 through 2001. This action extended the
development phase until 2006 and deferred the production decision
until then.
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 its scout helicopter, the Kiowa, and
modifying 227 basic model Apaches with the Longbow system which
includes a fire control radar with a radar detector and a Hellfire
missile with a radio-frequency seeker. 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, deferral
of the production decision, 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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 Defense Plan
----------------------------------------------------------------------
Budget authority 299 298 398 425 533
Outlays 170 272 344 399 477
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:8.1
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:8.2
Louis J. Rodrigues, (202) 512-4841
OPTION:
F-22 FIGHTERF-22 FIGHTER
------------------------------------------------------- Appendix III:9
---------------------------------- ----------------------------------
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
----------------------------------------------------------------------
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 engineering and manufacturing 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 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 showed that replacement of the F-15 is not urgent.
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 over $12
billion. Air Force plans call for procurement of 4 aircraft a year,
increasing to 36 a year 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 percentage 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 2000 and eight
aircraft in 2001 until initial operational tests and evaluations are
completed in April 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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 Defense Plan
----------------------------------------------------------------------
Budget authority 0 0 87 1,117 1,839
Outlays 0 0 5 90 412
----------------------------------------------------------------------
Note: Actual savings could be less because the President's 1997
budget requests 76, rather than 80, aircraft at a cost of about $11
billion.
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
----------------------------------------------------- Appendix III:9.1
Tactical Aircraft: Concurrency in Development and Production of F-22
Aircraft Should Be Reduced (GAO/NSIAD-95-59, April 19, 1995).
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).
GAO CONTACT
----------------------------------------------------- Appendix III:9.2
Louis J. Rodrigues, (202) 512-4841
OPTION:
MK-48 ADVANCED CAPABILITY
TORPEDO PROPULSION SYSTEMMK-48
ADVANCED CAPABILITY TORPEDO
PROPULSION SYSTEM
------------------------------------------------------ Appendix III:10
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
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, were
estimated to cost about $821 million ($249 million for the propulsion
upgrade, $462 million for the guidance and control system, and $110
million for the guidance and control software). The Navy plans to
upgrade its entire inventory of ADCAP torpedoes over the next 7
years.
The Navy Program Manager requested approval for low-rate initial
production for the upgrade program. In 1992, and again in 1995, GAO
questioned the need for the propulsion system upgrade and recommended
that it 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. In addition, we recommended in
June 1995 that the Navy delay any production decision for the
guidance and control system because the software necessary to take
advantage of the upgraded system will not be ready until 1998. In
June 1995, the Navy planned to acquire as many as 529 units at a cost
of about $177 million. If the Congress chose to terminate the
upgrade program and delay the production decision on the guidance and
control system, the following savings could be achieved.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 Defense Plan
----------------------------------------------------------------------
Budget authority 67 64 33 37 7
Outlays 10 29 48 45 34
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:10.1
Navy Torpedo Program: MK-48 ADCAP Upgrades Not Adequately Justified
(GAO/NSIAD-95-104, June 12, 1995).
Navy Torpedo Program: MK-48 ADCAP Propulsion System Upgrade Not
Needed (GAO/NSIAD-92-191, September 10, 1992).
GAO CONTACT
---------------------------------------------------- Appendix III:10.2
Richard A. Davis, (202) 512-3504
OPTION:
REASSESS DEFENSE CONVERSION
SPENDINGREASSESS DEFENSE
CONVERSION SPENDING
------------------------------------------------------ Appendix III:11
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
National Security (House)
Primary agency Department of Defense
Account Research, development, test, and
evaluation, Defense-wide (97-
0400)
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 increased in
the early years of the current administration. 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 eleventh 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 1997, the following savings
could be achieved.\1
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 Defense Plan
----------------------------------------------------------------------
Budget authority 201 207 213 219 226
Outlays 87 170 200 209 218
----------------------------------------------------------------------
Source: Congressional Budget Office.
--------------------
\1 The National Defense Authorization Act for Fiscal Year 1996
reduced the administration's request of $500 million for the
Technology Reinvestment Program to $195 million.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:11.1
Technology Reinvestment Project: Recent Changes Place More Emphasis
on Military Needs (T-NSIAD-95-167, May 17, 1995)
Defense Conversion: Capital Conditions Have Improved for Small- and
Medium-Sized Firms (NSIAD-94-224, July 21, 1994).
Defense Conversion: Status of Funding and Spending (NSIAD-94-218BR,
June 30, 1994).
Defense Conversion: Slow Start Limits Spending (NSIAD-94-72, January
25, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:11.2
Louis J. Rodrigues, (202) 512-4841
OPTION:
IMPROVE CONTROLS OVER PAYMENTS
TO DEFENSE CONTRACTORSIMPROVE
CONTROLS OVER PAYMENTS TO
DEFENSE CONTRACTORS
------------------------------------------------------ Appendix III:12
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
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 (DOD). 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 in interest each day; underpayments
are also costly as DOD is required to pay interest on valid invoices
that are paid late.
Our October 1995 report shows that the overpayment problem continues
to exist and is widespread. The 374 business units (representing 82
large defense contractors and 57 small contractors) that responded to
our request for data as of July 1994 reported about $231.5 million in
outstanding overpayments and about $625.9 million in underpayments.
The evidence suggests and contractors reported that they followed up
to collect underpayments and usually notified DOD of overpayments.
However, contractors did not always return overpayments unless
instructed to do so.
DOD 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:12.1
DOD Procurement: Millions in Contract Payment Errors Not Detected
and Resolved Promptly (GAO/NSIAD-96-8, October 6, 1995).
DOD Procurement: Overpayments and Underpayments at Selected
Contractors Show Major Problems (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:12.2
Louis J. Rodrigues, (202) 512-4841
OPTION:
DEFENSE INVENTORIESDEFENSE
INVENTORIES
------------------------------------------------------ Appendix III:13
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
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 accumulated inventory that
greatly exceeds its operational and war reserve needs. Systemic
problems in determining requirements and inadequate financial
accountability and control have contributed to poor inventory
management practices. Traditionally, DOD's culture has emphasized
overbuying and placed little value on economy and efficiency, causing
unneeded items to pile up in warehouses. Continuing force reductions
and base closures will only compound the situation and result in
additional unneeded inventory.
DOD could be more aggressive in implementing private sector practices
that could reduce inventory costs. In this regard, the Defense
Logistics Agency's most successful program to date uses prime vendors
to buy, store, and distribute medical inventory to military hospitals
and clinics. Opportunities exist for DOD to adopt similar practices
for hardware items such as construction, electronic, and industrial
supplies.
Systemic reforms--such as improving the way inventory requirements
are determined, using commercial inventory management practices, and
changing financial management policies and practices--continue to be
needed to achieve further reductions in DOD's budget requirements.
GAO estimates that, as of September 1994, only about half of DOD's
$73.6 billion in inventory had 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" and "Use of Innovative
Commercial Practices to Supply Electronics Items to Maintenance and
Repair Facilities."
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:13.1
Defense Inventory: Shortages Are Recurring, But Not a Problem
(GAO/NSIAD-95-137, August 7, 1995).
Inventory Management: DOD Can Build on Progress in Using Best
Practices to Achieve Substantial Savings (GAO/NSIAD-95-142, August 4,
1995).
Defense Inventory: Opportunities to Reduce Warehouse Space
(GAO/NSIAD-95-64, May 24, 1995).
Defense Supply: Inventories Contain Nonessential and Excessive
Insurance Stocks (GAO/NSIAD-95-1, January 20, 1995).
Commercial Practices: Opportunities Exist to Enhance DOD's Sales of
Surplus Aircraft Parts (GAO/NSIAD-94-189, September 23, 1994).
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).
GAO CONTACT
---------------------------------------------------- Appendix III:13.2
David R. Warren, (202) 512-8412
OPTION:
USE PRIME VENDORS TO SUPPLY
HIGH-VOLUME CLOTHING AND
TEXTILE ITEMSUSE PRIME VENDORS
TO SUPPLY HIGH-VOLUME CLOTHING
AND TEXTILE ITEMS
------------------------------------------------------ Appendix III:14
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
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. In January
1996, DOD began to implement a prime vendor program at recruit
induction centers. 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 PRODUCTS
---------------------------------------------------- Appendix III:14.1
Inventory Management: DOD Can Build on Progress in Using Best
Practices to Achieve Substantial Savings (GAO/NSIAD-95-142, August 4,
1995).
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:14.2
David R. Warren, (202) 512-8412
OPTION:
RESTRUCTURE DEFENSE
TRANSPORTATIONRESTRUCTURE
DEFENSE TRANSPORTATION
------------------------------------------------------ Appendix III:15
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
National Security (House)
Primary agency Department of Defense
Accounts Multiple
Spending type Discretionary
Budget subfunction Department of Defense--Military
Framework theme Improve efficiency
----------------------------------------------------------------------
In 1993 and again in 1996, we reported that DOD's current
transportation processes are fragmented, inefficient, and costly.
Beginning in 1949, various studies, commissions, and task forces have
recommended changes in the defense transportation system
organizational structure. In 1987, after the Goldwater-Nichols Act
of 1986 urged that actions be taken to unify transportation
management, the Secretary of Defense established the U.S.
Transportation Command (USTRANSCOM). USTRANSCOM's own study shows
that little has changed since it was created and charged with
responsibility for unifying DOD's transportation infrastructure.
Our work shows that opportunities exist to reduce defense
transportation infrastructure and improve efficiency of cargo traffic
management operations. For example, combining common-user
transportation functions and positions under the direct command and
control of a single manager, USTRANSCOM, would reduce overhead and
eliminate duplicative functions. Moreover, nearly 90 percent of
defense cargo moves by domestic commercial motor carriers during
peacetime and noncontingency operations. More such outsourcing is
possible and would further reduce transportation costs.
Overall, fixing the organizational structure is a mandatory first
step to substantially reduce transportation costs. One logical way,
though not the only one, would be to: (1) place the 362 Defense
Business Operations Fund Transportation Navy Military Sealift Command
staff worldwide together with the Army's Military Traffic Management
Command (MTMC), (2) close MTMC continental Unites States area
commands at Bayonne, New Jersey, and at Oakland, California, and (3)
eliminate MTMC overseas area commands and MTMC port commands.
If the Congress chose to consolidate the organizational structure in
this way, the following civilian personnel savings could be achieved.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 Defense Plan
----------------------------------------------------------------------
Budget authority 20 60 105 130 135
Outlays 20 60 105 130 135
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:15.1
Defense Infrastructure: Budget Estimates for 1996-2001 Offer Little
Savings for Modernization (GAO/NSIAD-96-131, April 4, 1996).
Defense Transportation: Streamlining of the U.S. Transportation
Command Organization Is Needed (GAO/NSIAD-96-60, February 22, 1996).
Defense Transportation: Commercial Practices Offer Improvement
Opportunities (GAO/NSIAD-94-26, November 26, 1993).
GAO CONTACT
---------------------------------------------------- Appendix III:15.2
David R. Warren, (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:16
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
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 the
repair and overhaul of military parts, weapon systems, and equipment.
This work is accomplished by 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. Faced with substantial excess
depot capacity and high infrastructure costs, DOD has been struggling
to implement initiatives to more cost-effectively (1) utilize
existing maintenance resources at depots and operational units, (2)
reduce excess depot maintenance infrastructure, largely by closing
depots as a part of the base closure and realignment process, and (3)
reallocate workload from closing depots. At the same time, DOD has
embarked on the implementation of a depot maintenance strategy that
will privatize much of the depot maintenance workload without
determining whether privatizing specific depot workloads will result
in savings.
In previous reports and as a part of our ongoing review of DOD depot
maintenance operations and management, GAO has identified the
following shortcomings in these initiatives and has highlighted other
actions that could be taken to improve the cost-effectiveness of the
DOD depot maintenance program.
First, DOD has not been successful in achieving an optimal balance
between maintenance work performed at operational units and at
depots. Cost-benefit evaluations of competing alternatives that
consider infrastructure, personnel, material, transportation, and
equipment trade-offs could result in significant savings.
Second, the services continue to rely largely on their own service
depots rather than maximizing interservicing opportunities by
consolidating similar maintenance operations at a single location.
On many occasions, we have pointed out that this approach leads to
unnecessary duplication of resources. A greater use of
cross-servicing could eliminate costly redundancies and excess
capacity.
Third, DOD plans to privatize-in-place depot maintenance activities
without evaluating other alternatives such as public-private
competitions or interservicing. Such privatization-in-place
initiatives will do little to resolve the extensive excess capacity
problem that currently exists in both public and private sector
industrial facilities and may not be the most cost-effective
solution. An option that could result in substantial savings would
be to reallocate core workload to remaining military depots when
determined to be more cost-effective and use competitive procedures
to include public and private entities to determine the
source-of-repair for noncore workload.
Fourth, DOD is reluctant to use competitions between the public and
private sector to assure that the privatization of maintenance
workloads will result in savings. While there are opportunities to
achieve cost savings by privatizing depot maintenance workloads which
have commercial counterparts and where there is a substantial private
sector competitive market, it is less likely the private sector will
be more cost-effective in an uncompetitive environment. A greater
reliance on public-private competitions as a means of depot
maintenance workload reallocations could produce significant savings.
Fifth, while the four previous base realignment and closure (BRAC)
rounds have resulted in the identification of four naval shipyards,
three naval aviation depots and two warfare centers, three Air Force
depots, and five Army depots for closure or realignment, significant
excess capacity will remain in the public depot system, particularly
if DOD proceeds with its privatization-in-place plans. Additional
closures and/or realignments could reduce costly excess capacity and
produce significant savings.
Sixth, we have reported that reengineering the processes and
procedures for organic workloads that have been competed resulted in
significant efficiency gains and productivity improvements. Similar
reengineering initiatives for other organic workloads should also
result in significant savings.
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.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:16.1
Depot Maintenance: Opportunities to Privatize Repair of Military
Engines (GAO/NSIAD-96-33, March 5, 1996).
Closing Maintenance Depots: Savings, Workload and Redistribution
Issues (GAO/NSIAD-96-29, March 4, 1996).
Navy Maintenance: Assessment of the Public-Private Competition
Program for Aviation Maintenance (GAO/NSIAD-96-30, January 22, 1996).
Depot Maintenance: The Navy's Decision To Stop F/A-18 Repairs at
Ogden Air Logistics Center (GAO/NSIAD-96-31, December 15, 1995).
Military Bases: Analysis of DOD's 1995 Process and Recommendations
for Closure and Realignment (GAO/NSIAD-95-133, April 14, 1995).
Aerospace Guidance and Metrology Center: Cost Growth and Other
Factors Affect Closure and Privatization (GAO/NSIAD-95-60, December
9, 1994).
Correspondence to the Chairman, Subcommittee on Readiness, Committee
on Armed Services, follow-up to April 12, 1994, Depot Maintenance
Testimony. (GAO/NSIAD-94-242R, July 28, 1994).
Navy Maintenance: Assessment of the Public and Private Shipyard
Competition Program (GAO/NSIAD-94-184, May 25, 1994).
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:16.2
David R. Warren, (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:17
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
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 four
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 user's facility at about
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 PRODUCTS
---------------------------------------------------- Appendix III:17.1
Inventory Management: DOD Can Build on Progress in Using Best
Practices to Achieve Substantial Savings (GAO/NSIAD-95-142, August 4,
1995).
Commercial Practices: DOD Could Reduce Electronics Inventories by
Using Private Sector Techniques (GAO/NSIAD-94-110, June 29, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:17.2
David R. Warren, (202)512-8412
OPTION:
CONSOLIDATE THE SEPARATE
MILITARY EXCHANGE
STORESCONSOLIDATE THE SEPARATE
MILITARY EXCHANGE STORES
------------------------------------------------------ Appendix III:18
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriation subcommittees Defense (Senate)
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:18.1
Morale, Welfare, and Recreation: Declining Funds Require DOD to Take
Action (GAO/NSIAD-94-120, February 28, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:18.2
David R. Warren, (202) 512-8412
OPTION:
COPAYMENTS FOR CARE IN MILITARY
HOSPITALSCOPAYMENTS FOR CARE IN
MILITARY HOSPITALS
------------------------------------------------------ Appendix III:19
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
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
controlling costs 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.
The Congress may wish to establish beneficiary cost-sharing
requirements for care received in military hospitals similar to the
cost sharing for care that beneficiaries receive from civilian
facilities.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 202 203 204 204 205
Outlays 175 197 201 201 202
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 202 203 204 204 205
Outlays 175 197 201 201 202
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:19.1
Defense Health Care: DOD's Managed Care Program Continues to Face
Challenges (GAO/T-HEHS-95-117, March 28, 1995).
Defense Health Care: Issues and Challenges Confronting Military
Medicine (GAO/HEHS-95-104, March 22, 1995).
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:19.2
David P. Baine, (202) 512-7101
OPTION:
ADMINISTERING DEFENSE HEALTH
CAREADMINISTERING DEFENSE
HEALTH CARE
------------------------------------------------------ Appendix III:20
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Defense (Senate)
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:20.1
Defense Health Care: DOD's Managed Care Program Continues to Face
Challenges (GAO/T-HEHS-95-117, March 28, 1995).
Defense Health Care: Issues and Challenges Confronting Military
Medicine (GAO/HEHS-95-104, March 22, 1995).
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:20.2
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:21
---------------------------------- ----------------------------------
Authorizing committees Energy and Natural Resources
(Senate)
Resources (House)
Commerce (House)
Appropriations subcommittees Energy and Water Development
(Senate and House)
Primary agency Department of Energy
Account Defense Environment, Restoration
and 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 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 is currently attempting to contract for these
services on a regional basis.
DOE estimates that laboratory analyses cost are at least 15 percent
of its cleanup costs. For fiscal year 1996, DOE was appropriated
about
$6.2 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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 62 62 62 62 62
Outlays 43 62 62 62 62
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 64 66 68 70 72
Outlays 45 65 67 69 71
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:21.1
Nuclear Facility Cleanup: Centralized Contracting of Laboratory
Analysis Would Produce Budgetary Savings (GAO/RCED-95-118, May 8,
1995).
GAO CONTACT
---------------------------------------------------- Appendix III:21.2
Victor S. Rezendes, (202) 512-3841
OPTION:
RESTRUCTURE THE DEPARTMENT OF
ENERGY'S NATIONAL
LABORATORIESRESTRUCTURE THE
DEPARTMENT OF ENERGY'S NATIONAL
LABORATORIES
------------------------------------------------------ Appendix III:22
---------------------------------- ----------------------------------
Authorizing committees Energy and Natural Resources
(Senate)
Commerce (House)
Appropriations subcommittees Energy and Water Development
(Senate and House)
Primary agency Department of Energy
Account Energy Supply, R&D Activities
(89-0224)
Spending type Discretionary
Framework theme Reassess objectives
----------------------------------------------------------------------
The Department of Energy's (DOE) laboratory network is comprised of
approximately 30 labs, with a budget of about $8 billion and
employing over 25,000 scientists and engineers. 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 Task Force 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 facility 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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 200 200 200 200 200
Outlays 140 200 200 200 200
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 206 212 218 224 231
Outlays 144 210 216 223 229
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:22.1
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:22.2
Victor S. Rezendes, (202) 512-3841
OPTION:
NEGOTIATE MORE REALISTIC
ENVIRONMENTAL
AGREEMENTSNEGOTIATE MORE
REALISTIC ENVIRONMENTAL
AGREEMENTS
------------------------------------------------------ Appendix III:23
---------------------------------- ----------------------------------
Authorizing committees Energy and Natural Resources
(Senate)
Resources (House)
Commerce (House)
Appropriations subcommittees Energy and Water Development
(Senate and House)
Primary agency Department of Energy
Account Defense Environment and Waste
Management (89-0242)
Spending type Discretionary
Budget subfunction Atomic energy defense activities
Framework theme Reassess objectives
----------------------------------------------------------------------
The Department of Energy's (DOE) Environmental Management (EM)
program oversees and directs all aspects of the agency's nuclear
weapons complex clean-ups. DOE has faced criticism about the 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, 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 1996 alone, about
$6.2 billion has been targeted for the cleanup program.
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. Although DOE is taking steps to identify the risks
associated with its facilities and a few agreements have been
renegotiated, DOE still does not have in place an overall strategy to
guide this effort.
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, DOE could achieve significant savings. For example, the
Congress may wish to reflect these savings by spending only $5.6
billion a year over the next 5 years, or about 10 percent less than
the 1996 funding level.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 616 616 616 616 616
Outlays 444 604 616 616 616
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 807 992 1,176 1,367 1,558
Outlays 582 924 1,121 1,310 1,501
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:23.1
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:23.2
Victor S. Rezendes, (202) 512-3841
150 INTERNATIONAL AFFAIRS
------------------------------------------------------ Appendix III:24
-- 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:25
---------------------------------- ----------------------------------
Authorizing committees Agriculture, Nutrition and
Forestry (Senate)
Commerce, Science and
Transportation (Senate)
Agriculture (House)
Appropriations subcommittees Agriculture, Rural Development,
and Related 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.
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 the Department of
Agriculture (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, legislatively mandated program requirements
(particularly cargo preference rules and reexport restrictions)
impose constraints on recipients that undermine market development
efforts.
Title II of the Federal Agriculture Improvement and Reform (FAIR) Act
of 1996 amended the Title I program to provide greater program
flexibility, make improvements in operations and administration, and
extend authority to enter into new agreements through 2002. Notably,
the FAIR Act: (1) authorized agreements with private entities in
addition to foreign governments; (2) eliminated the minimum repayment
period of 10 years for Title I concessional credits and reduced the
maximum grace period from 7 to 5 years; (3) permitted an agricultural
trade organization to carry out a project or program in a developing
country using funds derived from Title I sales if the organization
has a market development plan approved by the Secretary of
Agriculture; and (4) simplified the process by which the Secretary
determines the commodities eligible for the program.
Despite these reforms and 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 1997.\2 The delay would permit USDA to lower production
through an increased acreage set-aside in 1997 which would not build
surpluses or otherwise affect the budget.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 0 263 263 263 263
Outlays 0 145 250 263 263
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 0 279 286 294 303
Outlays 0 153 269 290 299
----------------------------------------------------------------------
Source: Congressional Budget Office.
--------------------
\2 The savings include $25 million for ocean freight differential
costs for the shipment of agricultural commodities.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:25.1
Farm Bill Export Options (GAO/GGD-96-39R, December 15, 1995).
Food Aid: Competing Goals and Requirements Hinder Title I Program
Results (GAO/T-GGD-95-68, June 26, 1995).
Cargo Preference Requirements: Objectives Not Significantly Advanced
When Used in U.S. Food Aid Programs (GAO/GGD-94-215, September 29,
1994).
Public Law 480 Title I: Economic and Market Development Objectives
Not Met (GAO/T-GGD-94-191, August 3, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:25.2
Benjamin F. Nelson, (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:26
---------------------------------- ----------------------------------
Authorizing committees Foreign Affairs (Senate)
International Relations (House)
Appropriations subcommittees Foreign Operations
(Senate and House)
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 in its January 1996 meeting did not vote on the
fourth replenishment.
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.
An estimate of budgetary savings was not developed because the
administration did not request and the Congress did not provide any
funds for IFAD in 1995 and 1996. If the Congress chose to suspend
further U.S. contributions, no future appropriations would be
needed.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:26.1
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:26.2
Benjamin F. Nelson, (202) 512-4128
OPTION:
SHORTWAVE RADIO MODERNIZATION
PROGRAMSHORTWAVE RADIO
MODERNIZATION PROGRAM
------------------------------------------------------ Appendix III:27
---------------------------------- ----------------------------------
Authorizing committees Foreign Relations (Senate)
International Affairs (House)
Appropriations subcommittees Commerce, Justice, State, the
Judiciary, and 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 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, eliminated some redundant language
broadcasts, and closed several shortwave stations. 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
construct a new shortwave station and modernize existing ones. As of
September 30, 1995, VOA had spent about $170.7 million of $600
million it planned to spend between 1994 and 2003 on modernization
and construction. 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 if the new Pacific Island shortwave station was not
constructed.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 8 9 9 9 9
Outlays 2 6 8 9 9
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 8 10 10 10 10
Outlays 2 6 9 10 10
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:27.1
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:27.2
Benjamin F. Nelson, (202) 512-4128
OPTION:
TV MARTITV MARTI
------------------------------------------------------ Appendix III:28
---------------------------------- ----------------------------------
Authorizing committees Foreign Relations (Senate)
International Affairs (House)
Appropriations subcommittees Commerce, Justice, State, and
Judiciary (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 the U.S. Information Agency (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 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. The savings
that could be achieved if TV Marti were eliminated are shown in the
following table.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 3 11 11 11 11
Outlays 2 10 11 11 11
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 3 11 12 12 13
Outlays 2 9 11 12 12
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:28.1
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:28.2
Benjamin F. Nelson, (202) 512-4128
OPTION:
SELL HIGH-VALUE PROPERTY IN
TOKYOSELL HIGH-VALUE PROPERTY
IN TOKYO
------------------------------------------------------ Appendix III:29
---------------------------------- ----------------------------------
Authorizing committee Foreign Relations (Senate)
International Affairs (House)
Appropriations subcommittees Commerce, Justice, State, the
Judiciary, and 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 U.S. government owns about 3,000 real properties
overseas--valued at about $12 billion--some of which could be sold or
leased. GAO believes that some high-value properties in Tokyo,
Japan, are unneeded. 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 in September 1994, 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's
sale. The second residence could be built on government-owned
property for $3.8 million, according to a 1991 study conducted for
the State Department.
The State Department is permitted to use real property sales proceeds
for other facilities' needs without specific OMB or Congressional
approval. Therefore, 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. The
savings that could be achieved from selling this property, if
relevant laws were changed, are shown in the following table.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Asset Sale
----------------------------------------------------------------------
Budget authority -4 0 0 0 40
Outlays -1 -1 -1 -1 40
----------------------------------------------------------------------
Note: The estimates shown in the table assume that construction of
the new Deputy Chief of Mission residence on the Mitsui compound
would cost $4 million and that the sale of the old residence would
occur after construction of the replacement residence is completed.
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:29.1
Overseas Real Estate: Millions of Dollars Could Be Generated by
Selling Unneeded Real Estate (GAO/NSIAD-96-36, April 23, 1996).
Management of Overseas Real Property (GAO/HR-93-15, December 1992).
GAO CONTACT
---------------------------------------------------- Appendix III:29.2
Benjamin F. Nelson, (202) 512-4128
250 GENERAL SCIENCE, SPACE, AND
TECHNOLOGY
------------------------------------------------------ Appendix III:30
-- Space Station
OPTION:
SPACE STATIONSPACE STATION
------------------------------------------------------ Appendix III:31
---------------------------------- ----------------------------------
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 10 reports and testimonies issued since 1991, GAO has expressed
concerns about various aspects of the space station, including rising
cost estimates that have prompted several redesigns since the project
was first funded in fiscal year 1985. In 1993, the station was
redesigned again and Russia was brought in as a partner. The
National Aeronautics and Space Administration (NASA) believed that
Russian participation would improve the station's capabilities and
reduce the estimated cost to complete its assembly. Subsequently,
annual funding through completion of assembly was capped at about
$2.1 billion and the total project cost was capped at $17.4 billion.
In June 1995, GAO reported that NASA was making progress on the space
station, but it still had considerable challenges to overcome,
including lower financial reserves and significant risk related to
the space shuttle's ability to support the space station's launch and
assembly schedule. Since then, cost and schedule threats have
continued, with the cost threat being particularly severe over the
next several years.
The Congress may wish to closely monitor NASA's efforts to manage
station development to enable it to act quickly should estimated
costs to complete the project increase substantially. Such actions
could include acceptance of the cost increases, further reduction in
the project's scope, or terminating the project. If the project were
terminated, the following savings would result.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 1,444 2,144 2,144 2,144 2,144
Outlays 892 1,817 2,110 2,139 2,143
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 1,508 2,272 2,337 2,401 2,467
Outlays 932 1,918 2,275 2,369 2,438
----------------------------------------------------------------------
Note: This estimate assumes termination costs of $700 million.
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:31.1
Space Station: Estimated Total U.S. Funding Requirements
(GAO/NSIAD-95-163, June 12, 1995).
Space Station: Plans to Expand Research Community Do Not Match
Available Resources (GAO/NSIAD-95-33, November 22, 1994).
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:31.2
Louis J. Rodrigues, (202) 512-4841
270 ENERGY
------------------------------------------------------ Appendix III:32
-- Recover clean coal technology funds
-- Privatize Uranium Enrichment Program
-- Privatize the Naval Petroleum Reserve-1
-- Consolidate Strategic Petroleum Reserve
OPTION:
RECOVER CLEAN COAL TECHNOLOGY
FUNDSRECOVER CLEAN COAL
TECHNOLOGY FUNDS
------------------------------------------------------ Appendix III:33
---------------------------------- ----------------------------------
Authorizing committees Energy and Natural Resources
(Senate)
Commerce (House)
Appropriations subcommittees Interior and Related Agencies
(Senate and House)
Primary agency Department of Energy
Account Clean Coal Technology
(89-0235)
Spending type Discretionary
Budget subfunction Energy supply
Framework theme Reassess objectives
----------------------------------------------------------------------
A number of clean coal technology demonstration projects are
experiencing problems and difficulties in meeting cost, schedule, and
performance goals. DOE has extended deadlines on some projects
several times to allow their sponsors to restructure the projects,
find suitable alternative project sites, and firm up financing
commitments to make the projects economically viable. In April 1995,
the Congress rescinded $200 million of this program's budget
authority. DOE's fiscal year 1997 budget request calls for an
additional $325 million rescission. As of March 1996, three projects
totaling about $109 million in unobligated funds had been terminated
since the first rescission. Also as of this date, DOE had additional
unobligated funds totaling more than $800 million for nine projects
facing the types of problems discussed above. This would indicate
that more than enough funds may be available to cover a $325 million
rescission. If the Congress chose to cut future budget authority by
this amount, the following savings could occur.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 325 0 0 0 0
Outlays 0 0 25 50 100
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 325 0 0 0 0
Outlays 0 0 25 50 100
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:33.1
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:33.2
Victor S. Rezendes, (202) 512-3841
OPTION:
PRIVATIZE URANIUM ENRICHMENT
PROGRAMPRIVATIZE URANIUM
ENRICHMENT PROGRAM
------------------------------------------------------ Appendix III:34
---------------------------------- ----------------------------------
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 DOE'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 that the corporation develop a plan to privatize the
government's uranium business by July 1995 and that GAO review the
plan before it is implemented.
In a September 1995 report, GAO found that the net present value
analysis used to develop sales price estimates in the corporation's
privatization plan needed to be updated and improved to help the
Congress and other decisionmakers considering the sale of the
corporation. In addition, GAO's analysis showed that the net present
value of the cash flows for the corporation if it remained a
government corporation ranged from $2.8 billion to $3.5 billion. GAO
also recommended that the privatization process, which will likely
set a precedent for future federal sales, be revised to ensure that
the Secretary of the Treasury, rather than the corporation, has the
lead role. GAO also recommended that the Secretary of the Treasury
consider mechanisms in the final sales contract that will protect the
government from an undervalued sale.
In April 1996, the President signed into law amendments to the
authority to privatize the corporation contained in the Energy Policy
Act of 1992. Included in the amendments are provisions regarding the
marketing of the natural uranium component of highly enriched uranium
derived from Russian warheads. CBO assumes that the corporation will
be privatized in fiscal year 1997 as a result of this legislation.
According to CBO, the transactions involved in selling the
corporation will cost about $150 million, almost all of which would
be spent in 1997. Once the corporation is privatized, its net
spending will no longer be part of the federal budget, but the net
effect on federal outlays of that change is projected to be small
over the period from 1997 through 2001. CBO also estimates that the
legislation will result in asset sale receipts of about $1.3 billion
in 1997 from selling the corporation and $187 million over fiscal
years 1997 through 1999 from selling certain amounts of natural
uranium derived from Russian highly enriched uranium. Under the
Balanced Budget and Emergency Deficit Control Act of 1985, as
amended, proceeds from asset sales are not counted in determining
compliance with the discretionary spending limits or the
pay-as-you-go requirement established under BEA.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Asset sales
----------------------------------------------------------------------
Budget Authority 1,355 65 67 0 0
Outlays 1,355 65 67 0 0
----------------------------------------------------------------------
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 0 0 0 0 0
Outlays -156 -133 -176 120 191
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:34.1
Uranium Enrichment: Process to Privatize the U.S. Enrichment
Corporation Needs to Be Strengthened (GAO/RCED-95-245, September 14,
1995).
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:34.2
Victor S. Rezendes (202) 512-3841
OPTION:
PRIVATIZE THE NAVAL PETROLEUM
RESERVE-1PRIVATIZE THE NAVAL
PETROLEUM RESERVE-1
------------------------------------------------------ Appendix III:35
---------------------------------- ----------------------------------
Authorizing committees Armed Services (Senate)
National Security (House)
Appropriations subcommittees Interior and Related Agencies
(Senate and 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.
In last year's option, we suggested the Congress consider amending
the NPR Production Act of 1976 to provide DOE with the flexibility to
operate NPR-1 in a way that would maximize the value of the asset
rather than maximize the production of oil. Since that time, the
Defense Authorization Act (Public Law 104-106) established a schedule
for selling NPR-1 within two years after the date of enactment.
Under the act, however, the sale cannot go forward if DOE and OMB
determine at any point in the process that an option other than the
immediate sale of the reserve is in the best interest of the United
States or that the proceeds are unlikely to reflect the reserve's
fair market value. Accordingly, CBO did not provide a 5-year
estimate at this time.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:35.1
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:35.2
Victor S. Rezendes, (202) 512-3841
OPTION:
CONSOLIDATE STRATEGIC PETROLEUM
RESERVECONSOLIDATE STRATEGIC
PETROLEUM RESERVE
------------------------------------------------------ Appendix III:36
---------------------------------- ----------------------------------
Authorizing committees Energy and Natural Resources
(Senate)
Commerce (House)
Appropriations subcommittees Interior and Related Agencies
(Senate and 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 in the foreseeable
future. By the end of 1996, the reserve will have over 100 million
barrels of excess storage capacity spread out over four storage
sites. DOE is considering leasing excess capacity to foreign
governments, which would require new statutory authority. Another
option would be to consolidate the oil at fewer sites and close sites
no longer needed. 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 is in the process of closing a former 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, one site could be mothballed and not reopened in addition to
the site already being decommissioned under current policy.
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.
Assuming such costs are financed from the proceeds of oil sales, the
table that follows shows that net operations savings would begin in
fiscal year 1997.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 9 9 26 26 26
Outlays 5 8 18 23 26
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 18 26 52 61 70
Outlays 10 20 39 53 65
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:36.1
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:36.2
Victor S. Rezendes, (202) 512-3841
300 NATURAL RESOURCES AND
ENVIRONMENT
------------------------------------------------------ Appendix III:37
-- Federal land policies
-- Collaborative federal land management approach
-- Federal timber sales
-- Charge fair market value for natural resources
-- Recreation fees at federal sites
-- Hardrock mining royalties
-- Natural resources revenue sharing
-- Federal water policies
-- Water transfers
-- Pollution fees and taxes
-- Hazardous waste cleanup cost recovery
-- Nuclear waste disposal fees
OPTION:
FEDERAL LAND POLICIESFEDERAL
LAND POLICIES
------------------------------------------------------ Appendix III:38
---------------------------------- ----------------------------------
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 about 650 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:38.1
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 124 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.
The Congress is considering several bills that address patenting of
hardrock mining claims. Two companion bills (H.R. 1580 and S. 506)
would repeal the current congressional proscription against new
mining patents. Three other bills (H.R. 357 and its companion S.
504, as well as H.R. 721) would eliminate patenting of mining
claims. Under a sixth bill (S. 639), patenting would grant the
claimholder title to the mineral only.
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.
HIGHER FEES FOR
CONCESSIONAIRES OPERATING ON
FEDERAL LANDS
---------------------------------------------------- Appendix III:38.2
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.
Currently, the Congress is considering several bills that would
reform concession policies. All of these bills would increase the
return to the government by limiting preferential rights of renewal
thus increasing competition. H.R. 773 and S. 309 would allow
agencies to receive increased fee revenue. H.R. 2028, which was
included in the fiscal year 1996 omnibus budget reconciliation bill
(H.R. 2491) would have increased fees up to a minimum amount
credited to the Treasury and all fees above that level go to
agencies.
CBO has estimated that the fee provisions included in H.R. 2028
would result in $79 million in budgetary savings over 7 years. The
following savings would be scored if these provisions were estimated
for the 5-year budget window.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 0 0 5 10 15
Outlays 0 0 5 10 15
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 0 0 5 10 15
Outlays 0 0 5 10 15
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:38.3
LAND OWNERSHIP
-------------------------------------------------- Appendix III:38.3.1
Land Ownership: Information on the Acreage, Management, and Use of
Federal and Other Lands (GAO/RCED-96-40, March 13, 1996).
HARDROCK MINING PATENTS
-------------------------------------------------- Appendix III:38.3.2
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:38.3.3
NPS Projected Returns From Concessionaires (GAO/RCED-96-48R, November
28, 1995).
National Parks: Difficult Choices Need to Be Made About the Future
of the Parks (GAO/RCED-95-238, August 30, 1995).
Federal Lands: Views on Reform of Recreation Concessionaires
(GAO/T-RCED-95-250, July 25, 1995).
National Parks: Difficult Choices Need to Be Made About the Future
of the Parks (GAO/T-RCED-95-124, March 7, 1995).
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:38.4
Barry T. Hill, (202) 512-9775
OPTION:
COLLABORATIVE FEDERAL LAND
MANAGEMENT
APPROACHCOLLABORATIVE FEDERAL
LAND MANAGEMENT APPROACH
------------------------------------------------------ Appendix III:39
---------------------------------- ----------------------------------
Authorizing committees Agriculture, Nutrition and
Forestry (Senate)
Energy and Natural Resources
(Senate)
Agriculture (House)
Resources (House)
Appropriations subcommittees Interior and Related Agencies
(Senate and 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), Fish and Wildlife Service
within Interior, and the Forest Service within Agriculture--have
prepared or are preparing a streamlined plan showing potential
reductions and restructuring of their workforces. 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) potentially 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) sharing 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:39.1
National Park Service: Better Management and Broader Restructuring
Efforts Are Needed (GAO/T-RCED-95-101, February 9, 1995).
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:39.2
Barry T. Hill, (202) 512-9775
OPTION:
FEDERAL TIMBER SALESFEDERAL
TIMBER SALES
------------------------------------------------------ Appendix III:40
---------------------------------- ----------------------------------
Authorizing committees Agriculture, Nutrition and
Forestry (Senate)
Agriculture (House)
Appropriation subcommittees Interior and Related Agencies
(Senate and 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
----------------------------------------------------------------------
The Department of Agriculture's Forest Service does not always
recover all of its timber-related costs from the sale of timber.
Currently, the Service receives most of its timber funding from
timber sales and from appropriated funds linked primarily to timber
management and harvest.
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. According to the Forest Service's fiscal
year 1994 Timber Sale Program Annual Report--the latest available
report--timber sale program costs exceeded revenues by about $66
million when payments to states are considered as costs of the
program.
The escalating costs of the Forest Service's timber sale program has
long been a concern of the Congress. In response to this concern,
the Forest Service has taken efforts to achieve cost efficiencies and
is reviewing its policy regarding below-cost timber sales. The
primary objective of some timber sales is to achieve forest
stewardship objectives such as forest health--generating revenues is
secondary. However, notwithstanding these types of timber sales, at
some forests, the costs to prepare and administer timber sales still
exceed total receipts.
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. This also
would 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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 20 35 50 65 75
Outlays 15 30 45 60 70
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 20 35 50 65 75
Outlays 15 30 45 60 70
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:40.1
Forest Service: Observations on the Emergency Salvage Sale Program
(GAO/T-RCED-96-38, November 29, 1995).
Forest Service: Distribution of Timber Sales Receipts Fiscal Years
1992-94 (GAO/RCED-95-237FS, September 8, 1995).
Forest Service: Status of Efforts to Achieve Cost Efficiency
(GAO/RCED-94-185FS, April 26, 1994).
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:40.2
Barry T. Hill, (202) 512-9775
OPTION:
CHARGE FAIR MARKET VALUE FOR
NATURAL RESOURCESCHARGE FAIR
MARKET VALUE FOR NATURAL
RESOURCES
------------------------------------------------------ Appendix III:41
---------------------------------- ----------------------------------
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.
According to the Thoreau Institute, charging fair market value for
all uses, including timber, grazing, recreation, and minerals and
subsequently funding forests, parks, and public lands out of the net
income would save taxpayers more than $21 billion over 5 years. No
more funds would be appropriated for these uses.
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:41.1
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:41.2
Barry T. Hill, (202) 512-9775
OPTION:
RECREATION FEES AT FEDERAL
SITESRECREATION FEES AT FEDERAL
SITES
------------------------------------------------------ Appendix III:42
---------------------------------- ----------------------------------
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 Park
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 fiscal year 1996 appropriations legislation for the Park Service,
as well as some other land management agencies, included language
that permits these agencies to experiment with increased entrance
fees at a number of locations. In addition, legislation has been
introduced in the Congress to authorize higher fees throughout the
Park Service.
Requiring the Park Service to charge fees to cover direct as well as
associated costs and disallowing their use for increased park
spending would yield net new receipts over the fiscal year 1997
through 2001 period as shown in the following table. Any spending
increases resulting from increased fees would be subject to new
authorizing legislation.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Added receipts 10 15 23 28 37
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:42.1
National Parks: Difficult Choices Need to Be Made About the Future
of the Parks (GAO/RCED-95-238, August 30, 1995).
National Parks: Difficult Choices Need to Be Made About the Future
of the Parks (GAO/T-RCED-95-124, March 7, 1995).
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:42.2
Barry T. Hill, (202) 512-9775
OPTION:
HARDROCK MINING
ROYALTIESHARDROCK MINING
ROYALTIES
------------------------------------------------------ Appendix III:43
---------------------------------- ----------------------------------
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 is considering several bills that would impose royalties
on hardrock minerals extracted from federal lands. H.R. 1580 and S.
506 would impose a royalty of 3 percent of the net proceeds for mines
grossing at least $500,000 annually. Two other bills (H.R. 721 and
S. 504) would impose a royalty fee of 8 percent of the gross income.
H.R.357, the companion bill to S. 504, would impose a royalty of 8
percent of the net smelter return. Another bill, S. 639, would
assess royalties for gold at 3 percent of the gross value, and for
minerals other than gold at 2 percent of the gross value.
Assuming that the Congress adopted an 8-percent royalty on gross
profits, CBO estimates that the following receipts would be gained.
CBO's estimate reflects a reduction since 1990 in the expected amount
of hardrock minerals produced on federal lands.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Added receipts 8 53 31 31 31
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:43.1
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:43.2
Barry T. Hill, (202) 512-9775
OPTION:
NATURAL RESOURCES REVENUE
SHARINGNATURAL RESOURCES
REVENUE SHARING
------------------------------------------------------ Appendix III:44
---------------------------------- ----------------------------------
Authorizing committees Agriculture, Nutrition and
Forestry (Senate)
Energy and Natural Resources
(Senate)
Agriculture (House)
Resources (House)
Appropriations subcommittees Agriculture, Rural Development,
and Related 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.
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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 190 195 200 200 205
Outlays 145 190 195 195 200
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 190 195 195 200 200
Outlays 145 190 195 195 200
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:44.1
Forest Service: Distribution of Timber Sales Receipts Fiscal Years
1992-94 (GAO/RCED-95-237FS, September 8, 1995).
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:44.2
Barry T. Hill, (202) 512-9775
OPTION:
FEDERAL WATER POLICIESFEDERAL
WATER POLICIES
------------------------------------------------------ Appendix III:45
---------------------------------- ----------------------------------
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:45.1
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
to which it is entitled under the act.
SUBSIDIZED WATER TO PRODUCE
SUBSIDIZED CROPS
---------------------------------------------------- Appendix III:45.2
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:45.3
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 ultimately may 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:45.4
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 added receipts shown in the tables below would be achieved if the
Congress collected full cost of federally subsidized water to large
farms, required CVP irrigators to repay the costs of the CVP by 2013
(roughly half the time required under current law), and/or phased out
the interest subsidy for Western irrigators.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Option: Increased fees for subsidized water
----------------------------------------------------------------------
Added receipts 4 8 8 8 8
----------------------------------------------------------------------
Source: Congressional Budget Office.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Option: Repayment of water project construction costs
----------------------------------------------------------------------
Added receipts 2 8 11 11 11
----------------------------------------------------------------------
Source: Congressional Budget Office.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Option: Federal water subsidies
----------------------------------------------------------------------
Added receipts 4 14 19 19 19
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:45.5
SUBSIDIZED FEDERAL WATER
TO LARGE FARMS
-------------------------------------------------- Appendix III:45.5.1
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:45.5.2
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:45.5.3
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:45.5.4
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:45.6
Barry T. Hill, (202) 512-9775
OPTION:
WATER TRANSFERSWATER TRANSFERS
------------------------------------------------------ Appendix III:46
---------------------------------- ----------------------------------
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:46.1
Water Markets: Increasing Federal Revenues Through Water Transfers
(GAO/RCED-94-164, September 21, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:46.2
Barry T. Hill, (202) 512-9775
OPTION:
POLLUTION FEES AND
TAXESPOLLUTION FEES AND TAXES
------------------------------------------------------ Appendix III:47
---------------------------------- ----------------------------------
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 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, 1996. Rates
range from $0.65 per pound for the least toxic pollutant to $63.40
per pound for the most toxic pollutant. Over time, revenue from a
pollution fee tax should decline since the intent of such a tax is to
provide an incentive to reduce the amount of pollutants generated.
Five-Year Revenues
(Dollars in billions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Revenue gain 0.3 0.5 0.5 0.4 0.4
----------------------------------------------------------------------
Note: JCT provided its revenue estimates in billions of dollars.
Source: Joint Committee on Taxation (JCT).
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:47.1
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:47.2
Peter Guerrero, (202) 512-6111
OPTION:
HAZARDOUS WASTE CLEANUP COST
RECOVERYHAZARDOUS WASTE CLEANUP
COST RECOVERY
------------------------------------------------------ Appendix III:48
---------------------------------- ----------------------------------
Authorizing committees Environment and Public Works
(Senate)
Commerce (House)
Transportation and Infrastructure
(House)
Appropriations subcommittees VA, HUD, and Independent Agencies
(Senate 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 cleanup costs incurred from activities such
as administrative management, research and development on cleanup
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:48.1
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:48.2
Peter Guerrero, (202) 512-6111
OPTION:
NUCLEAR WASTE DISPOSAL
FEESNUCLEAR WASTE DISPOSAL FEES
------------------------------------------------------ Appendix III:49
---------------------------------- ----------------------------------
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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Added receipts 18 36 54 72 91
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:49.1
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:49.2
Victor S. Rezendes, (202) 512-3841
350 AGRICULTURE
------------------------------------------------------ Appendix III:50
-- Reduce or eliminate funding for the Market Access Program
-- Reduce funding for the Export Credit Guarantee Programs
OPTION:
REDUCE OR ELIMINATE FUNDING FOR
THE MARKET ACCESS PROGRAMREDUCE
OR ELIMINATE FUNDING FOR THE
MARKET ACCESS PROGRAM
------------------------------------------------------ Appendix III:51
---------------------------------- ----------------------------------
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
----------------------------------------------------------------------
Under the Agriculture Trade Title (Title II) of the Federal
Agriculture Improvement and Reform (FAIR) Act of 1996, the Congress
changed the name of the Market Promotion Program to the Market Access
Program. The Market Access Program is an export promotion program
that subsidizes overseas promotional activities for U.S.
agricultural products. The program uses government funds to help
U.S. producers, exporters, and trade associations finance cost-share
promotional activities for U.S. agricultural products abroad. The
Foreign Agricultural Service (FAS) operates the Market Access Program
through 65 not-for-profit associations that either run the programs
themselves or pass funds through to other entities.
Adequate assurance does not exist to demonstrate that Market Access
Program funds are supporting additional promotional activities rather
than simply replacing company/industry funds. Moreover, FAS has not
provided adequate guidance or oversight in targeting Market Access
Program funds to smaller and new-to-export industries which are less
likely to supplant them.
Under Title II of the FAIR Act, the Congress cut annual program
funding from $110 million to $90 million for fiscal years 1996
through 2002. The legislation also prohibits program funding for
direct assistance of branded promotions from being provided to
foreign companies for promotion of foreign produced products or to
companies that are not recognized as small business concerns under
the Small Business Act, with the exception of cooperatives and
nonprofit trade associations.
Nevertheless, additional future savings could be achieved if the
Congress further reduced or eliminated the program. Based on our
examinations of the program since its inception, we recommend
continued monitoring to ensure that executive and legislative branch
reforms are effectively and efficiently implemented, particularly
those pertaining to funding additionality, graduation of private
companies out of the program, and greater small company
participation. Even with the FAIR Act reforms, the Congress could
cut annual Market Access Program funding by an additional $40
million, to a $50 million level for fiscal years 1997 through 2002.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 3 31 40 40 40
Outlays 3 31 40 40 40
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:51.1
Farm Bill Export Options (GAO/GGD-96-39R, December 15, 1995).
Agricultural Trade: Competitor Countries' Foreign Market Development
Programs (GAO/T-GGD-95-184, June 14, 1995).
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:51.2
Benjamin F. Nelson, (202) 512-4128
OPTION:
REDUCE FUNDING FOR THE EXPORT
CREDIT GUARANTEE PROGRAMSREDUCE
FUNDING FOR THE EXPORT CREDIT
GUARANTEE PROGRAMS
------------------------------------------------------ Appendix III:52
---------------------------------- ----------------------------------
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 is required to make a total of $5.5
billion in government loan guarantees available each year to foreign
country buyers of U.S. agricultural commodities.
Since the programs began in the 1980s, and as of December 1995, the
government had paid out approximately $7.6 billion in claims because
of loan repayment defaults and reschedulings 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 for 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.
The Agriculture Trade Provisions (Title II) of the Federal
Agriculture Improvement and Reform (FAIR) Act of 1996 reformed the
operations of the Export Credit Guarantee Programs. Notably, the
FAIR Act: (1) authorized short-term supplier credit guarantees; (2)
listed criteria to be used by the Secretary of Agriculture in
deciding whether a country is creditworthy for intermediate-term
credit guarantees; (3) mandated annual program levels at $5.5 billion
through 2002 but allowed for flexibility in how much is provided for
each program; (4) clarified that the 1 percent maximum origination
fee is to be applied to the amount of short-term credit to be
guaranteed and removed the cap on the origination fee charged for
Commodity Credit Corporation Facilities Financing Guarantees; and (5)
permitted the use of credit guarantees for high-value products with
at least 90 percent U.S. content by weight. Minimum amounts of
credit guarantees will be required to be available for processed and
high-value products: 25 percent in 1996 and 1997; 30 percent in 1998
and 1999; and 35 percent thereafter. Minimum requirements are not
applicable if they cause a reduction in total commodity sales under
the program.
It is unclear that the export credit guarantee programs have 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.
Although reforms will allow USDA to improve its management of the
programs, additional steps are still necessary. 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 annual loan guarantees to $3.3 billion, about $1
billion 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. The 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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 91 146 144 143 148
Outlays 91 146 144 143 148
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:52.1
Farm Bill Export Options (GAO/GGD-96-39R, December 15, 1995).
Former Soviet Union: Creditworthiness of Successor States and U.S.
Export Credit Guarantees (GAO/GGD-95-60, February 24, 1995).
GSM Export Credit Guarantees (GAO/GGD-94-211R, September 29, 1994).
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:52.2
Benjamin F. Nelson, (202) 512-4128
370 COMMERCE AND HOUSING CREDIT
------------------------------------------------------ Appendix III:53
-- National Oceanic and Atmospheric Administration research fleet
modernization
-- Opportunities to reduce the cost of the 2000 decennial census
OPTION:
NATIONAL OCEANIC AND
ATMOSPHERIC RESEARCH FLEET
MODERNIZATIONNATIONAL OCEANIC
AND ATMOSPHERIC RESEARCH FLEET
MODERNIZATION
------------------------------------------------------ Appendix III:54
---------------------------------- ----------------------------------
Authorizing committees Commerce, Science and
Transportation (Senate)
Commerce (House)
Appropriations subcommittees Commerce, Justice, State and the
Judiciary 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, GAO reported on the National Oceanic and Atmospheric
Administration's (NOAA) fleet modernization plan. As reported, 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 a potentially cost-effective
alternative 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:54.1
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:54.2
Barry T. Hill, (202) 512-9775
OPTION:
OPPORTUNITIES TO REDUCE THE
COST OF THE 2000 DECENNIAL
CENSUSOPPORTUNITIES TO REDUCE
THE COST OF THE 2000 DECENNIAL
CENSUS
------------------------------------------------------ Appendix III:55
---------------------------------- ----------------------------------
Authorizing committees Governmental Affairs (Senate)
Government Reform and Oversight
(House)
Appropriations subcommittees Commerce, Justice, State, and the
Judiciary 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 by the Bureau. Census Bureau
estimates suggest that the use of these options could result in
savings 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, improves 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 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 1994 legislation (Public
Law 103-430). To realize these savings, the Census Bureau estimated
in 1995 that it would incur costs of about $5.1 million in 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 change. However, the Census Bureau should require 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 an interim year
baseline would be inappropriate.
To illustrate the potential savings, CBO estimates that using
sampling for nonresponse follow-up for the 2000 Decennial Census
could result in the following savings.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Budget authority 0 0 150 600 0
Outlays 0 0 119 506 125
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:55.1
Decennial Census: Fundamental Design Decisions Merit Congressional
Attention (GAO/T-GGD-96-37, October 25, 1995).
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:55.2
L. Nye Stevens, (202) 512-7824
400 TRANSPORTATION
------------------------------------------------------ Appendix III:56
-- 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
-- Target military airport program funds within the national
airport system
-- Enhance Department of Transportation's oversight of its
university research
OPTION:
CARGO PREFERENCE LAWS: THEIR
COSTS AND EFFECTSCARGO
PREFERENCE LAWS: THEIR COSTS
AND EFFECTS
------------------------------------------------------ Appendix III:57
---------------------------------- ----------------------------------
Authorizing committees Commerce, Science and
Transportation (Senate)
Transportation and Infrastructure
(House)
Appropriations subcommittees Multiple
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 approximately 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.
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.\3
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 503 503 503 503 503
Outlays 373 473 490 495 498
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 515 529 544 559 575
Outlays 380 495 526 545 563
----------------------------------------------------------------------
Source: Congressional Budget Office.
--------------------
\3 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 $2 million and $20 million over the next several years.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:57.1
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:57.2
John H. Anderson, Jr., (202) 512-2834
OPTION:
INCREASE FEDERAL FEES PAID BY
FOREIGN-FLAGGED CRUISE
SHIPSINCREASE FEDERAL FEES PAID
BY FOREIGN-FLAGGED CRUISE SHIPS
------------------------------------------------------ Appendix III:58
-------------------------------- -- --------------------------------
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, the safety of U.S.
passengers and property, and enforcement of immigration laws, 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 United States 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
INS exemption.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Added receipts
----------------------------------------------------------------------
Option: Coast Guard fees 0.4 1.0 1.0 1.0 1.0
Option: Lifting INS Exemption 38 38 38 38 38
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:58.1
None
GAO CONTACT
---------------------------------------------------- Appendix III:58.2
John H. Anderson, Jr., (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:59
---------------------------------- ----------------------------------
Authorizing committees Commerce, Science and
Transportation (Senate)
Transportation and Infrastructure
(House)
Appropriations subcommittees Transportation (Senate and House)
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
----------------------------------------------------------------------
Section 403(b) of the Rail Passenger Service Act authorizes Amtrak to
initiate and/or operate intercity rail services, in addition to its
basic system, when such services are financially supported by the
states. As of January 1996, Amtrak had contracts with 11 states to
operate such service over 15 routes.\4 These operations account for
about 15 percent of Amtrak's ridership. Under the provisions of the
Rail Passenger Service Act, the states contribute at least 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. Although
long-term avoidable losses are a larger amount than short-term
avoidable losses, they are only about 55 percent of losses that are
based on fully allocated costs--including capital costs. The states
do pay 50 percent of the capital equipment costs (primarily
depreciation and interest) associated with section 403(b) service.
In fiscal year 1994, Amtrak sustained about $82.2 million in losses
on section 403(b) services and this increased to $88.2 million in
fiscal year 1995. The states receiving section 403(b) services
contributed $32.6 million in 1994 and $35.7 million in 1995. These
amounts are consistent with Amtrak's experience in recent years.
However, Amtrak is planning to substantially increase the share of
section 403(b) service losses that the individual states will bear.
In fiscal year 1996, Amtrak plans to collect $72.6 million in state
contributions to cover section 403(b) losses. At the end of the
first quarter of fiscal year 1996, Amtrak was slightly ahead of its
target. Amtrak plans to eventually recover the fully allocated
losses from section 403(b) services, but has not yet secured the
states' agreement.
The Congress could elect to require that the states reimburse Amtrak
for the fully allocated costs of providing section 403(b) services.
While this is Amtrak's goal, supporting legislation would pave the
way for fully allocated loss reimbursement. Currently, Amtrak must
negotiate reimbursement with each state and the state contributions
vary widely. On the basis of Amtrak's experience in recent years (as
opposed to its plan for the current year) the following savings would
apply if federal subsidies were reduced by the estimated 403(b)
losses that Amtrak now must absorb.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 82 82 82 82 82
Outlays 82 82 82 82 82
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 84 87 89 92 94
Outlays 84 87 89 92 94
----------------------------------------------------------------------
Source: Congressional Budget Office.
--------------------
\4 These states were Alabama, California, Illinois, Michigan,
Missouri, New York, North Carolina, Wisconsin, Oregon, Washington,
and Vermont.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:59.1
Intercity Passenger Rail: Amtrak's Financial and Operating
Conditions Threaten Its Long-term Viability (GAO/RCED-95-71, February
6, 1995).
GAO CONTACT
---------------------------------------------------- Appendix III:59.2
John H. Anderson, Jr., (202) 512-2834
OPTION:
REDUCE OR ELIMINATE AMTRAK
SUBSIDIESREDUCE OR ELIMINATE
AMTRAK SUBSIDIES
------------------------------------------------------ Appendix III:60
---------------------------------- ----------------------------------
Authorizing committees Commerce, Science and
Transportation (Senate)
Transportation and Infrastructure
(House)
Appropriations subcommittees Transportation (Senate and House)
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 deteriorated rapidly in the first
half of the decade, seriously threatening Amtrak's ability to provide
high-quality passenger rail service nationwide. The time has come
for Amtrak and the federal government 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, Amtrak has developed
a strategic and business plan that is designed to eliminate the need
for federal operating subsidies by the year 2002. To facilitate the
proposed changes, Amtrak has been reorganized into strategic business
units (SBU) which are responsible for different "product lines." The
West Coast SBU is responsible for operations in California,
Washington, and Oregon; the Northeast Corridor SBU is responsible for
the Metroliners and other operations between Washington and Boston;
and the Intercity SBU has responsibility for the remaining rail
passenger operations. The parent SBU in Washington, D.C., handles
the corporate operations, such as legal affairs and national
advertising, that transcend the geographic areas covered by the SBUs.
Amtrak believes that decentralization of authority and
responsibility, combined with route, service, and fare changes, will
allow it to achieve operating self-sufficiency. However, Amtrak's
plan is predicated on continued availability of federal funds for
capital improvements, greater state support for 403(b) services, and
significant productivity savings. While Amtrak reports that its
efforts to date are on target with its longer-term goal, it remains
to be seen whether it can achieve self-sufficiency if its assumptions
are not wholly fulfilled.
If substantially increasing the level of federal funding for Amtrak,
especially for capital investments, is not possible in today's
budgetary environment, 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 cannot 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:60.1
Intercity Passenger Rail: Amtrak's Financial and Operating
Conditions Threaten Its 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:60.2
John H. Anderson, Jr., (202) 512-2834
OPTION:
TARGET MILITARY AIRPORT PROGRAM
FUNDS WITHIN THE NATIONAL
AIRPORT SYSTEMTARGET MILITARY
AIRPORT PROGRAM FUNDS WITHIN
THE NATIONAL AIRPORT SYSTEM
------------------------------------------------------ Appendix III:61
---------------------------------- ----------------------------------
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 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 further limit
participation. In extending authorization for AIP in 1994, the
Congress limited participation to those airports located in
FAA-defined congested airports with more than 20,000 hours of annual
delays. The Congress also could limit participation to those
airports 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 also would 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 MAP as shown in the table below.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 26 26 26 26 26
Outlays 5 16 21 24 25
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 27 28 28 29 30
Outlays 5 16 22 26 28
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:61.1
Airport Improvement Program: The Military Airport Program Has Not
Achieved Intended Impact (GAO/RCED-94-209, June 30, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:61.2
John H. Anderson, Jr., (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:62
---------------------------------- ----------------------------------
Authorizing committees Commerce, Science and
Transportation (Senate)
Transportation and Infrastructure
(House)
Appropriations subcommittees Transportation (Senate and House)
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 is 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, a lack of oversight on some
university awards led to overcharges of almost $450,000 and unpaid
cost-sharing totaling $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.
As GAO recommended last year, DOT has completed the development of a
departmentwide database to track the purpose and costs associated
with each university research award. GAO continues to recommend that
DOT 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:62.1
Department of Transportation: University Research Activities Need
Greater Oversight (GAO/RCED-94-175, May 13, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:62.2
John H. Anderson, Jr., (202) 512-2834
500 EDUCATION, TRAINING,
EMPLOYMENT, AND SOCIAL SERVICES
------------------------------------------------------ Appendix III:63
-- Employment and training programs
OPTION:
EMPLOYMENT AND TRAINING
PROGRAMSEMPLOYMENT AND TRAINING
PROGRAMS
------------------------------------------------------ Appendix III:64
---------------------------------- ----------------------------------
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 numerous reports and testimonies commenting on federal
employment and training programs. Most recently, GAO identified more
than 150 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 House and the Senate have passed bills that would consolidate
many of the federally funded employment training programs. The House
bill creates three block grants by consolidating 74 employment
training programs and eliminating 52 higher education programs. The
Senate bill consolidates 83 programs into a single block grant.
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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Option: Disadvantaged adults
----------------------------------------------------------------------
Direct spending
----------------------------------------------------------------------
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 136 68 54 41 30
Outlays 71 27 24 11 0
----------------------------------------------------------------------
Source: Congressional Budget Office.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Option: Disadvantaged adults
----------------------------------------------------------------------
Discretionary spending
----------------------------------------------------------------------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 182 182 182 182 182
Outlays 13 158 180 182 182
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 188 193 199 204 210
Outlays 14 163 191 198 204
----------------------------------------------------------------------
Source: Congressional Budget Office.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Option: Dislocated workers
----------------------------------------------------------------------
Direct spending
----------------------------------------------------------------------
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 13 11 13 10 10
Outlays 6 10 12 11 10
----------------------------------------------------------------------
Source: Congressional Budget Office.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Option: Dislocated workers
----------------------------------------------------------------------
Discretionary spending
----------------------------------------------------------------------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 114 114 114 114 114
Outlays 8 81 108 114 114
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 117 121 124 128 131
Outlays 9 83 114 123 127
----------------------------------------------------------------------
Source: Congressional Budget Office
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:64.1
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: Basic Program Data Often
Missing (GAO/T-HEHS-94-239, September 28, 1994).
Multiple Employment Training Programs: Overlap in Programs Raises
Questions About Efficiency (GAO/HEHS-94-193, July 11, 1994).
Department of Labor: Rethinking the Federal Role in Worker
Protection and Workforce Development (GAO/T-HEHS-95-125, April 4,
1994).
Multiple Employment Training Programs: Major Overhaul Is Needed
(GAO/T-HEHS-94-109, March 3, 1994).
Multiple Employment Training Programs: Most Federal Agencies Do Not
Know If Their Programs Are Working Effectively (GAO/HEHS-94-88, March
2, 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:64.2
Carlotta C. Joyner, (202) 512-7014
550 HEALTH
------------------------------------------------------ Appendix III:65
-- 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:66
---------------------------------- ----------------------------------
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. In fiscal year 1995, Medicaid's drug benefit
cost more than $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. The Department of Health and Human Services
(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:66.1
Medicare and Medicaid: Opportunities to Save Program Dollars by
Reducing Fraud and Abuse (GAO/T-HEHS-95-110, March 22, 1995).
Prescription Drugs: Automated Prospective Review Systems Offer
Significant Potential Benefits for Medicaid (GAO/AIMD-94-130, August
5, 1994).
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:66.2
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:67
---------------------------------- ----------------------------------
Authorizing committees Finance (Senate)
Commerce (House)
Primary agency Department of Health and Human
Services
Account Grant to States for Medicaid
(75-0512)
Spending type Direct
Budget subfunction Health care services
Framework theme Reassess objectives
----------------------------------------------------------------------
GAO raised a concern that in fiscal year 1993 Michigan, Texas, and
Tennessee 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. For the period from fiscal year 1991 to
fiscal year 1995, Michigan alone reduced its share of Medicaid costs
by almost $1.8 billion through financing partnerships with medical
providers and local units of government. GAO's analysis of
Michigan's transactions last year showed that even though legislation
curtailed certain creative financing practices, the state was able to
reduce its share of Medicaid costs at the expense of the federal
government by $428 million through other mechanisms.
The practices that involve payments to state-owned facilities are
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:67.1
State Medicaid Financing Practices (GAO/HEHS-96-76R, January 23,
1996).
Michigan Financing Arrangements (GAO/HEHS-95-146R, May 5, 1995).
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:67.2
William J. Scanlon, (202) 512-7119
OPTION:
MEDICAID FORMULA: FAIRNESS
COULD BE IMPROVEDMEDICAID
FORMULA: FAIRNESS COULD BE
IMPROVED
------------------------------------------------------ Appendix III:68
---------------------------------- ----------------------------------
Authorizing committees Finance (Senate)
Commerce (House)
Primary agency Department of Health and Human
Services
Account Grant 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
government and the states share the financing of the program. Under
current law, the federal commitment is open-ended: federal outlays
rise with the costs and use of Medicaid services. The federal share
of the program costs varies with the per capita income of the state.
Consequently, 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 that
identify ways in which the fairness of federal grant formulas could
be improved. With respect to Medicaid, GAO believes that the
fairness of the matching formula in the open-ended program could be
improved by replacing the per capita income factor with two
factors--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 with
the most generous benefits, the fewest low-income people in need, and
the greatest ability to fund benefits from state resources. These
changes 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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 5,430 5,990 6,550 7,160 7,850
Outlays 5,430 5,990 6,550 7,160 7,850
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:68.1
Medicaid: Matching Formula's Performance and Potential Modifications
(GAO/T-HEHS-95-226, July 27, 1995).
Medicaid Formula: Fairness Could Be Improved (GAO/T-HRD-91-5,
December 7, 1990).
GAO CONTACT
---------------------------------------------------- Appendix III:68.2
William J. Scanlon, (202) 512-7119
OPTION:
ADOPT AUTOMATED DRUG
UTILIZATION REVIEWSADOPT
AUTOMATED DRUG UTILIZATION
REVIEWS
------------------------------------------------------ Appendix III:69
---------------------------------- ----------------------------------
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 that
states implement drug utilization review (DUR) programs in their
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 most of the states
now have or are planning to acquire these systems. Automated systems
for prospective DUR reviews reduce Medicaid program costs in two
ways: (1) by canceling 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 canceled during this period
exceeded $6.7 million.
Although most states plan to have automated prospective DUR systems,
states have implemented these systems differently. The absence in
some states of some types of drug therapy reviews, such as those for
pregnancy conflict (use of prescribed drug is not recommended during
pregnancy) and underutilization (an indication of noncompliance with
a prescribed drug regimen), could have dramatic effects on patient
safety. Also, whether or not states automatically deny early refill
claims (request for prescription refill before a predetermined amount
of a drug--such as 75 percent--has been consumed) can substantially
affect the relative amount of the savings and the prevention of
potential waste, fraud, and abuse. Given both the substantial safety
benefits that can accrue to Medicaid recipients and savings to the
Medicaid program through the effective use of automated prospective
DUR systems, the Health Care Financing Administration could assist
the states in coordinating and sharing experiences and best practices
for the implementation and use of these systems.
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:69.1
Prescription Drugs: Automated Prospective Review Systems Offer
Potential Benefits for Medicaid (GAO/AIMD-94-130, August 5, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:69.2
Patricia T. Taylor, (202) 512-5434
570 MEDICARE
------------------------------------------------------ Appendix III:70
-- 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:71
---------------------------------- ----------------------------------
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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Option: Reduce to 6-percent adjustment factor
----------------------------------------------------------------------
Outlays 886 947 1,018 1,093 1,171
Option: Reduce to 3-percent adjustment factor
----------------------------------------------------------------------
Outlays 2,491 2,664 2,864 3,076 3,295
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:71.1
Medicare: Indirect Medical Education Payments Are Too High
(GAO/HRD-89-33, January 5, 1989).
GAO CONTACT
---------------------------------------------------- Appendix III:71.2
Sarah F. Jaggar, (202) 512-7119
OPTION:
MEDICARE PAYMENT
SAFEGUARDSMEDICARE PAYMENT
SAFEGUARDS
------------------------------------------------------ Appendix III:72
---------------------------------- ----------------------------------
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, GAO 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.
The Congress has proposed Medicare reforms that would increase
funding for Medicare program safeguard activities. For the fiscal
year 1996 congressional proposal, CBO estimated a net savings of over
$3 billion for increasing Medicare, HHS office of Inspector General,
and Federal Bureau of Investigations resources to identify and pursue
individuals or entities that defraud federal health care programs.\5
Though this proposal passed in the Congress, the President vetoed it
as part of the broader fiscal year 1996 budget reconciliation
package.
--------------------
\5 In prior years, CBO did not score increases in such funding
because the proposals violated rules (established in the conference
report on the Omnibus Budget Reconciliation Act of 1993) that
preclude attributing changes in mandatory spending to changes in
discretionary funding for program administration. That prohibition
did not apply to these proposals, however, because they would
establish long-term mandatory appropriations to cover all of the
enforcement activities proposed.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:72.1
Funding Anti-Fraud and Abuse Activities (GAO/HEHS-95-263R, September
29, 1995).
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:72.2
Sarah F. Jaggar, (202) 512-7119
OPTION:
MEDICARE PAYMENTS FOR HIGH
TECHNOLOGY PROCEDURESMEDICARE
PAYMENTS FOR HIGH TECHNOLOGY
PROCEDURES
------------------------------------------------------ Appendix III:73
---------------------------------- ----------------------------------
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, providers' unit
costs often are high because of large capital expenditures and low
initial utilization rates. When Medicare sets its payment rates for
these new technologies, the rates typically are based on the high
initial unit costs. Over time, providers' unit costs decline as
equipment improves, 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 adjusting its fee schedule payment rates to reflect the declining
unit costs.
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, MRI scans, and
intraocular lenses. The Administration also has proposed legislation
to use competitive acquisition, rather than the fee schedule, for
selected services such as MRI scans. 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 revising the Medicare fee
schedule potentially encompasses all procedures, and any savings
would depend on the particular technologies for which Medicare
payment rates are reduced.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:73.1
Medicare Spending: Modern Management Strategies Needed to Curb
Billions in Unnecessary Payments (GAO/HEHS-95-210, September 19,
1995).
Medicare: High Spending Growth Calls for Aggressive Action
(GAO/T-HEHS-95-75), February 6, 1995).
Medicare: Excessive Payments Support the Proliferation of Costly
Technology (GAO/HRD-92-59, May 27, 1992).
Medicare: Further Changes Needed to Reduce Program and Beneficiary
Costs (GAO/HRD-91-67, May 15, 1991).
GAO CONTACT
---------------------------------------------------- Appendix III:73.2
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:74
---------------------------------- ----------------------------------
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), the 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 for two reasons. First, 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. Second, in many areas Medicare's 5 percent
"discount" from fee-for-service costs is too modest. By failing to
reflect local market conditions and greater HMO efficiencies, the
capitation rate causes Medicare to overpay HMOs.
GAO has suggested that Medicare address the problem of overpayments
to HMOs by pursuing three promising strategies. These strategies
include fostering price competition among HMOs through competitive
bidding, improving the risk adjusters' accuracy, and making
adjustments to the current formula to reflect market competition and
HMOs' local health care costs. These strategies should be pursued
concurrently since any one strategy will not emerge as best for all
areas. Market conditions vary too much and in important ways, even
among metropolitan areas.
A 5-year estimate of savings cannot be developed at this time.
Insufficient data have been collected to determine the specific
impact of proposed alternative payment methods on Medicare costs and
on HMO participation in the risk contract program.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:74.1
Medicare Managed Care: Growing Enrollment Adds Urgency to Fixing HMO
Payment Problem (GAO/HEHS-96-21, November 8, 1995).
Medicare: Changes to HMO Rate Setting Method Are Needed to Reduce
Program Costs (GAO/HEHS-94-119, September 2, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:74.2
William J. Scanlon, (202) 512-7119
600 INCOME SECURITY
------------------------------------------------------ Appendix III:75
-- 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:76
---------------------------------- ----------------------------------
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
1994, non-AFDC caseloads and costs have risen 340 percent and 600
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 1994, for example, state fee practices
returned $33 million of the $1.1 billion 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, GAO believes
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 recover almost all of 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, 1996.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 605 655 705 760 815
Outlays 605 655 705 760 815
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:76.1
Child Support Enforcement: Opportunity to Reduce Federal and State
Costs (GAO/T-HEHS-95-181, June 13, 1995).
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:76.2
Jane L. Ross, (202) 512-7215
OPTION:
AUTOMATED CHILD SUPPORT
ENFORCEMENT SYSTEMSAUTOMATED
CHILD SUPPORT ENFORCEMENT
SYSTEMS
------------------------------------------------------ Appendix III:77
---------------------------------- ----------------------------------
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 was discontinued at
the end of fiscal year 1995 but the Congress may extend it as part of
welfare reform. The federal government now reimburses states' costs
to develop and operate these systems at the 66-percent rate
established for administrative expenses.
GAO work shows that beginning in fiscal year 1996, the states could
begin spending 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 the savings shown
in the following table.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 50 55 60 65 70
Outlays 50 55 60 65 70
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:77.1
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:77.2
Patricia T. Taylor, (202) 512-5434
OPTION:
FUNDING FOR STATE AUTOMATED
WELFARE SYSTEMSFUNDING FOR
STATE AUTOMATED WELFARE SYSTEMS
------------------------------------------------------ Appendix III:78
---------------------------------- ----------------------------------
Authorizing committees Agriculture (Senate and House)
Finance (Senate)
Ways and Means (House)
Appropriations subcommittees Labor, HHS, Education and Related
Agencies (Senate)
Agriculture (House)
Primary agencies 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, 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
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:78.1
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:78.2
Patricia T. Taylor, (202) 512-5434
OPTION:
UNIFIED RISK-BASED FOOD SAFETY
SYSTEMUNIFIED RISK-BASED FOOD
SAFETY SYSTEM
------------------------------------------------------ Appendix III:79
---------------------------------- ----------------------------------
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 over $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:79.1
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:79.2
Bob A. Robinson, (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:80
---------------------------------- ----------------------------------
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 Discretionary/Direct
Framework theme Improve efficiency
----------------------------------------------------------------------
GAO 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.
The 1996 Agriculture Appropriations Act consolidated The Emergency
Food Assistance Program (TEFAP), Soup Kitchens/Food Banks (SKFB) and
Commodity Supplemental Food Program (CSFP) into one account.
However, the recently enacted Federal Agriculture Improvement and
Reform (FAIR) Act of 1996 continues to authorize these programs
separately.
To illustrate how savings could be achieved, consolidating these
three commodity food assistance programs 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 funding
currently provided the states for administering the programs. Total
appropriations for these programs for fiscal year 1996 were $166
million, of which $49 million went to states for administering the
programs. The following table reflects the savings that could be
achieved from this option.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 49 49 49 49 49
Outlays 40 49 49 49 49
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 50 52 53 55 56
Outlays 42 52 53 55 56
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:80.1
Food Assistance: Alternatives for Delivering Benefits
(GAO/T-RCED-95-202, May 23, 1995).
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 (RCED-78-113, June 13, 1978).
GAO CONTACT
---------------------------------------------------- Appendix III:80.2
Bob A. Robinson, (202) 512-5138
650 SOCIAL SECURITY
------------------------------------------------------ Appendix III:81
-- Social Security continuing disability reviews
OPTION:
SOCIAL SECURITY CONTINUING
DISABILITY REVIEWSSOCIAL
SECURITY CONTINUING DISABILITY
REVIEWS
------------------------------------------------------ Appendix III:82
---------------------------------- ----------------------------------
Authorizing committees Finance (Senate)
Ways and Means (House)
Appropriations subcommittees Labor, Health and Human Services,
and Education (Senate and House)
Primary agencies Social Security Administration,
and Department of Health and Human
Services
Accounts
Social Security Federal Old-Age and Survivors
Administration Insurance Trust Fund (20-8006)
Federal Disability Insurance Trust
Fund (20-8007)
Department of Health Federal Supplementary Medical
and Human Services Insurance Trust Fund (20-8004)
Federal Hospital Insurance Trust
Fund (20-8005)
Spending type Discretionary/Direct
Budget subfunctions Social Security and Medicare
Framework theme Improve efficiency
----------------------------------------------------------------------
Since 1987, the Social Security Administration (SSA) has completed
less than half of the continuing disability reviews (CDRs) required
by law for the Disability Insurance (DI) program. As a result, in
1995 the DI backlog for such reviews for disabled workers had reached
1.5 million cases. These reviews determine whether DI beneficiaries
no longer are disabled and thus may be removed from the rolls.
According to SSA, CDRs reduce outlays by $90,000--in lifetime DI
benefits and Medicare benefits---for every ineligible individual
removed from the rolls.
While SSA has taken steps to improve the payoff from the disability
reviews it performs, GAO believes that SSA should continue to examine
ways to increase the number of such reviews and to make existing
reviews more efficient. The Congress has introduced legislation to
establish a revolving fund in the DI trust fund to finance all SSA
disability reviews. The proposed Senior Citizens' Right to Work Act
of 1995 would have provided funding for 7 years, enabling SSA to
conduct the overdue reviews and remove recipients who no longer are
disabled from the rolls.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:82.1
Social Security Disability: Management Action and Program Redesign
Needed to Address Long-Standing Problems (GAO/T-HEHS-95-223, August
3, 1995).
Disability Insurance: Broader Management Focus Needed to Better
Control Caseload (GAO/T-HEHS-95-164, May 23, 1995).
Social Security: Federal Disability Programs Face Major Issues
(GAO/T-HEHS-95-97, March 2, 1995).
Social Security: New Continuing Disability Review Process Could Be
Enhanced (GAO/HEHS-94-118, June 27, 1994).
Social Security: Continuing Disability Review Process Improved, But
More Targeted Reviews Needed (GAO/T-HEHS-94-121, March 10, 1994).
Social Security: Disability Rolls Keep Growing, While Explanations
Remain Elusive (GAO/HEHS-94-34, February 8, 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:82.2
Jane L. Ross, (202) 512-7215
700 VETERANS BENEFITS AND
SERVICES
------------------------------------------------------ Appendix III:83
-- Cost sharing for veterans' long-term care
-- Veterans' disability compensation for nonservice connected
diseases
OPTION:
COST SHARING FOR VETERANS'
LONG-TERM CARECOST SHARING FOR
VETERANS' LONG-TERM CARE
------------------------------------------------------ Appendix III:84
---------------------------------- ----------------------------------
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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Option: Recovery of 25 percent of costs
----------------------------------------------------------------------
Budget authority 350 350 350 350 350
Outlays 315 350 350 350 350
Option: Recovery of 50 percent of costs
----------------------------------------------------------------------
Budget authority 700 700 700 700 700
Outlays 630 700 700 700 700
----------------------------------------------------------------------
Source: Congressional Budget Office.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Option: Recovery of 25 percent of costs
----------------------------------------------------------------------
Budget authority 364 379 394 410 426
Outlays 328 378 393 408 424
Option: Recovery of 50 percent of costs
----------------------------------------------------------------------
Budget authority 728 758 789 820 851
Outlays 655 755 786 817 848
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:84.1
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 Costs By Adopting State
Copayment Practices (GAO/HRD-92-96, August 12, 1992).
GAO CONTACT
---------------------------------------------------- Appendix III:84.2
David P. Baine, (202) 512-7101
OPTION:
VETERANS' DISABILITY
COMPENSATION FOR NONSERVICE
CONNECTED DISEASESVETERANS'
DISABILITY COMPENSATION FOR
NONSERVICE CONNECTED DISEASES
------------------------------------------------------ Appendix III:85
---------------------------------- ----------------------------------
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 1995, CBO reported that about
230,000 veterans were receiving about $1.5 billion annually in VA
compensation for these diseases. GAO's study of five countries shows
that those countries do not compensate veterans under such
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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 16 48 83 120 158
Outlays 14 45 80 128 142
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:85.1
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:85.2
David P. Baine, (202) 512-7101
750 ADMINISTRATION OF JUSTICE
------------------------------------------------------ Appendix III:86
-- 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:87
---------------------------------- ----------------------------------
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
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:87.1
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:87.2
Norman J. Rabkin, (202) 512-3610
800 GENERAL GOVERNMENT
------------------------------------------------------ Appendix III:88
-- 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:89
---------------------------------- ----------------------------------
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. For
fiscal year 1996, GSA's markups had increased to 22 percent and 35
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
developed in fiscal year 1995 and used again this year, the
difference is still significant and reflects the higher costs
associated with maintaining and operating a large depot distribution
system.
In fiscal year 1992, 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) permits agencies to use supply sources other than depots for
purchases under $5,000, which GSA estimated includes 99 percent of
all potential purchases, (2) has 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.
The Congress could consider requiring 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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 23 48 73 75 78
Outlays 17 41 67 75 77
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:89.1
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:89.2
J. William Gadsby, (202) 512-8387
OPTION:
THE 1-DOLLAR COINTHE 1-DOLLAR
COIN
------------------------------------------------------ Appendix III:90
---------------------------------- ----------------------------------
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 and 1995, 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. Seigniorage
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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Revenue gains 0 0 0 80 110
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:90.1
A Dollar Coin Could Save Millions (GAO/T-GGD-95-203, July 13, 1995).
1-Dollar Coin: Reintroduction Could Save Millions If It Replaced the
1-Dollar Note (GAO/T-GGD-95-146, May 3, 1995).
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:90.2
J. William Gadsby, (202) 512-8387
OPTION:
JUDICIARY'S LONG-RANGE SPACE
PLANNING SYSTEMJUDICIARY'S
LONG-RANGE SPACE PLANNING
SYSTEM
------------------------------------------------------ Appendix III:91
---------------------------------- ----------------------------------
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:91.1
Federal Courthouse Construction: More Disciplined Approach Would
Reduce Costs and Provide for Better Decisionmaking (GAO/T-GGD-96-19,
November 8, 1995).
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:91.2
J. William Gadsby, (202) 512-8387
MULTIPLE
------------------------------------------------------ Appendix III:92
-- 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
-- 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:93
------------------------------- ---- -------------------------------
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. GAO reviewed five agencies--the
Federal Aviation Administration, the Customs Service, and the
Departments of Defense, Justice, and Veterans Affairs--which are
among the most frequent payers of Sunday premium pay in the federal
government. Using leave information provided by these five agencies
for fiscal year 1994, we estimated that $17.9 million of the $146.1
million in Sunday premium pay was paid to employees on leave.
The House Committee on Appropriations' Subcommittee on Transportation
and Related Agencies included a provision in the Department of
Transportation's (DOT) fiscal year 1995 appropriation that precluded
DOT from paying premium pay for Sundays not actually worked. GAO
addressed this issue governmentwide in a 1995 report. We suggested
that to preclude federal employees from receiving Sunday premium pay
while on leave and to reduce governmentwide employment costs, the
Congress may wish to consider requiring that employees actually must
work on Sunday to receive Sunday premium pay.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:93.1
Sunday Premium Pay: Millions of Dollars in Sunday Premium Pay Are
Paid to Employees on Leave (GAO/GGD-95-144, May 19, 1995).
GAO CONTACT
---------------------------------------------------- Appendix III:93.2
L. Nye Stevens, (202) 512-8676
OPTION:
GLOBAL POSITIONING SYSTEM
TECHNOLOGYGLOBAL POSITIONING
SYSTEM TECHNOLOGY
------------------------------------------------------ Appendix III:94
------------------------------- ---- -------------------------------
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:94.1
Global Positioning Technology: Opportunities for Greater Federal
Agency Joint Development and Use (GAO/RCED-94-280, September 28,
1994).
GAO CONTACT
---------------------------------------------------- Appendix III:94.2
John H. Anderson, Jr., (202) 512-2834
OPTION:
REFORM OR REPEAL THE
DAVIS-BACON ACTREFORM OR REPEAL
THE DAVIS-BACON ACT
------------------------------------------------------ Appendix III:95
---------------------------------- ----------------------------------
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/Direct
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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Direct Spending
----------------------------------------------------------------------
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 41 31 28 28 28
Outlays 13 32 34 31 29
----------------------------------------------------------------------
Note: CBO has identified some direct spending savings from the
repeal of the Davis-Bacon Act, including a reclassification of about
$2 billion in federal aid to highways in fiscal year 1996.
Source: Congressional Budget Office.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Discretionary spending
----------------------------------------------------------------------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 725 725 725 725 725
Outlays 163 418 558 631 675
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 736 758 780 802 826
Outlays 166 421 571 658 720
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:95.1
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:95.2
Carlotta C. Joyner, (202) 512-7014
OPTION:
BETTER MANAGE DEPARTMENT OF
ENERGY OVERTIME COSTSBETTER
MANAGE DEPARTMENT OF ENERGY
OVERTIME COSTS
------------------------------------------------------ Appendix III:96
---------------------------------- ----------------------------------
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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 2 3 5 6 7
Outlays 2 3 5 6 7
Savings from the 1996 funding level adjusted for inflati
----------------------------------------------------------------------
Budget authority 2 4 6 8 11
Outlays 2 4 7 8 10
----------------------------------------------------------------------
Source: Congressional Budget Office.
RELATED GAO PRODUCT
---------------------------------------------------- Appendix III:96.1
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:96.2
Victor S. Rezendes, (202) 512-3841
OPTION:
USE UNCOSTED OBLIGATIONS TO
OFFSET FUTURE BUDGET NEEDSUSE
UNCOSTED OBLIGATIONS TO OFFSET
FUTURE BUDGET NEEDS
------------------------------------------------------ Appendix III:97
---------------------------------- ----------------------------------
Authorizing comittees 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 1995, uncosted
obligations totaled about $7.5 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
Management and Defense Programs--identified over $500 million in
unneeded funds.
GAO believes that additional uncosted funds are available because the
scope of our reviews so far has focused primarily on two major
accounts--Defense Programs and Environmental Management--that account
for about $3.2 billion in uncosted balances. Other programs, such as
energy research, also hold large balances. Future appropriations
could be reduced to reflect these unused funds.
The Congress may wish to consider reducing fiscal year 1997
appropriations to reflect these unused funds. Based upon our last
three audits, reducing appropriations by $500 million in fiscal year
1997 could achieve the following savings.\6
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Savings from the 1996 Defense Plan
----------------------------------------------------------------------
Budget authority 500 0 0 0 0
Outlays 300 164 36 0 0
----------------------------------------------------------------------
Source: Congressional Budget Office.
--------------------
\6 The budget authority amount is a GAO estimate. The corresponding
outlays are computed using CBO spendout rates.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:97.1
DOE's Fiscal Year 1994 Uncosted Balance (GAO/RCED-95-263R, August 7,
1995).
Energy Management: Use of Uncosted Balances to Meet Budget Needs
(GAO/RCED-94-232FS, June 6, 1994).
GAO CONTACT
---------------------------------------------------- Appendix III:97.2
Victor S. Rezendes, (202) 512-3841
OPTION:
FEDERAL AGENCY CREDIT
MANAGEMENT PROGRAMSFEDERAL
AGENCY CREDIT MANAGEMENT
PROGRAMS
------------------------------------------------------ Appendix III:98
---------------------------------- ----------------------------------
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 effective loan
origination, account servicing, collection, and write-off procedures
as initially specified by the Office of Management and Budget (OMB)
in its nine-point credit management program and currently contained
in OMB Circular A-129.
GAO has reported several times that agencies have not effectively
managed their debt collection programs. For example, agencies do not
always screen applicants for delinquent federal debt before approving
new loans or guarantees. Further, some agencies have failed to fully
use the authorities available for collecting debt. To expand and
strengthen federal agency debt collection procedures and authorities,
the Debt Collection Improvement Act of 1996 was enacted in April
1996.
Despite past efforts to improve federal debt collection, problems
persist. In the fiscal year 1996 Analytical Perspectives of the
budget, OMB reported that in fiscal year 1994, lending agencies wrote
off about $2.8 billion of direct loans and terminated for default
about $16.4 billion of guaranteed loans. OMB also has reported that
outstanding loans in delinquent status grew to an all-time high of
almost $40 billion in fiscal year 1994, representing 20 percent of
all nontax receivables. Nearly $35 billion of this amount had been
delinquent for more than a year and the collectibility is considered
doubtful by OMB.
Compounding these problems is the unreliability of agency data on
outstanding receivables and guarantees. OMB states that the
information being reported on IRS tax receivables does not agree with
information on audited financial statements. Further, GAO has been
unable to render an opinion on IRS' financial statements because of
the unreliability of information. Similar problems with the
reliability and completeness of information on credit programs at
other agencies also have been reported in the past. Complete and
reliable financial information, a primary objective of the Chief
Financial Officers' Act of 1990 and the Government Management Reform
Act of 1994, and meaningful program performance measures as called
for by the Government Performance and Results Act of 1993, are a
prerequisite to effective agency debt collection operations and for
the Congress to be able to assess the effectiveness of program
implementation.
At the request of House Budget Committee Chairman Kasich, GAO
currently is updating its previous work on debt collection.
Objectives include (1) developing a current profile of uncollected
debt across government, (2) identifying any significant recent trends
or changes in those amounts, and (3) identifying opportunities to
further strengthen agency debt collection and determining the extent
to which credit management reports provide sufficient information to
monitor credit quality.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:98.1
Financial Management: Legislation To Improve Governmentwide Debt
Collection Practices (GAO/T-AIMD-95-235, September 8, 1995).
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:98.2
Gregory M. Holloway, (202) 512-9507
OPTION:
FORMULA-BASED GRANT
PROGRAMSFORMULA-BASED GRANT
PROGRAMS
------------------------------------------------------ Appendix III:99
---------------------------------- ----------------------------------
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. Last year, 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.\7 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)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Option: Discretionary spending
----------------------------------------------------------------------
Savings from the 1996 funding level
----------------------------------------------------------------------
Budget authority 2,191 2,191 2,191 2,191 2,191
Outlays 597 2,567 3,299 3,598 3,713
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 2,255 2,321 2,387 2,453 2,522
Outlays 614 2,663 3,492 3,901 4,128
----------------------------------------------------------------------
Source: Congressional Budget Office.
Five-Year Savings
(Dollars in millions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Option: Direct spending
----------------------------------------------------------------------
Savings from the 1996 funding level adjusted for inflation
----------------------------------------------------------------------
Budget authority 2,154 2,207 2,263 2,318 2,376
Outlays 423 515 542 556 568
----------------------------------------------------------------------
Source: Congressional Budget Office.
--------------------
\7 In the transportation budget function, several very small
closed-ended grants could not be easily isolated in the baseline and
these are included in the estimate.
RELATED GAO PRODUCTS
---------------------------------------------------- Appendix III:99.1
Highway Funding: Alternatives for Distributing Federal Funds
(GAO/RCED-96-6, November 28, 1995).
Ryan White Care Act of 1990: Opportunities to Enhance Funding Equity
(GAO/HEHS-96-26, November 13, 1995).
Department of Labor: Senior Community Service Employment Program
Delivery Could Be Improved Through Legislative and Administrative
Action (GAO/HEHS-96-4, November 2, 1995).
Rural Development: USDA's Approach to Funding Water and Sewer
Projects (GAO/RCED-95-258, September 22, 1995).
Medicaid: Matching Formula's Performance and Potential Modifications
(GAO/T-HEHS-95-226, July 27, 1995).
Older Americans Act: Funding Formula Could Better Reflect State
Needs (GAO/HEHS-94-41, May 12, 1994).
Medicaid: Alternatives for Improving the Distribution of Funds to
States (GAO/HRD-93-112FS, August 20, 1993).
Mental Health Grants: Funding Not Distributed According to State
Needs (GAO/T-HRD-91-32, May 16, 1992).
Maternal And Child Health: Block Grants Funds Should Be Distributed
More Equitably (GAO/HRD-92-5, April 2, 1992).
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).
Block Grants: Proposed Formulas for Substance Abuse, Mental Health
Provide More Equity (GAO/HRD-87-109BR, July 16, 1987).
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:99.2
William J. Scanlon, (202) 512-7123
RECEIPTS
----------------------------------------------------- Appendix III:100
-- 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:101
---------------------------------- ----------------------------------
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 $415 and $200 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, 1996.
Five-Year Revenues
(Dollars in billions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Revenue gains 24.1 -5.4 -3.3 -1.1 1.7
----------------------------------------------------------------------
Note: JCT provided its revenue estimates in billions of dollars.
Source: Joint Committee on Taxation.
RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:101.1
Tax Policy: Effects of Changing Tax Treatment of Fringe Benefits
(GAO/GGD-92-43, April 7, 1992).
GAO CONTACT
--------------------------------------------------- Appendix III:101.2
Lynda D. Willis, (202) 512-9110
OPTION:
INFORMATION REPORTING ON
FORGIVEN DEBTSINFORMATION
REPORTING ON FORGIVEN DEBTS
----------------------------------------------------- Appendix III:102
---------------------------------- ----------------------------------
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, 1997.
Five-Year Revenues
(Dollars in billions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Revenue gains \a \a \a \a \a
----------------------------------------------------------------------
Note: JCT provided its revenue estimates in billions of dollars.
\a A gain of less than $50 million.
Source: Joint Committee on Taxation.
RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:102.1
Tax Administration: Information Returns Can Improve Reporting of
Forgiven Debts (GAO/GGD-93-42, February 17, 1993).
GAO CONTACT
--------------------------------------------------- Appendix III:102.2
Lynda D. Willis, (202) 512-9110
OPTION:
ADMINISTRATION OF THE TAX
DEDUCTION FOR REAL ESTATE
TAXESADMINISTRATION OF THE TAX
DEDUCTION FOR REAL ESTATE TAXES
----------------------------------------------------- Appendix III:103
---------------------------------- ----------------------------------
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, 1997, and for amounts reported on tax bills
after December 31, 1998. Together, the proposals would increase
federal fiscal year revenues as shown in the table below.
Five-Year Revenues
(Dollars in billions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Revenue gain \a \b 0.1 0.2 0.2
----------------------------------------------------------------------
Note: JCT provided its revenue estimates in billions of dollars.
\a Not applicable to that year.
\b A gain of less than $50 million.
Source: Joint Committee on Taxation.
RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:103.1
Tax Administration: Overstated Real Estate Tax Deductions Need To Be
Reduced (GAO/GGD-93-43, January 19, 1993).
GAO CONTACT
--------------------------------------------------- Appendix III:103.2
Lynda D. Willis, (202) 512-9110
OPTION:
CORPORATE TAX DOCUMENT
MATCHINGCORPORATE TAX DOCUMENT
MATCHING
----------------------------------------------------- Appendix III:104
---------------------------------- ----------------------------------
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 through 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:104.1
Tax Administration: Benefits of a Corporate Document Matching
Program Exceed the Costs (GAO/GGD-91-118, September 27, 1991).
GAO CONTACT
--------------------------------------------------- Appendix III:104.2
Lynda D. Willis, (202) 512-9110
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:105
---------------------------------- ----------------------------------
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
forgone revenue. 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, 1996.
Five-Year Revenues
(Dollars in billions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Revenue gain 5.1 13.3 16.3 18.4 20.3
----------------------------------------------------------------------
Note: JCT provided its revenue estimates in billions of dollars.
Source: Joint Committee on Taxation.
RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:105.1
Tax Policy: Tax Treatment of Life Insurance and Annuity Accrued
Interest (GAO/GGD-90-31, January 29, 1990).
GAO CONTACT
--------------------------------------------------- Appendix III:105.2
Lynda D. Willis, (202) 512-9110
OPTION:
FEDERAL AGENCY REPORTING TO THE
INTERNAL REVENUE SERVICEFEDERAL
AGENCY REPORTING TO THE
INTERNAL REVENUE SERVICE
----------------------------------------------------- Appendix III:106
---------------------------------- ----------------------------------
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:106.1
Tax Administration: Federal Agencies Should Report Service Payments
Made to Corporations (GAO/GGD-92-130, September 22, 1992).
GAO CONTACT
--------------------------------------------------- Appendix III:106.2
Lynda D. Willis, (202) 512-9110
OPTION:
INDEPENDENT CONTRACTOR TAX
COMPLIANCEINDEPENDENT
CONTRACTOR TAX COMPLIANCE
----------------------------------------------------- Appendix III:107
---------------------------------- ----------------------------------
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 extending 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.
During 1995, various proposals on clarifying the definition of
independent contractors and improving related information reporting
emerged. Congressional hearings dealt with some of these bills. As
of January 1996, the Congress had not acted on any of them.
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:107.1
Tax Administration: Approaches for Improving Independent Contractor
Compliance (GAO/GGD-92-108, July 23, 1992).
GAO CONTACT
--------------------------------------------------- Appendix III:107.2
Lynda D. Willis, (202) 512-9110
OPTION:
DEDUCTIBILITY OF HOME EQUITY
LOAN INTERESTDEDUCTIBILITY OF
HOME EQUITY LOAN INTEREST
----------------------------------------------------- Appendix III:108
---------------------------------- ----------------------------------
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, 1998,
this option would generate the following revenues.
Five-Year Revenues
(Dollars in billions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Revenue gains 1.6 2.2 2.3 2.4 2.6
----------------------------------------------------------------------
Note: JCT provided its revenue estimates in billions of dollars.
Source: Joint Committee on Taxation.
RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:108.1
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:108.2
Lynda D. Willis, (202) 512-9110
OPTION:
INTERNAL REVENUE SERVICE STAFF
UTILIZATIONINTERNAL REVENUE
SERVICE STAFF UTILIZATION
----------------------------------------------------- Appendix III:109
---------------------------------- ----------------------------------
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 January 1995, IRS committed about 800 staff years to an early
intervention program designed to reduce the number of collection
notices sent to delinquent taxpayers and to make telephone contact
earlier in the collection process. The additional telephone staff
were funded from IRS' fiscal year 1995 Compliance Initiative, which
was not extended into fiscal year 1996. According to the IRS
Commissioner, although the loss of funding will impact the program,
early results from the increased staff reflected additional
collections of about $111 million.
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:109.1
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).
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:109.2
Lynda D. Willis, (202) 512-9110
OPTION:
COLLECTING GASOLINE EXCISE
TAXESCOLLECTING GASOLINE EXCISE
TAXES
----------------------------------------------------- Appendix III:110
---------------------------------- ----------------------------------
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:110.1
Tax Administration: Status of Efforts to Curb Motor Fuel Tax Evasion
(GAO/GGD-92-67, May 12, 1992).
GAO CONTACT
--------------------------------------------------- Appendix III:110.2
Lynda D. Willis, (202) 512-9110
OPTION:
COMPUTING EXCISE TAX
BASESCOMPUTING EXCISE TAX BASES
----------------------------------------------------- Appendix III:111
---------------------------------- ----------------------------------
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, 1997.
Five-Year Revenues
(Dollars in billions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Revenue gains 0.3 0.7 1.0 1.4 1.6
----------------------------------------------------------------------
Note: JCT provided its revenue estimates in billions of dollars.
Source: Joint Committee on Taxation.
RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:111.1
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:111.2
Lynda D. Willis, (202) 512-9110
OPTION:
SMALL-ISSUE INDUSTRIAL
DEVELOPMENT BONDS AND QUALIFIED
MORTGAGE BONDSSMALL-ISSUE
INDUSTRIAL DEVELOPMENT BONDS
AND QUALIFIED MORTGAGE BONDS
----------------------------------------------------- Appendix III:112
---------------------------------- ----------------------------------
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 (1) job creation attributed to IDB projects would likely
have occurred without issuance of the bonds in the three states
reviewed, (2) no evidence exists to support the contention that IDBs
achieve significant public benefits, such as providing economic
growth to depressed areas that would not have otherwise occurred, 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 effective for bonds issued
after December 31, 1996. Estimated revenues gained from eliminating
QMBs and IDBs are shown in the following table.
Five-Year Revenues
(Dollars in billions)
FY97 FY98 FY99 FY00 FY01
------------------------------ ------ ------ ------ ------ ------
Revenue gains \a 0.1 0.2 0.3 0.3
----------------------------------------------------------------------
Note: JCT provided its revenue estimates in billions of dollars.
\a A gain of less than $50 million.
Source: Joint Committee on Taxation.
RELATED GAO PRODUCTS
--------------------------------------------------- Appendix III:112.1
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:112.2
Judy A. England-Joseph, (202) 512-7631
OPTION:
IMPROVING COMPLIANCE OF SOLE
PROPRIETORSIMPROVING COMPLIANCE
OF SOLE PROPRIETORS
----------------------------------------------------- Appendix III:113
---------------------------------- ----------------------------------
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.\8
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).\9 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.
--------------------
\8 The term sole proprietors refers to self-employed individuals
other than farmers.
\9 This program generates compliance data through rigorous audits of
randomly selected tax returns.
RELATED GAO PRODUCT
--------------------------------------------------- Appendix III:113.1
Tax Administration: IRS Can Better Pursue Noncompliant Sole
Proprietors, (GAO/GGD-94-175, August 2, 1994).
GAO CONTACT
--------------------------------------------------- Appendix III:113.2
Lynda D. Willis, (202) 512-9110
OPTION:
INCREASE HIGHWAY USER FEES ON
HEAVY TRUCKSINCREASE HIGHWAY
USER FEES ON HEAVY TRUCKS
----------------------------------------------------- Appendix III:114
---------------------------------- ----------------------------------
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:114.1
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:114.2
John H. Anderson, Jr., (202) 512-2834
OPTIONS NOT UPDATED FOR THIS
REPORT
========================================================== Appendix IV
The following table provides information on options from last year's
report\1 that were not updated because of congressional or agency
action that took into consideration GAO's work on the issues.
Option Comments
--------------------------------------- ---------------------------------------
Hunter Joint Tactical Unmanned Aerial DOD has decided not to continue the
Vehicle System Hunter program.
Reduce Army Inventories of Spare and Army inventory levels are being reduced
Repair Parts at Divisions based on GAO recommendations.
Alter Readiness Status of Some Ready GAO's proposal for the Ready Reserve
Reserve Force Ships Force suggested that savings could be
achieved by decreasing the readiness
levels of 20 ships. Requirements for
the Ready Reserve Force were modified
by the Bottom-Up Review Update
published in March 1995, and reductions
in both overall force size and
readiness levels have been made.
Upgrades to Navy F-14 Fighter Aircraft GAO's budget reduction option
May Not Be Needed questioned the ground attack and
structural/survivability upgrades to
the F-14, and the Congress acted in
fiscal year 1995 to eliminate funding
for ground attack upgrades. Regarding
the structural/survivability upgrade,
it is now less clear that these
upgrades are not needed given that F-
14 will be called on for longer range
interdiction missions since the A-6E
strike aircraft are being retired.
Options to Acquire Fewer Attack The Congress authorized and
Submarines appropriated $700 million for fiscal
year 1996 to continue the SSN-21
program, including the 3rd Seawolf
submarine. The authorization act
stipulates that this will be the final
vessel of the SSN-21 Seawolf class.
C-17 Aircraft GAO's budget deficit reduction option
suggested that 120 C-17s were not
needed based on the strategic delivery
requirements of the national security
strategy. Moreover, our position is
that lift requirements beyond the
unique military requirements could be
met with B-747s. Since then, the
Defense Acquisition Board determined
that 120 C-17s were needed to meet
unique military requirements and to
maintain flexibility. We are now
evaluating the analysis that supports
that position.
Improve Department of Energy's Property DOE has acted to deal with this
Management Controls problem. For example, specific
management performance measures have
been included in a new O&M contract at
the Rocky Flats facility.
Improve Hanford Site Management DOE has taken a number of steps to
improve the tank farm program and has
also cut back funding for well-
drilling activities.
Burdensharing in the Republic of Korea The United States and the Republic of
Korea recently concluded an agreement
satisfactory to the United States, and
no new negotiations can be conducted
until December 31, 1998.
Delay Procurement of Nuclear Waste DOE has decided to terminate this
Containers program, effective April 1996.
Conservation Reserve Program Contracts The Federal Agriculture Improvement and
Reform (FAIR) Act of 1996 contains
provisions that limit enrollment to
36.4 acres and allow contracts that
were entered into before January 1,
l995, and that have been in effect for
at least 5 years, to be eligible for
early termination. However, this
provision does not apply to contracts
covering certain environmentally-
sensitive
lands.
Communications Site Fees In November 1995, the Bureau of Land
Management and the Forest Service
established a new fee system for
communications rights-of-way that is
based on the population a site serves.
Change How Federal Needs for Helium Are Both the Congress and the
Met administration agreed to terminate the
Bureau of Mines as well as the federal
government's responsibility for the
production and sale of refined helium.
U.S. Department of Agriculture Dairy The FAIR Act of 1996 eliminates the
Price Support Program budget assessment on dairy producers
immediately and phases down the support
price on butter, powdered milk, and
cheese over 4 years. At the end of
1999, price support authority is
eliminated until 2002 when permanent
parity-priced provisions would become
effective.
Milk Marketing Orders The FAIR Act of 1996 instructs the
Secretary of Agriculture to
consolidate, within 3 years, milk
marketing orders from 33 to no more
than 14 and no less than 10.
U.S. Department of Agriculture Crop Although the FAIR Act of 1996 does not
Price Supports limit crop price supports in the manner
suggested by GAO, it reduces payment
limitations for production flexibility
contracts to $40,000. More importantly,
the act sets up a system to transition
producers to a greater market
orientation with the ultimate goal of
eliminating their dependency on federal
price support programs.
Farm Lands Eligible for Deficiency The FAIR Act of 1996 eliminates
Payments traditional production control programs
and establishes a production
flexibility contract which lets farmers
plant as they wish. (Fruits or
vegetables may not be planted on
contract acres, except under certain
circumstances.) A
producer may enroll all or part of the
farm's contract base acreage in the
program and, after sign-up, may request
a permanent reduction in the acreage
without penalty.
Rice Program The FAIR Act of 1996 allows farms with
a planting history of wheat, corn,
grain sorghum, barley, oats, upland
cotton or rice in one of the past 5
years to enroll for production
flexibility contracts. This program
will eliminate the traditional income
and price support program for rice.
Peanut Program The FAIR Act of 1996 reduces the quota
support rate
through the year 2002, eliminates the
price support escalator, eliminates the
national poundage quota floor and
undermarketing provisions, and allows
limited sale, lease, and transfer of
quota across county lines.
Centralize Servicing for Rural Housing The Department of Agriculture's Rural
and Community Development Service's Housing Service acted over the last
Single-Family Housing Loans year to address this issue. The Service
is replacing its decentralized manual
system for servicing direct loans with
a recently purchased, modern commercial
loan origination and servicing system
that can operate from a central
location.
Eliminate or Transfer Interstate This option was adopted by the Congress
Commerce Commission Functions and action was completed on December
29, 1995, with the passage of The
Interstate Commerce Commission
Termination Act of 1995.
Reappraise Rural Development Programs The core of the rural development title
of the FAIR Act of 1996 is the
establishment of the Rural Community
Advancement Program. This changes
federal rural development programs by
putting in place an approach to rural
economic development that will enable
state and local officials to identify
needs locally and find flexible and
innovative ways to meet them. The act
also repeals a number of unused rural
development authorities and
consolidates duplicative existing
authorities.
Construction of Veterans' Medical Care In its fiscal year 1996 budget
Facilities submission, VA sought funds to build
new hospitals in East Central Florida
and northern California as well as
funds to renovate several existing
hospitals. The Congress, however,
provided no funding for new hospital
construction in VA's fiscal year 1996
appropriation.
Eliminate Prefinancing Funds for DOE has acted to eliminate these funds.
Department of Energy Contractors
--------------------------------------------------------------------------------
--------------------
\1 Addressing the Deficit: Budgetary Implications of Selected GAO
Work for Fiscal Year 1996 (GAO/OCG-95-2, March 15, 1995).
MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V
ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C.
Margaret T. Wrightson, Assistant Director
Thomas M. James, Evaluator-in-Charge
Carolyn L. Litsinger, Senior Evaluator
Claudia J. Dickey, Senior Evaluator
*** End of document. ***